Income Annuities for Retirement

PLANNING FOR YOUR FINANCIAL FUTURE

As options for retirement, you have both income and income annuities.

One job that annuities have is to make sure money is coming in during retirement. Many people have social security or a pension, but it can be a good idea to turn some of your savings into payment that will pay you for the rest of your life. This is known as an income annuity and provides lifetime income guaranteed by an insurance company.

There can be advantages to having an income annuity. If you just keep your income in a savings account and draw money out of it, there is a chance that you will outlive your savings and run out of money. An annuity can guarantee your income for life, regardless of how long you live.

How to go about setting up an annuity:
A great time to set up an annuity is before you retire so that you can give it a chance to grow. This is called a deferred annuity. One good rule of thumb can be to open one between five to ten years prior to your planned retirement.

How do I know if an annuity is right for me?
Some factors to consider when deciding if an annuity is right for you is the combination of your life expectancy, amount of savings and income amount.

Annuity Payments and Types:
There are various types of annuities and different payout options you can choose –

Income annuity with Life Payout – This gives you the highest cash flow/payout and a lifetime income. If you die prior to using all of your cash, payments stop and there is no refund.

Fixed annuity with fixed or refund payments – This annuity offers a fixed rate and no market exposure. If you die prior to using all of your cash, your beneficiary receives the rest.

Variable annuity – This annuity, like all annuities, is a long term investment and the accumulation is based on the performance of investment options.

Annuities are typically paid monthly and are lower for women than for men. Women have a longer life expectancy so the payout is longer and as a result, lower.

There are also options to get an annuity in which your income is guaranteed for your lifetime with a minimum number of payments. For example, if you get an annuity with a payment guarantee of ten years and you die within three years, your beneficiary would receive the rest of your guaranteed payments. There is also a lower payout for this annuity.

First Financial offers annuities and acts as a broker for many different companies. Have questions about investing or you’d like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union? Call 732.312.1500. You can also obtain more information on our website at FIRSTFFCU.COM, under the Investment & Retirement tab.

All guarantees are based on the claims-paying ability of the underwriting insurance company. Withdrawals before age 59 1/ 2 may be subject to a 10% federal tax penalty.

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution.  CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR111123-F058.

The Five Worst Investment Mistakes You Can Make

PLANNING FOR YOUR FINANCIAL FUTURE

Mistake #1: You don’t have an exit strategy.

One of the worst mistakes you can make is not having an exit strategy. In other words, many people don’t have any idea of when to get out of an investment and end up losing more money than they accounted for. For example, if your investment is declining, you can buy more at a cheaper price, but this can backfire. By buying additional investments, you are throwing in money in anticipation of that investment going up, when it may not.

How do you decide?

It’s simple. Calculate your time horizon. If you have enough time on your side to make an investment, keep it in there and ride the downfall (we’re talking about 1-2 years), then you may decide to do so. If you have less time than this to wait, it’s probably in your best interest to cut your losses and look for a new opportunity. You need to have an end point and risk tolerance and know your limits when investing. And stick to it. If your risk tolerance is ten percent, take your money out when that investment dips ten percent.

Buying stock and how much is the easy part; it’s important to know when you want to sell it. When it goes up? Down? You need to make a choice and stick to a range you’re comfortable with. What happens tomorrow if the world totally changes? If your investment goes down, you need to know where you want to sell it.

Mistake #2: You don’t know what you’re investing in.

It’s important to know what you bought and why. “My advisor told me to buy it” isn’t good enough. There is so much research out there! But what good is it if you don’t use it?

Mistake #3: “Real estate is always a sure investment.”

It’s not a rule of thumb that trends that existed in the past will continue to exist. A great example is the housing market. People used to say that your investment will always go up in a housing market – look at our current situation!

Mistake #4: You buy an investment based on hype.

A mistake people make all the time is buying an investment on hype. They hear about it on TV or in the paper and they just want it for their portfolio. Instead of making a decision based on research, the company’s earnings, and prospects, they buy it based on what they heard from a different source.

Mistake #5: You invest before you reduce or eliminate other debts.

Investing before your debts are reduced or eliminated is one of the worst mistakes you can make. It doesn’t make sense to make an investment that you’re making four to six percent on and then have credit card debts with interest rates of 19 to 21 percent. It doesn’t even out or benefit you in any way. Investing is a gamble; it’s not a sure thing. If it doesn’t go your way and you have debt on top of it, now you’re double in the hole. It’s important that you take care of your debts first.

