This section is all about growing cash value and building your wealth, with the goal of preparing yourself for retirement. There are many different ways to build wealth. However, the most popular ways how people prepare for their retirement is through their Social Security and their 401Ks or IRAs or Roths (or similarities).

Prepare Yourself: When is the best age to retire?

If you are eligible for Social Security Benefits, you can apply for your monthly retirement benefit any time between age 62 and 70. The payment calculation is based upon how much you've earned throughout your life. The amount will be higher the longer you wait to apply, up until age 70. The timing is up to you and should be based on your own personal needs. Here is a summary of the Social Security Benefits:

1. Age 62-67: Reduced benefits AND Benefits deduction (if earnings are >$22,320 1as of 2024; $1 benefit deduction for every $2 earning above the yearly limit)

2. Age 67 (full retirement age): 100% benefits AND No-deduction benefits (earning won’t affect)

3. Age 67-70 (delayed retirement credits for every month you delay)

What you need to know before investing in “retirement savings”

Financial experts recommend having in your savings account an emergency fund that could cater 3-6 months of your monthly expenses. This amount of money can also be available in your cash value if you had a Whole Life or IUL. However, it takes time (at least 10 years, depending on how you fund your policy) to accumulate enough cash value that could serve as an emergency fund.

Before you tap into retirement savings, it is advisable to have an emergency fund first. Because early withdrawals (before age 59½) of funds (in the case of a traditional IRA/Annuity) and earnings (in the case of a Roth IRA/Roth Annuity) are generally subject to a 10% penalty, plus taxed at an ordinary income tax rate. Therefore, before age 59 ½, you wouldn’t want to get cash from your retirement savings to use for emergency cases. Nonetheless, there are exceptions to this rule.

Exceptions to the 10% early withdrawal penalty on your retirement savings

• After death or total and permanent disability of the owner

• Distributions up to $5,000 per child for qualified birth or adoption expenses

• Qualified higher education expenses

• Qualified first-time homebuyers, up to $10,000

• Health insurance premiums paid while unemployed

Once you have saved enough emergency funds, it is recommendable to:

1. Maximize your 401(K) match* (if your employer does matches)

2. Maximize your Roth IRA

3. Maximize your Traditional IRA

*If you leave your 401(K) job, you can roll it over to a Roth IRA. However, since you hadn’t paid income taxes on that money in your traditional 401(k) account, you will owe taxes on the money for the year when you roll it over into a Roth IRA.

How to protect retirement savings from market downturns?

A. Problem with investing your IRAs/Roths in the market

When you have a Traditional IRA or Roth IRA, you will need to allocate your contributions into different investment options, such as stocks, bonds, ETFs, Index Funds, mutual funds, etc. The problem with these is that your investments go up and down according to the market. Every time you lose, you would need to gain “even more” to recover your loss.

Consider the following illustration.

Case 1. If you invested $100, and the market goes UP 50%, you would end up with $150.

Case 2. If you invested $100, and the market goes DOWN 50%, you would have $50 left. Now, would you recover your loss if the market goes up 50%? No!!! 50% of $50 is only $75! The market needs to go up 100% to recover your $100!

The following chart illustrates how much percentage is required to fully recover from a loss in the market.

As you can see, the more you lose in the market, the more you need in return in order to recover to your initial state. That is why a Roth IRA Indexed Annuity could be a better option.

B. Why an Indexed Annuity could be a better option

An Indexed Annuity is designed in helping you “grow” AND “protect” your retirement savings, because it credits interest based on the performance of an index, like the S&P 500, without actually participating in the stock market. There is a 0% floor guarantee, where premiums paid and interest credited are not affected by market downturns (though there also is a cap when the market performs very well). This is a great advantage, since we’ve seen that every loss needs a greater gain to fully recover from a loss.

Long-term Cash-Value Growth & Long-term Retirement Investment

We just explained why an Indexed Annuity might be a better option over IRAs or Roths or 401Ks, or the like.

Now we will look at 2 different types of Indexed Annuities.

