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Using Annuities to Combat Social Security Loss

Gary Mattson

If you have planned for retirement, then hopefully, you’ll be ready to enjoy a lifestyle with steady income that gives you enough every month to pay for your recurring bills, along with having the funds to enjoy travel, assist grandkids with education, delve into a hobby or start a new one, or anything else on your “bucket list”.

As you’re enjoying the prospects of helping grandchildren and family members learn from your financial success, tragedy happens. A loved one passes, leaving you alone and worried, rather than feeling financially secure. All sorts of questions come to mind now, especially since you’ve heard that your social security benefits will change at the passing of your spouse.

What will happen to your joint income? Going forward, how do you manage your finances with less social security income coming your way? Are you going to have to spend down your assets? Will you run out of money? If you have another financial set back or event that you have not expected, how will you survive financially? Will you be able to maintain the lifestyle you had, or is your retirement life going to change drastically?

What really happens financially when one spouse dies before the other? You may be afraid to ask yourself these important question, but you should.

With Social Security, after a spouse passes away, you are able to maintain the higher of the two payments between you and your spouse’s social security insurance amounts. The lower amount will stop being paid, immediately. Remember, Social Security is an insurance program. Getting to retain the higher amount doesn’t happen automatically – you must notify the Social Security administration of your position, and set up continuation. Only after you notify the agency will they continue the higher of the two benefits.

While a reduction in benefits is an unfortunate situation, it is a reality. However, you can take steps to plan ahead, and begin looking for ways that can help supplement guaranteed Social Security lifetime income with another guaranteed lifetime income payment.

If you have the funds to purchase an Fixed Index Annuity (“FIA”), then you can supplement lost income flow by using a FIA with an income rider feature at an additional expense.

How this approach works is that a sum of funds, called premiums, is paid to an insurance company in exchange for the purchase of an insurance contract. The insurance company guarantees your principle.* Then, the insurance company offers an additional rider that can help guarantee a future income amount. The growth rate varies from one insurance company to the next.

The fees and amount will vary per insurance company. It is important for you to ask your agent to provide you with illustrations that explain the calculations, so you know exactly what you are getting when you purchase an insurance contract. With the company’s illustration, verify that the contract meets your income needs at your current given age, your time horizons, and liquidity needs.

Does this guaranteed rate of income growth sound too good to be true? It’s too good to be free! There are costs involved and you should understand that the annuity company takes an annual fee, usually based on a percentage of the funds or the value of the annuity. However, the insurance contract does guarantee the income growth rate.

With this approach, when you turn on this annuity for income, those funds are there to supplement Social Security income. We recently had a client lose part of their pension benefits so we turned on this income rider and were able to make up the amount that was taken away.

Stock markets, over time, are a good place to invest some of your funds, but you also need to guarantee your monthly “critical income” that you need to pay your ongoing bills each month. A fixed index annuity with an additional income rider helps give a guaranteed rate of growth for income when one spouse passes. It can be a game changer.

* Based upon certain insurance and annuity products (not securities, variable, or investment advisory products) including optional benefits, and are subject to product terms, exclusions, limitations, the insurer’s claims-paying ability, and the financial strength of the issuing insurance company.
Note: Lakeview Financial and Mattson Financial are not affiliated with or endorsed by the Social Security Administration or any government agency.

About the Author:

Gary Mattson has been assisting clients in Michigan for over 26 years. He was the No. 1 agent with the Independent Order of Foresters, and is a leading insurance sales agent in the financial services industry. Gary is the managing partner of affiliated companies Mattson Financial Services, LLC and Lakeview Financial Group, LLC.

For more information about income for life, contact Gary Mattson at info@mattsonfinancial.com or 800-536-8907.

Advisory services are offered by Mattson Financial Services LCC, a Registered Investment Advisor in the State of Michigan. Insurance products and services are offered through Lakeview Financial Group, LLC. The aforementioned are affiliated companies.

 

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