For a no-cost consultation with the Investment & Retirement Center located as First Financial, you can call 732.312.1500 or visit our website at www.firstffcu.com!

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109.  Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution.  CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR111123-03CE

Investing for New Parents and How to Save for Your Child’s Future

Hands down, the best way for a new parent to invest in and save for his or her child’s future is with a 529 plan. And you want to start saving as soon as possible.

But what is a 529 plan? The 529 plan is a tax-deferred plan that encourages saving for future college costs. Earnings in this plan are not subject to federal taxes and in most cases state taxes as well, as long as the withdrawal is used for college expenses. These expenses can include everything from room and board, to books, classes, enrollment, etc. Parents can contribute up to $13,000 per year on a 529 plan. The 529 plan is owned by the parent with the child’s name listed as a beneficiary. Each state has its own 529 plan but the child doesn’t have to attend a qualified school in that specific state, though there are advantages to doing so. For example, in New Jersey, students can receive a $1500 tuition credit for using a 529 plan purchased to attend a school in the state.

What if your child doesn’t go to college? The great thing about a 529 plan is since the parents are its owners; they can have it transferred to another beneficiary in the family such as a child, grandchild, sibling, etc. – who is attending college.

What are additional investment options for new parents? Another option is to set up a custodial account. When the child turns eighteen, this automatically becomes his or her account and he or she can do what they wish with it. It’s not strictly limited to education. The custodial account is also tax-deferred. Both the 529 and custodial plans work almost like a 401k. Parents can invest in different options and mutual funds, etc. The only thing that parents need to be aware of is that if they are planning to save specifically for a child’s education, the custodial account sometimes works against financial aid since the money will be in the child’s name.

How do you set up one of these accounts? Both the 529 and custodial plans can be set up through either First Financial or the state. Have questions about investing or you’d like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union?  Call 732.312.1500, or you can obtain more information on our website at FIRSTFFCU.COM, under the Investment & Retirement tab.

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109.  Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution.  CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR091115-1376

Investing in Your 20’s and 30’s: Why It’s Never Too Early to Start

PLANNING FOR YOUR FINANCIAL FUTURE

One of the best things about investing in your 20’s is that time is your best friend. If you start investing for retirement during these years, you get a longer time period to accumulate long-term gain and compounding interest. But where do you start?

Most 20-year-olds have their first job right out of college, and that’s the best place to start. Most companies offer employees a 401k plan. This money is taken right out of your paycheck pre-tax, so you don’t even miss it. Many companies even give a match up to a certain percentage. This is an added bonus, since the company is actually giving you free money that can give you a real boost. If your company matches, you should definitely take advantage of it and try to put in up to the amount the company matches, even though it may be difficult to put in the maximum amount.

Another way to get involved is with mutual funds, which allow investors to add funds little by little and watch them accumulate over time.

But what exactly is a mutual fund?

A mutual fund is like a basket of stocks and companies in one sector. Instead of trying to pick a company to invest in, you can choose a basket of stocks. Every mutual fund family has a different asset class, and investors can be moderate, conservative or aggressive and choose stocks within those classes.  For example, more conservative investors would choose stocks in the utility sector, which typically don’t vary a great deal.  A more aggressive investor would choose to invest in things like tech stocks and those that have the chance to explode.

When in your 20’s and 30’s, you want to be as aggressive as possible because time is on your side. Contributing more when you’re younger and single, gives you more when you’re older. Once you have a family and a home, you can cut back a little because you have more expenses, but while you’re young and have time to ride out the stock market’s ups and downs – you may want to consider putting a larger percent of your investments into stocks and mutual funds.

Of course, you also have to try to pay off debt at the same time. It’s crazy to invest in something that’s making four or five percent and have debt on a credit card at an 18 percent payoff rate. Once you pay off your debt, begin accumulating money in both savings and retirement accounts.

By following the basic tips above, if you’re an investor in your 20’s or 30’s you should be more than ready for retirement when the time comes!

Questions about investing or you’d like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial?  Call 732.312.1500, or you can also obtain more information on our website at FIRSTFFCU.COM, under the Investment & Retirement Center tab.

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109.  Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution.  CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR091108-515B.