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Retiring in a Positive Tax Climate is Only Half The Battle

Understanding retirement income alternatives can help you reach your long-term goals

Pennsylvania has been known for having a positive tax climate when it comes to retirement. For example, our residents benefit from a low sales tax (six percent), no state taxes on Social Security benefits and partial taxes on pensions. While this is good news for Pennsylvanians, retiring in a tax advantageous climate is only half the battle. In order to ensure longevity of your retirement assets, you must not only protect the value of your accounts by reaping as many tax benefits as possible, but also be able to turn your retirement savings into a predictable income source that will last the duration of your retirement years.  This can be accomplished through income planning.

One of the keys to income planning is maximizing what you are earning from your retirement assets.  For example, many retirees often seek “safe” ways to invest their money that both protects their principal and provides modest returns.  However, interest earned from Certificate of Deposits, for example, has reached record lows.  These low interest rates have many scrambling to find better ways to make money on their money in retirement. 

An alternative to CDs that one may consider is the fixed annuity insurance product.  Like CDs, it offers a fixed annual rate of return paid over the term of the contract. However, since fixed annuities are contracts with insurance companies and not banks, they often pay at a higher rate than CDs.  Monies deposited into a fixed annuity contract are are not vulnerable to market volatility, and the earnings within the product are tax-deferred, allowing the account holder to compound their earnings tax-free until distribution begins.  Fixed annuities can be valuable tools to give you the predictable, consistent income stream you are looking for during your retirement years.

A variation of this type of annuity that has the potential for even greater earnings through market-linked gains is the fixed indexed annuity.  The principal amount is also protected from the possibility of the market taking a downward swing as well. However, while an account holder that opts for market-linked returns wouldn’t lose any principal, they would not earn a return either if the market suffers a loss. 

Every “safe” financial product comes with its own terms and conditions.  Fixed annuities are contracts with an insurance company, so if you’re seeking liquidity then this product may not be the best fit.  Before entering any financial contract, is important that you meet with a qualified professional who will thoroughly cover all product details and terms with you, before you make a buying decision. 

The best way to achieve predictable income in retirement is to protect what you have from unnecessary taxes and fees, and then figure out what options are available to you in order to meet your long-term goals.  Identify and discuss your retirement income source possibilities with a financial professional and make sure your retirement savings is positioned to work for you.  Knowledge is power, and understanding alternatives such as fixed annuities can assist you to create a tax-advantageous income stream for the golden years.

ABOUT FORTUNE FINANCIAL GROUP

Christopher Scalese, financial advisor and president of Fortune Financial Group, is best known as Northeastern Pennsylvania’s Retirement Specialist. Scalese has spent the last two decades of his career assisting area residents with the financial transition from the working years to the retirement years. His primary goal is to help individuals structure their finances so that they have a steady income throughout their lifetime, while working to ensure their finances aren’t overly exposed to risk or unnecessary taxation. Scalese is an investment advisor representative, life and health insurance licensed and currently working on earning his Chartered Financial Consultant designation. Scalese received his Bachelor of Science degree in finance and Master of Business Administration degree from Wilkes University. For more information about Christopher Scalese and Fortune Financial Group, please visit www.fortune-financial.org.

Fortune Financial Group, Inc., is an independent firm with securities offered through Summit Brokerage Services. Inc., Member FINRA, SIPC.

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