TOP 10 Things Baby Boomers

Need to Know About CDs,

Annuities, and Social Security &
Taxes
Nnika Cromwell | nnikacromwell
July 8th, 2017

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EXECUTIVE SUMMARY
Regardless of the economic crash of 2008 and the Great Recession that followed
Baby Boomers are still retiring either by choice or force every day. The hard
lessons of the pass, the volatile stock market and the unpredictable political
climate that a Trump presidency has ushered in has driven seniors to seek safer
waters for their retirement nest eggs or least whats left of them now more than
ever. Thousands of Baby Boomers are retiring every day. With the internet
providing information overload its difficult for most to figure out what to do when
it comes to investing their lifelong savings so that they dont run out of money
before running out of life.

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TABLE OF CONTENTS
INTRODUCTION ............................................................................................................4
BACKGROUND .............................................................................................................5
SOLUTION .....................................................................................................................7
CONCLUSION ...............................................................................................................8
ADDITIONAL RESOURCES ........................................................................................12

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INTRODUCTION
Baby Boomers retiring today have many concerns about how they are going to
live out their golden years and for good reason. With the constant screams from
Washington D.C. about Social Security running out of money by 2034 or rather
will there be enough tax dollars to fund it, the Affordable Care debacle, the rising
cost of healthcare its no wonder folks are worried.

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BACKGROUND
There are a few things we know for sure. We know interest rates have been
historically low for nearly 10 years. And we know that they are going to
rise. However, they most likely wont sharply as politicians will try to hold
off taking such drastic measures for fear of inflation. So, in the meantime
the Feds will most likely continue to gradually increase interest rates
slightly to try to head off inflation. Low rates have been great for consumer
purchases, but not so much when it comes to investing in CDs. Your
banker of course will try to convince you otherwise, but we think its fair to
say that the rates of returns seen over the last decade just wont cut the
mustard. Baby Boomers need as close to stock market returns without any
of the risk and as much as they can get. The Great Recession of 2008 has
done a number of many of their portfolios returns of 1% to 2% will not
enable to preserve their principal and surely they will run out of money
before they run out of life.

Then theres Social Security and all the talk about its going to run out and that
we need to stem entitlement programs. Well, first off I take offense to this
because #1 anyone who has worked at a job knows that there is nothing entitling
about having your hard earned money taken from you without your consent. That
is exactly what employers do on behalf of the Federal Government when they
deduct social income taxes from your paycheck. So there is absolutely nothing
entitling about that. We pay into the Social Security Trust Fund with the promise
from the Federal Government that when the time comes it will be there for us.

The Facts About Social Security:

In 2017, over 62 million Americans will receive approximately $955 billion in

Social Security benefits.

Snapshot of a Month: December 2016 Beneficiary Data

Retired workers 41.2 million $56 billion $1,360 average monthly benefit
dependents 3 million $2 billion

Disabled workers 8.8 million $10.3 billion $1,171 average monthly benefit
dependents 1.8 million $0.65 billion

Survivors 6.1 million $6.8 billion

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 Nearly nine out of ten individuals age 65 and older receive Social Security
benefits.
Social Security benefits represent about 34% of the income of the elderly.
Among elderly Social Security beneficiaries, 48% of married couples and 71%
of unmarried persons receive 50% or more of their income from Social
Security.
Among elderly Social Security beneficiaries, 21% of married couples and
about 43% of unmarried persons rely on Social Security for 90% or more of
their income.

Retired workers and their dependents account for 71% of total benefits paid.
Disabled workers and their dependents account for 16% of total benefits paid.

21-64 in covered employment in 2016 and

their families have protection in the event of a long-term disability.
-olds will become disabled before reaching
age 67.
-term disability insurance.

Survivors of deceased workers account for about 13% of total benefits paid.
-year-olds will die before reaching age 67.
-49 who worked in covered employment in 2016
have survivors insurance protection for their young children and the surviving
spouse caring for the children.

51% of the workforce in private industry has no private pension coverage.

31% of workers report that they and/or their spouse have no savings set
aside specifically for retirement.

