Fixed Index annuity
Terri:
We are married, ages 64 and 68. We are well off. Both retired. We have a broad mix of stock and bond mutual funds, and cash. We have a fair amount of dividends and mutual funds cap gains at the end of the year. I am planning for future taxes. Once we start taking Social Security, and then have to take RMD’s, we will have a MAJOR tax problem. One financial advisor has suggested Fixed Index Annuity. It shields us from some current taxes, future taxes, and RMD’s. Your thoughts?
Terry Says
My thoughts are that you are going to make this financial advisor wealthy, and not vice versa! You need to talk with a FIDUCIARY FEE-ONLY Certified Financial planner — one who is not trying to sell you products like this.
In general at your age you need to make sure you have a path to make your money last as long as you do. Retiring in your mid-sixties can be very costly. For example, what are you doing about health insurance now? And do you have any idea how much it will cost in the future?? According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2022 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement.
Have you even planned for the devastating potential costs of needing long term care — not covered by Medicare or a Supplement?
I hope neither of you has started taking Social Security — and that you can put it off until you are age 70. You get an 8% boost- plus a COLA — for every year you delay after full retirement age until 70, when you must start taking SS.
And it looks like pending legislation will mean you don’t have to start taking RMDs until age 75.
So stop worrying about your potential TAX problem and start worrying about the real problem: retiring too early and running out of money, especially with inflation devastating any fixed payments you might receive.
Again, I strongly suggest a meeting with a Fee-Only Fiduciary. Get matched with one through this link. I get nothing out of this except the knowledge that you will be in good hands.
