Retirement income

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Dear Mr. Berko: I'm 69, and my wife is 77. We have no debts and no children. When we married 51 years ago, we decided children are a waste of time, energy and money. After 37 years of working with the same firm, I'm quitting. I don't know how I lasted that long, because the company and its owners are not nice to work for. But I have $317,000 to roll over from my 401(k) to an individual retirement account. A broker we met recommends a list of high-yield stocks paying 12 to 18 percent. Another adviser, who counsels retiring employees, says that the safest and best investment would be an annuity that right away would pay us $1,479 a month, or $17,748 annually, till both of us die. He calls this an immediate annuity because it would begin paying us immediately.

This 401(k) is the only asset we have besides our Social Security and our big house, which is worth $225,000. We're thinking of selling our big home and buying a smaller town house for $116,000. After paying moving costs, we would have about $100,000 remaining. We'd invest $60,000 of that cash in those 12-18 percent stocks, giving us $7,000 to $9,000 annually, and keep $40,000 for emergency cash. My wife and I get $28,000 annually from Social Security. If we could get nearly $18,000 from an annuity plus $7,000 to $9,000 from stocks, that would be the cat's meow. We need at least $55,000 a year to live on. Any help you could give us would be great.

- SA, Indianapolis

Dear SA: Imagine a man who dies without children at the end of a million years of evolution. His ancestors lived through the ages, fished, hunted saber-toothed tigers and woolly mammoths - and it all ends here in a puddle of blood. His whole lineage and whatever potential his progeny might have had in the centuries ahead are gone. How sad and incomplete!

Getting a safe 12 to 18 percent dependable income would be purrfect but impossible, even with highly regarded speculative issues such as Mesabi Trust, Portugal Telecom, TICC Capital, LinnCo, Northern Tier Energy, Calumet Specialty Products Partners or Dominion Resources. Broker No. 1 knows his high-income stocks, but he should also know that these would not be suitable issues for you. This Neanderthal is dangerous to society, and if he were to take a long walk off a high alp, Indianapolis would be a safer place for investors. An immediate annuity is actually a great idea; however, the idiot who's counseling you should go back to annuity school or return to his previous job selling recycled cardiac stents. There are good annuities and bad annuities, and this isn't a good one. It's a high-commission (10 percent) piece of garbage and poorly rated. Given your age and stage, a high-quality immediate annuity would give you two guaranteed lifetime income of between $22,000 and $26,000 a year. Look for such names as Pacific Life, John Hancock, Sun Life Financial, Northwestern Mutual, Protective Life, Thrivent Financial, AXA Equitable, New York Life and Jackson National. Those are some of the nation's top insurers. I suggest that you review several of them and take the highest rate that's offered. Before signing the papers, you might wish to check with me first.

You don't have to sell your big house. Consider keeping your house and taking out a reverse-annuity mortgage, or RAM. In this case, the bank would send you a monthly check, which I guesstimate would be somewhere in the neighborhood of $800 to $1,100 a month for the next 827 years or till you've both passed, whichever comes first. The precise amount you would get depends on the value of your home and your ages, but that monthly check would be tax-free. And you wouldn't have any liability if your home were to crash in value or be worth enormously less than what you have received. RAMs are ideal for many retirees, and AARP has some excellent, easy-to-understand reading material that you can ask for.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

© 2015 Creators.com

Published: Tue, Jun 23, 2015

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