With stats like these its no wonder Baby Boomers and soon to be retirees are
worried about how they are going to make their money last longer than they do.
They are worried about how can they can continue to grow their money while still
minimizing taxes and keeping their risk to a minimal. After all, time is not on their
side. Many have yet to recover economically for the financial losses incurred
nearly 10 years ago. They know they cannot or should not put their money under
a mattress for surely they will certainly run out of money before they run out of
time. Preservation of their principal is imperative, no question about it, directly
investing all ones savings in the stock market in no longer an option once you

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reach your fifties and we would recommend it not be an option at any age.
Diversification, safety, and minimizing taxation are the keys to growth.

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SOLUTION
So whats the answer you are probably asking? Why, annuities
of course. Did you know that you can get much higher rates of
returns then CDs and still have safety and guarantees? Deferred
annuities have been around in the U.S. for almost 200 years!
Almost 50 million people now have some sort of annuity
contract.
While CDs are certainly safe they do not provide a high enough rate of
return to help deal with, the Preservation of Principal concern that many
seniors have. Additionally, every time you renew your CD the surrender
charges start all over again. Contrary to CDs, with most annuities clients
can withdraw up to 10% a year and not incur any penalties or surrender
charges. Of course if you need to withdraw from your annuity due to a
terminal illness or nursing home care then in those cases you usually can
penalty-free.

Full disclosure Insurance companies are not FDIC insured. However, the
insurance industry is one of the most highly regulated industries on the planet
and has been for over 100 years. There is nothing that insurance doesnt touch,
including each other. Even insurance companies have insurance! By law
insurance carriers must be able to payout 100% of policyholders claims with their
reserves, which is why insurance carriers typically investment in very secure
stable investments.

How much does taxes play a part making your money last and maximizing your
social security income? Well lets see. Take a look at the chart below. For a
single person if your modified adjusted gross income exceeds $34,000 or a
married couple $44,000 then 85% of your Social Security check is taxable.
Another way to look at is, if your income falls, and between $25,000-$34,000, as
a single person, or between $32,000-$44,000, as a married couple, going over
the maximum allowable income with cause you to have up to 50% of your Social
Security check taxed. Remember now you have already paid taxes on this
money during your working years! Talk about adding insult to injury. See figure 2
how much less your tax liability is when you incorporate an annuity into your
income preservation strategy.

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FIGURE 1

FIGURE 2

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FIGURE 3

SOURCE: 10 Secrets

KEY POINTS
CDs are taxable
CDs can be seized by creditors
CDs pay a very low rate of return which wont help with principal
preservation
No access to your money while its in a CD without serve penalties
CD interest earned will add to your Social Security taxable income
CDs are subject to Probate
CDs do not offer a guaranteed monthly income stream for life
Indexed Annuities can potentially provide you with Stock Market
Like returns
Annuities provide you with options even from beyond the grave
CDs do not allow you to deferred the interest payments

SOURCE: Top 10 Secrets About Annuities in 2016

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CONCLUSION
If you want to have your money last until your passing and beyond you cant
have all your money in a CD nor can you afford to invest it directly in the stock
market if you dont have at least 15 to 20 years to recover from any downturns in
the market. And we know from the data that you cannot continue to place so
much of income stream on coming from Social Security:

We know the country is in a major debt crises see www.usdebtclock.org if you dont believe me.
An increase in taxes is all but inevitable. We must face this reality. The Federal Government gave
Social Security recipients a modest increase this year in 2017. Although we wouldnt call a .3%
increase anything to write home about. Proponents of annuities will undoubtedly want to talk
about the surrender charges with annuities. There is some sort of cost to everything. Mutual
funds, stocks, etc have cost associated with them also. What we have to ask ourselves is the cost
worth the risk. If you are already in your fifties can you afford the all the risk investing directly in
the stock market? If you can great! But if you are like the millions of Americans who have only
have a modest retirement savings than perhaps you cant afford such a risky option. An annuity
can function much like SSA benefits. Some deferred annuities with income riders will increase
each year until you decide to start taking an income (think how your social security benefits
increases each year you don't touch it).

With annuities that offer an income stream, you'll know exactly how much you're going to get and
how long whenever you decide to take it.

This is an excellent option in retirement since it operates as something very much like a standard
pension. The big difference, though, is that unlike a pension if something happens to you or your
spouse, the remaining funds would be passed on to your family.

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ADDITIONAL RESOURCES
www.investopedia.com
www.usdebtclock.org
www.ssa.gov
Top 10 Secrets About Annuities in 2016

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