[Narrator] Question: What happens if your retirement income takes a HIT? Allianz Answers.
So your retirement is finally on the horizon, and you're getting ready to turn your retirement savings into an income stream that can help pay for your housing and food costs, healthcare, and other expenses like entertainment and travel. So you can count on the same amount of income, year after year, for the rest of your life. Sounds great, right?
But what happens if your income takes a HIT? That stands for healthcare, inflation, and taxes. And they're three big reasons why your retirement income may not go as far as you think over time. Here's why: We know that as people get older, their health care needs increase. And what's more, the cost of medical care has risen.
[On-screen disclosure] Source: National Health Expenditures; Aggregate and Per Capita Amounts, Annual Percent Change and Percent Distribution: Selected Calendar Years 2007-2019. National health spending is projected to grow at an average rate of 5.4% per year for 2019-2028. [End of on-screen disclosure]
But the rising cost of health care isn't all you have to worry about, because historically, the general inflation rate for goods and services has been about three percent per year.
[On-screen disclosure] Consumer Price Index, All Urban Consumers (CPI-U), U.S. city average, 1920-2020, United States Department of Labor / Bureau of Labor Statistics. [End of on-screen disclosure]
That may not seem like much, but years of inflation can significantly lower your purchasing power. How significantly? Well, if you had received the same amount of income every year for the last 25 years, today, that income would buy only half of what it used to.
[On-screen disclosure] Example based on actual historical Consumer Price Index data from 1/1/1989 to 11/1/2020. Past performance is not a guarantee of future results. [End of on-screen disclosure]
And on top of that, there's also the possibility of higher taxes in the future, and not just federal taxes, but higher state and local taxes, too. So while we can't know exactly how much income you'll need in retirement, we can tell you this: Even if you're starting with what seems like a substantial annual income, these unpredictable rising costs, the HIT, could quickly chip away your purchasing power and lower your standard of living.
That's why, to help with your plans for a comfortable retirement, you may want to consider a solution like an annuity. Annuities are designed to meet long-term needs for retirement income.
[On-screen disclosure] The potential for increasing income is available through a rider that may be at an additional cost. [End of on-screen disclosure]
They provide tax-deferred growth potential, a death benefit for beneficiaries during the accumulation phase, and a guaranteed stream of income during retirement.
[On-screen disclosure] Withdrawals or partial surrenders will reduce contract values and may incur surrender or withdrawal charges. If excess withdrawals are taken during lifetime income withdrawals, the contract values will be reduced and the future lifetime income withdrawals will also be reduced. Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions. [End of on-screen disclosure]
But it can also have the potential to increase your income when your annuity has an income benefit, such as an optional income rider that may have an additional cost.
[On-screen disclosure] The potential for increasing income is available through a rider that may be at an additional cost. The potential for increasing income and what is required to realize those increase may vary by annuity contract chosen. [End of on-screen disclosure]
Keep in mind that there's more than one type of annuity. A fixed index annuity offers you the opportunity for accumulation without the risk of losing money in the market. If it's a variable annuity, you have market growth potential that's based on investment options you choose. Variable annuities are subject to investment risk, including possible loss of principal. Investment returns and principal value will fluctuate with market conditions so that units, upon distribution, may be worth more or less than the original cost.
[On-screen disclosure] Variable annuities are subject to investment risk, including possible loss of principal. Investment returns and principal value will fluctuate with market conditions so that units, upon distribution, may be worth more or less than the original cost. [End of on-screen disclosure]
Yes, it's important to plan for enough income at the time you retire, but an annuity with increasing income potential can help offset rising expenses later. So if the HIT comes, you're more ready for it.
For a retirement income solution that offers increasing income potential, talk to your financial professional. And if you don't already have a financial professional, you can contact us for help at allianzlife.com.
Allianz Life Insurance Company of North America (Allianz)
For complete information about fixed annuities, ask your financial professional for a contract or Statement of Understanding that outlines the risks, fees, and expenses as well as other information.
For more complete information about variable annuities and variable options from Allianz, ask for a prospectus from your financial professional or Allianz Life Financial Services, LLC, 800.624.0197. The prospectuses contain details on investment objectives, risks, fees, and expenses, as well as other information about the variable annuity and variable options, which you should carefully consider. Please read the prospectuses thoroughly before sending money.
This content is general information for educational purposes, and is not intended to constitute fiduciary advice. Please consult your financial professional for a specific recommendation about purchasing this product.
Withdrawals are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal additional tax.
Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.
Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of principal and credited interest, and the reassurance of a death benefit for beneficiaries.
The potential for increasing income is available through a rider that may be at an additional cost. The potential for increasing income and what is required to realize those increases may vary by annuity contract chosen.
The maximum annual income withdrawal may need to be taken in order to be eligible for an income increase.
With the purchase of any additional-cost riders, the contract’s values will be reduced by the cost of the rider. This may result in a loss of principal and interest (or gains) in any year in which the contract does not earn interest or earns interest in an amount less than the rider charge.
Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. Variable products are distributed by their affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297.
Products and feature availability may vary by state and broker/dealer.
• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF
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Allianz Life Insurance Company of North America
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