It Takes More than Luck

One-third of Americans believe that the only way to become financially secure in life is to win the lottery. A multi-million-dollar jackpot would certainly give you a head start on financial independence Ė but donít count the winnings just yet.  You are more likely to be struck by lightning than to win the lottery. 

Achieving financial security is far more likely when people have a plan. Yet there is no guarantee that even the best-crafted plan will be successful. Because of such variables as investment performance and the length of your career, you may not be able to know exactly how much income you will receive until your retirement. 

Purchasing a fixed annuity may be one way to take some of the uncertainty out of your retirement income projections.  A fixed annuity is a contract with an insurance company. In exchange for the premiums you pay, the insurance company will provide a future income based on certain variables, such as the account balance, interest rate and payout method (income from a specified period or life.) 

Typically, a fixed annuity is funded with after-tax dollars, but the money can come from practically any source, including a retirement plan distribution or an inheritance. Any earnings accumulate tax deferred, and only the earnings are taxed upon withdrawal. There may be surrender charges in the early years of the contract, and a 10 percent federal income tax penalty for withdrawals taken prior to age 59Ĺ. But the advantage of annuities is that they have no contribution limits, and they donít require that you begin withdrawals by a certain age. Any guarantees are contingent on the claims-paying ability of the issuing insurance company. 

With a fixed annuity, you have the ability to know in advance how much income the contract will pay. It is even possible to specify an income amount and then calculate backward to arrive at the monthly premium you would need to make based on your current age. 

Itís fun to play the lottery, but itís no guarantee of financial security. A portfolio that includes fixed annuities may help add some certainty to your plans for a steady retirement income.


~Wesley E. Watkis, Financial Advisor with The W&W Group in Chevy Chase, MD. For more information, call him at 240-235-6054 or send an email:

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3) Most annuities have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the annuity.  In addition, if you surrender the contract before age 59Ĺ you may be subject to a 10 percent income tax penalty. 

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The information contained in this article is derived from sources believed to be accurate.  You should discuss any legal, tax, or financial matter with the appropriate professional.  Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.  Copyright 2005 Emerald Publications.


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