Category: Retirement Planning

by Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First

 

“They’re too complicated.”

“They’re only for old people.”

“The fees are outrageous.”

“Any extra money you have goes to the insurance company when you pass away.”

Annuities are among the least known of financial vehicles, but often drive the most intense feelings from those who do know about them. They seem to be shrouded in mystery, myth, and even misunderstanding.

So what exactly is an annuity? And are the myths and misconceptions true?

An annuity is a financial product offered by an insurance company that provides a steady stream of income for a person over a set period of time, or for life. Because of the benefit of providing a steady stream of income, annuities are commonly used for retirement.

Despite the misconception, annuities aren’t really all that complicated. You can make a lump sum investment or multiple investments and then, after a specific timeframe, or immediately, if desired, you receive a stream of income for a set period of time, or for life, depending on the annuity.

A popular alternative in today’s financial climate.

With the volatility in today’s financial markets, the low deposit rate environment, and the pressure on Baby Boomers facing retirement, many people are taking a second look at annuities. And with these compelling annuity benefits, it’s easy to see why:

• Unlimited contributions. Unlike an IRA, there is no limit to the amount of money you can contribute to an annuity.
• Tax-deferred growth. Money invested in an annuity grows tax-deferred until it is withdrawn.*
• Protection from market volatility. One only has to review recent stock market activity to understand this benefit from a fixed annuity product.
• Competitive rates. An annuity can provide a greater rate of return than many CDs, particularly in today’s low-rate environment.
• Guaranteed income. One of the biggest attractions of annuities is that they pay a guaranteed return until the annuitant (the person who gets the income) dies or thereafter depending on the type of annuity.
• Bypassing of Probate. If you leave funds in an annuity to your beneficiaries, they won’t have to deal with the time and expense of Probate. In addition, funds in annuities generally can’t be accessed by creditors.

Annuities now offer another benefit that made them less attractive to investors in the past – liquidity. Annuity holders can take advantage of flexible riders that allow them to customize their investment to their unique needs and financial situation. DNB First Wealth Management, for example, offers annuities that will let you take advantage of improved market conditions and choose different death benefit options. In addition, we can ensure that any fees never come from the benefit your annuity generates.

Though annuities offer many benefits, it’s important to note that they aren’t for everyone. At DNB First Wealth Management, we’d be happy to review your situation to determine if annuities may be right for you. We’ll do what’s in your best interest. That’s no myth.

* Consult a professional tax advisor regarding your individual tax situation.

by Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First

 

Anyone who is a parent can tell you: parenting changes you in many ways.

One of the most obvious is an intense desire to care for and protect our children. We want to be sure we’re always there to provide the things they need during their different stages of life. But when they reach adulthood, we experience a change in thinking:

We want to protect and care for our children when we are no longer here.

Fortunately, there’s a very simple and proven solution that makes that goal possible: a solution that many people don’t fully understand or use to their advantage.

It’s called life insurance.

According to a 2015 study by Life Happens and LIMRA (the Life Insurance Market Research Association), “more than 40% of Americans don’t have life insurance.” What’s more, those who do have it are often underinsured and know they need more.

One of the biggest reasons for underinsurance is the perception that life insurance is “too expensive.” And when people are worried about meeting their monthly bills today and saving for retirement tomorrow, they may view life insurance as an additional expense they don’t need.

What they should understand, according to Rick Weber, Managing Director of DNB First Wealth Management, is that “ life insurance isn’t expensive for what it can offer you, mainly peace of mind. It can help a person preserve and create wealth, particularly in this low interest rate environment.”

An example of the gift of life insurance.

Weber cites one type of program as an outstanding example of the power of life insurance. The program is designed for clients looking to gift funds they don’t need for retirement to their loved ones. It allows participants to make a single premium payment and get up to two and half times that in the form of a death benefit. For example, if they put $100,000 into the policy, their beneficiary could receive upwards of $250,0000 upon their death. (The precise amount of the death benefit depends upon selective criteria such as age, gender, health and tobacco use.) The program also provides the flexibility for the policyholder to cash out the principal amount at any time without penalty. In addition, the death benefit is free from federal taxes, as well as the Pennsylvania inheritance tax.

To learn more about this program and others offered, call DNB First Wealth Management at 484-359-3531.