There is a growing concern clambering upon the lives of elderly Americans. The concern involves the growing rate of Americans who are living longer as a direct result of modern science. Despite the obvious fact that modern science bequeathed human society with longevity and a higher standard of living, it also sprung forth the ever-growing problem of people outliving their nest eggs (i.e., their pensions and savings).

Jonathan Clements, of The Wall Street Journal, wrote an article titled "Four Ways to Avoid Outliving Your Money." In it he explains that most Americans are now living longer than they did decades ago and as a result, they are outliving their savings. Consequently, many Americans are forced to sacrifice their assurance of a safe and secure life in their old age.

Additionally, there is the loss of pension fund money because of corporate bankruptcies. The U.S. government guarantees that it will step in and support its citizens' pensions when their employers are unable to. However, do not expect to get any more than half of what you would have normally received had your employer not fell into bankruptcy. In some cases, retirees may get nothing.

Clements provides several suggestions to help you better preserve your money throughout your lifetime. I, on the other hand, have only one. As intriguing as his may sound, I am sure my one suggestion far surpasses his several on many levels, such as personal security and financial benefits. The following paragraphs outline, compare and contrast both the pros and cons of the different policies you can adopt to assure a safe and secure future so that you can decide for yourself which is the better choice.

Clements, in his article, provides four ways in which one can secure a comfortable future:

1. The Immediate Fixed Annuity, a U.S. policy that allows you to put up, let us say, $100,000 and receive a 3 percent return (or $3,000 annually). However, whatever remains upon the death of you and your spouse goes to the insurance company. What's more, your payout will buy less if the dollar devalues.
2. The Immediate Variable Annuity, a U.S. policy that allows you to invest your money in a "menu of mutual funds." If, according to Clements, "the funds you pick beat the annuity's hurdle rate, which might be 3.5 to 5 percent annually, your income will grow overtime." On the other hand, how many of you think you can consistently earn 3.5 to 5 percent, plus an inflation premium, annually? Perhaps, the more compelling reason to steer clear of both this option and the first is the fact that you leave your remaining monies to the insurance company upon death of both you and your spouse.
3. Living Benefits, a U.S. policy that allows you to tack on a living benefit to a tax-deferred variable annuity. Then, you invest your money in stocks with the hope of increasing your fixed-rate income. This annuity allows you to pass any remaining money to heirs upon the death of both you and your spouse. The drawback is dollar devaluation and the annuity's excessive cost. A typical annual charge is 2.5 to 3 percent. Historically, inflation averages approximately 3 percent a year. Therefore, you must earn at least 6 percent a year just to break even. What's more, this would prove to be an extremely difficult task during times of slow growth, recession, political instability or all of the above.
4. Longevity Insurance, a U.S. policy that allows you to make an initial substantial investment and receive income after a certain age. Let us say you make this investment at the age of 65. Then, if you live past the age of, let us say, 85, you start receiving income. Therefore, if you and/or your spouse happen to live longer than your money, you would still receive income throughout the rest of your lives. According to Clements, "…longevity insurance is not exactly selling like hotcakes. Still, outliving your savings is a real danger and longevity insurance strikes me as a great way to limit that risk."

However, in my opinion, there is an even safer, less expensive and more beneficial way to avoid the risk of outliving your money-the Swiss Annuity. Of course, the only real drawback is that you cannot purchase a Swiss annuity in the U.S. You must contact the insurance company directly. I will be glad to help anyone interested in obtaining more information regarding the Traditional Swiss Annuity and/or the New Era Wrap Around Annuity. The latter annuity is a new policy that allows you to wrap what you already own in the U.S. into a Swiss annuity. The advantage is your Swiss annuity is free from the clutches of potential lawsuits or bankruptcy and the tax deferral can be passed on to heirs for a few generations. Moreover, a Swiss annuity can be tacked onto your IRA.

For more information, contact my office via e-mail at net2host2@adelphia.net or call (760) 720-0107.

Kenneth Coleman