Many successful business owners are looking for ways to secure their retirement future. One way is to purchase a pension solution. Whether it involves pretax or post-tax dollars, all growth is tax deferred until withdrawal, a significant long-term advantage for otherwise-taxable accounts.
Consider the 45-year-old entrepreneur with a $500,000 windfall and more on the way. With the sting of the 2008 stock market meltdown not fully healed, she wants to "put this money safely away" for retirement.
With the right pension solution, she can guarantee an annual income of $128,176 beginning at age 65 for as long as she lives. Some might say she could do better investing that $500,000 over 20 years, but can other investment strategies guarantee that starting at age 65, she will receive $10,681 every month for as long as she lives? If she lives to age 84, the right pension will have paid out $2,563,520. Are you confident enough in your investing ability to think you’ll still be generating $128,176 annually if you should live 30-plus years in retirement?
As a financial planner I do not recommend placing the majority of your assets in this type of pension structure. For those seeking retirement guarantees, the right fixed annuity can be an attractive safe-money solution.
Dr. Michael Sullivan
The Estate Planners Group
Washington Crossing, Pa.
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