1.Long-term Cash Value Growth Indexed Annuity

This is designed for cash value growth only, where you can later use that cash value accumulated for other purposes, like future investment or withdrawing money in installments.

This option is available for people ages 0-85, meaning that parents can start investing in their children's future from their very start of life.

2. Retirement Investment Indexed Annuity

This is designed with a “rider” (at an additional cost) that permits you to convert your retirement savings into guaranteed income for life. This latter is called “Guaranteed Lifetime Income Riders (GLIR)”. More details are in the next section: Characteristics of the Guaranteed Lifetime Income Rider (GLIR).

BOTH Indexed Annuities (Cash-Value Growth and Retirement Investment) have the following characteristics:

1) Tax deferral. This helps your savings grow faster than if you paid taxes on your earnings each year.

2) Investment strategies. With several index strategies to choose from, your account can benefit from interest crediting tied in part to the change in a major market index.

3) Death Benefit protection. Upon death, the accumulated value passes to your beneficiaries.

Characteristics of the Annuity with Guaranteed Lifetime Income Riders (GLIR)

1) Guaranteed Lifetime Income “Rider” (GLIR) WITH BONUSES

There are two unique Guaranteed Lifetime Income Riders (GLIR) with a bonus feature that lets you choose how to optimize your income, the Max Bonus GLIR and the Split Bonus GLIR.

1A) The Max Bonus GLIR (for long-term investment)

The Max Bonus GLIR provides a one-time Activation Bonus that scales up your payments when you are ready to start receiving income. The activation bonus effectively increases the amount of income you receive. If you are focused on receiving the maximum income in retirement, the Max Bonus GLIR may be for you.

Let’s say hypothetically you purchased an Indexed Annuity with Max Bonus GLIR Rider 20 years ago to maximize your potential lifetime income. Now at age 65, you are ready to begin receiving income in the 20th policy year. Therefore, you would get a 170% bonus. If up to this point you have accumulated $275,000 in your annuity, you would have the following annual lifetime income: $26,413/year as long as you live (up to age 100).

*Hypothetical examples for illustrative purposes only – these do not represent the actual results of the product.

1B) Split Bonus GLIR (for long-term investment)

The Split Bonus GLIR provides a 5% Immediate Interest Credit to all premium payments in the first eight policy years and one-time Activation Bonus that scales up your payments when you are ready to start receiving income. If you are focused on boosting your accumulation value and receiving lifetime income, the Split Bonus GLIR may be for you.

Let’s say hypothetically you purchased an Indexed Annuity with Split Bonus GLIR Rider 20 years ago for lifetime income but also wanted a higher accumulation value. Now at age 65, you are ready to begin receiving income in the 20th policy year. Therefore, you would get a 145% bonus. If up to this point you have accumulated $290,000 in your annuity (having a 5% interest credit to all premium payments done for years 0-7 of the policy), you would have the following annual lifetime income: $23,758/year as long as you live (up to age 100).

Hypothetical examples for illustrative purposes only – these do not represent the actual results of the product.

2) Income Doubler

In addition to the bonuses, should you become incapacitated, both GLIR options (Max or Split Bonus) offer the Income Doubler.

Your income can be doubled for up to five years if:

• Your policy has been in force for two years

• You cannot perform two of the six activities of daily living without the assistance of another individual permanently: bathing, dressing, transferring, toileting, continence and eating (must be medically certified)

• Your policy has an accumulation value greater than zero

• Elected income is based on one life only

• No withdrawals in excess of the current lifetime income have been taken in the current policy year

Your current lifetime income will double until the sooner of five years or the accumulation value of the policy reaching zero. When the doubler period ends, your lifetime income will go back to your income prior to qualification

3) Level or Increasing Income, It is Your Choice

When you activate your Guaranteed Lifetime Income Rider, you can choose to have a level payment for life or an amount that will increase over time. If you select increasing income, your initial income will be lower than level income but will increase by 2.5% per year until your accumulation value reaches zero dollars. At that time, your income will lock in at the current amount.

Contact us for any questions. Our goal is that you are educated and well-informed. We are here to answer your concerns at no cost and without pressure to apply or commit. We give you our word.