It is very common when individuals explore retirement plan alternatives that they focus on the monthly payments they will receive when they start taking lifetime income.
There are certain circumstances where that criteria can work against what the plan holder needs. Recently a client explored what products would give him the highest monthly income. He had inherited a pension program from CalPERS, the tax-guaranteed pension provider in California. He had options of taking the entire cash balance as a lump sum or of electing either of two levels of significant monthly payments. He could take monthly cash-only, or he could take less monthly cash and receive a plan-paid health care program.
What If Emergency Cash Is Needed?
Having just suffered a family loss, the client asked what would happen if he was already receiving monthly payments from the plan, and there was a family cash emergency, such if one of his children or grandchildren needed expensive medical care. The advice to the client was to confirm with the plan if he would have access to cash above his regular periodic payments if he needed it, or if that would not be the case.
The client reported that CalPERS informed that, if he had already started taking his lifetime income, there would be no way to get more cash on an emergency basis if he needed it. So, if push came to shove and if he was desperate for a block of funds beyond his monthly stipend, the plan could not help him, and he’d have no reliable way by which to bridge the needed cash.
The Client’s Total Plan Requirements
The client wondered how he could have not only lifetime income, but the possibility of income growth, and the ability to withdraw a large amount if he genuinely needed to do so.
The client was shown a Fixed Indexed Annuity into which he could roll the entire principal amount of his CalPERS plan without any adverse tax consequences. The particular annuity is backed by the strength and guarantees of a major insurance company. Not only can the principal in the annuity grow over time, but the available monthly payments can also grow over time and may increase while he takes withdrawals. And most importantly, for this client, his account value is available to him at any time that he requires or desires it.
Compelled To Roll His Funds To Fixed Asset Annuity
It was the client’s ability within the annuity to have blocks of cash available at times of family stress that compelled him to roll his funds from the CalPERS plan into the Fixed Indexed Annuity. Now he controls what he can take out, not CalPERS. Depending on the timing and the amount of the withdrawal, there may be charges for a portion of the withdrawal. However, subject to the charges that may apply, the entire cash balance belongs to him and is available at his discretion as needed for his circumstances.
Working together, the client was able to obtain medical coverage to replace the coverage he gave up when he let go of the original plan, and he has also been given a stout manner in which to provide for any duration of long term care reimbursement that he may require during his advancing years.
The Right FIA Helps Meet Demands Placed On All Of Us
This is an interesting client case in the use of excellent utilization of a Fixed Asset Annuity along with other strategically selected strategies and proven products that can be arranged to provide not only maximum security but for maximum flexibility and conservation of family financial resources.
A real lesson is to be sure during your retirement planning that you cover known needs and that you also pay careful attention to those additional and unexpected demands that life sometimes places on all of us.