Variable Annuities: Strategies to Recover Retirement Income

There is a wide variety of annuities managed by professional staffs of expert financial people. These professionals have the ability to buy and sell securities with the basis of strength that individuals would not have. When administered professionally, they can achieve ‘paychecks’ within defined limits. The largest insurance companies and stock brokerage firms issue these variable annuities. Variable annuities are just one financial instrument that offers risks and rewards of investment. Each of us should consider what local firms offer, and we are pleased to print one option for conservative investors to examine how to invest money in order to receive these ‘paychecks’ for their lifetimes.

David Caruso and Vince Magee will offer investment and business ideas from Morgan Stanley Smith Barney.

David Caruso, Vice President, has been in the financial services industry and with Morgan Stanley Smith Barney, LLC for fourteen years. David graduated from Rider University with a Bachelor of Science in Commerce. David has worked in the field of corporate finance and logistics for eighteen years prior to Morgan Stanley Smith Barney, LLC. David and his family moved to Marco Island in 2005. He has been a member of many organizations such as Marco Island Leadership Program, Marco Island Police Foundation, Marco Island Chamber of Commerce, Marco Island Planning Board, and a Director of the Marco Island Yacht Club.

Vincent Magee, Vice President, started in the financial services industry in 1995. Vince graduated from Wagner College in 1990 with a Bachelor of Science in Finance. He began his career at AG Edwards as a Financial Advisor Trainee. As he began to build his business at AG Edwards he was offered an opportunity to join Raymond James & Associates. Vince continued to build his business achieving the status of Vice President within the first five years of his career as a Financial Advisor. Vince continued at Raymond James & Associates until November of 2008 when he was offered an opportunity to join Morgan Stanley Smith Barney, LLC. Vince and his family moved to Marco Island in 1995. He has served many organizations here on Marco Island such as President of the Marco Island Rotary Club, President of

the Marco Island Charter School. Currently, he is a member of the Marco Island Planning.

“The past 18 months have been difficult for the financial markets – and for retirement investors. Many investors, especially those approaching or already in retirement, are seeking ways to add the potential for stabiity to their portfolios and to help protect their retirement incomes. One approach that has proven attractive for many of our clients is the variable annuity. A well-strucured annuity is designed toward recovering and protecting retirement income by helping to reduce retirement income risk.

When it comes to retirement planning, there are three main risks to a sustainable income:

• Investment risk – All investors have experienced the ups and downs of market cycles, but these fluctuations can be particularly problematic in the years just before and just after retirement.  The ability to generate a lifetime income from retirement can depend greatly on when you start to take income and, specifically, on the sequence of your returns.
  Negative returns early in retirement have more impact, and when returns eventually turn positive, it takes longer to make up the losses caused by the initial declines.

• Longevity risk – The risk of outliving your retirement in savings. Thanks to advances in science and medicine, life expectancies – and the length of the average retirement – have increased by 20 years. And if both you and your spouse reach age 65, there is 52% chance that one of you will live to be 90. (Source: Society of Actuaries, 2006.) As a result, without careful planning, the risk increases significantly that you may outlive your retirement savings. Income must be able to sustain lifestyle needs for much longer,while also covering health care, housing and other costs for an extended period of time.

• Inflation risk – Inflation erodes the purchasing power of your income and wealth. And it doesn’t stop just beause you have retired. Of particular concern in any retirement income plan is the cost of health care, which is rising far more rapidly than the cost of living. During the past eight years, while inflation was pushing prices up by about 20%, the cost of health care more than doubled.”