A SavvyInterview – Jim

Jim Poolman is Executive Director of the Indexed Annuity Leadership Council, a consortium of life insurance organizations that provides complete and factual information about fixed indexed annuities. He previously served two terms as North Dakota’s Insurance Commissioner, working to strengthen laws to protect citizens against insurance fraud, and served four terms in the North Dakota House of Representatives.

 [RetirementSavvy] What do most Americans fear most about retirement?

[Jim Poolman] Right now, more than half of Americans are afraid of outliving their income or not being able to pay for the basic necessities. This is a real fear, and unfortunately too few of us are taking actions to address these fears. One way to ensure you have income to last as long as you do is to incorporate products like Fixed Indexed Annuities, which can offer much-needed balance to your portfolio and can offer guaranteed lifetime income.


[RS] Why do so many Americans struggle to save for retirement?

[JP] Many Americans simply don’t start saving soon enough. Failing to start saving early can quickly add up.  In fact, more than a quarter of Baby Boomers—who are closest to retirement—have less than $5,000 saved.

Additionally, many Americans simply don’t make a plan. Those who plan for retirement are estimated to save three times more than those who don’t. Take into account that your expenses may increase during retirement, specifically for items such as healthcare and travel.

[RS] Most readers are probably not familiar with Fixed Index Annuities (FIAs). Can you give us a basic description of this product?

[JP] In the most basic sense, an annuity is a contract between you and an insurance company that says you will pay for the annuity in either a single lump sum or multiple payments over time. In return, the insurance company promises to make payments from the annuity to you in a single or series of payments. An FIA uses a unique formula to calculate annual interest based on the performance of a stock, bond or commodity index. The index is used as a benchmark; however, you do not actually invest in it, offering balance and protection against the ups and downs in the market. With FIAs, your principal can never decline in value due to index volatility, and it can offer lifetime income. To learn more about FIAs, check out the IALC website.

[RS] What role should they play in a retirement portfolio?

[JP] FIAs can be a key component of a balanced financial plan. FIAs are uniquely designed to help you moderate risk and reward as you chart your financial future. Incorporating less risky options is one way to create a balanced retirement portfolio. FIAs also offer the benefit of a steady lifetime income with minimum guaranteed interest credits.

[RS] What is the typical FIA fee structure?

[JP] FIA’s have no fees unless optional riders—like the Nursing-Home Rider or Terminal Illness Rider—are added. These optional riders may be added to an annuity to protect policyholders’ future long-term and immediate health costs needs. Rider fees are typically less than 1 percent. Ask your agent about what riders are included in your policy and what other amendments are offered. Also, be sure to visit the IALC Smart Buyers Checklist to ensure you are asking the right questions when purchasing an annuity.

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