08-29-2019 Columns

Interested in fixed annuities?

Beware of common misconceptions Between your 401(k) or pension, your IRA and Social Security, you hope to have enough to enjoy a comfortable retirement lifestyle. Yet, you may want, or need, to find other financial resources – one of which might be a fixed annuity, which offers a guaranteed interest rate and can be structured to provide a lifetime income stream. But you may be nervous about investing in annuities because of some negative things you’ve heard about them. How concerned should you be? To help answer that question, let’s consider some common misconceptions about fixed annuities: “I won’t be able to touch any of my money if I need some of it before I retire.” A fixed annuity is designed to provide you with income during your retirement years. But if you want to withdraw a significant amount of your money before you retire – when your annuity is in what’s called the “accumulation phase” – you’ll likely face a surrender charge, as well as a 10% federal tax penalty. Withdrawals may also be subject to a market value adjustment. However, to access a small percentage of your allocated funds, you might not encounter any fees. And some annuity contracts allow a 10 percent withdrawal with no penalty. “Annuities cost too much.” Many annuities are actually low in cost. Be sure to compare the cost against the value of each additional guarantee, feature, and benefit—and only pay for what you need. “A deferred annuity isn’t worth the wait.” If you set up a deferred annuity, it’s true that you won’t immediately start receiving income. You will, however, be able to factor future expected payments into your retirement plan. “When I die, the insurance company keeps my money.” If your payout plan includes a beneficiary agreement, your beneficiaries will receive the remaining amount of money in the contract. Read the terms and conditions listed with an annuity, as they will spell out where the remaining money will go after you pass away. Of course, even if the above concerns are simply misconceptions, it doesn’t mean there are no issues about which you must be aware when considering fixed annuities. For one thing, the safety of your lifetime income stream and guarantees will depend on the claims-paying ability of the insurer that issued the annuity, so you’ll want to choose a company that has demonstrated financial strength and stability. One other concern about fixed annuities: They typically don’t carry a cost of living adjustment, such as that found in Social Security. You can find annuities that do offer some inflation protection, but this feature can reduce early payments significantly. If it’s appropriate for your situation, a fixed annuity can be a valuable addition to your retirement income. Before purchasing one, though, you’ll need to weigh all the potential benefits and issues. But don’t be swayed by misconceptions – you’ll want to base your decision on facts, rather than fears. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Local control

Last week, the Nuclear Regulatory Commission hosted a listening session at Lake Michigan College in Benton Harbor to gather public input for a report they are preparing for Congress. The report will provide recommendations on the formation of advisory panels that will help foster communication between a licensee and their local community during the decommissioning process. As the Vice-Chair of the Michigan House Energy Policy Committee, I had a statement read in support of the formation of local community-based advisory panels. As home to two operating nuclear power plants, Southwest Michigan is familiar with the benefits that these plants provide to our region in terms of economic activity and safe, clean electricity. Both Palisades and the DC Cook plant have made transparency and public engagement a priority, communicating regularly with state and local officials as well as maintaining an active presence in our community. Since announcing the 2022 closure of Palisades, Entergy has maintained active communication, public information sharing, and transparency. With the future formation of a locally-created community advisory panel, I expect that high standard and positive community partnership to continue. We are blessed to live in a nation united in the richness of our diversity and regional differences. Rather than proposing a nationwide model or procedure for the creation of these community advisory panels, they should reflect the values of the communities they serve. In the case of Palisades, a future advisory panel should be driven by municipal and county leaders, law enforcement, area school districts, county health officials, and appropriate state agency representatives. The NRC is still gathering input for their recommendation on how these advisory panels should be created. Opinions can be submitted by emailing the NRC at infocollects.resource@nrc.gov.