Retirees

Annuities

People are living longer and that means more time and savings will be spent in retirement. If you need a tax-deferred investment to provide a guaranteed1 stream of income for life or a specified number of years, it might be worth considering an annuity. An annuity is a contract between an insurance company and an annuity owner. In exchange for a purchase payment, or series of payments, the insurance company guarantees1 to pay a stream of income in the future.

There are two types of annuities—Immediate and Deferred.

Immediate Annuities

An immediate annuity is usually purchased with a single premium and begins a stream of income within the first 12 months from the date of issue. You decide when payments will begin within that period and how long to receive income. There are two types of immediate annuities: fixed and variable.

  • Immediate Fixed Annuity – An immediate fixed annuity provides a guaranteed and predictable stream of income during the payout period.
  • Immediate Fixed and Variable Annuity – An immediate fixed and variable annuity provides a guaranteed stream of income. The variable income payments fluctuate based on the performance of the variable investment choices selected. A fixed account is also usually offered as an investment choice within this type of contract.

Deferred Annuities

A deferred annuity is specifically designed to help accumulate assets for retirement. It also offers the ability to turn those assets into a guaranteed stream of income at some point in the future. You decide when payments begin and how long to receive income. There are basically two types of deferred annuities: fixed and variable.

  • Deferred Fixed Annuity – A deferred fixed annuity earns interest during the contract’s accumulation period. The interest rates are set by the issuing company and are guaranteed not to be lower than the minimum guaranteed interest rate shown in the contract. A contract’s accumulated assets can be converted into a guaranteed stream of income for the future.
  • Deferred Variable Annuity – A deferred variable annuity offers variable investment choices (and usually a fixed account) in which the contract owner can invest. During the accumulation period, the investment return and value of the annuity will fluctuate in accordance with the investments selected. A contract’s accumulated assets can be converted into a guaranteed stream of income for the future.

1Guarantees are based on the claims-paying ability of the issuing company and do not apply to the investment performance or safety of the amounts held in the variable investment options.

Annuities are not appropriate for everyone. There are fees and charges associated with owning an annuity.

Annuities do not provide any additional tax advantage when used to fund a qualified plan. Investors should consider buying an annuity to fund a qualified plan for the annuity’s additional features, such as lifetime income payments and death benefit protection.

Variable annuities are sold by prospectus. Before purchasing a variable annuity contract, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity contract and its underlying investment choices. For this and other information, obtain the product prospectus and underlying investment choices prospectus from your registered representative. The prospectuses should be carefully considered before investing or sending money.

If taken prior to age 59 1/2, a 10% federal income tax penalty may apply. This information is not written or intended as specific tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. MassMutual, its employees, and representatives are not authorized to give legal or tax advice. Individuals are encouraged to seek advice from their own tax or legal counsel.

Principal Underwriters: MML Distributors, LLC (MMLD) and MML Investors Services LLC (MMLISI) Members FINRA {www.finra.org} and SiPC {www.sipc.org}. MMLD and MMLISI are subsidiaries of Massachusetts Mutual Life Insurance Company (MassMutual), 1295 State Street, Springfield, MA 01111-0001.

Insurance products issued by Massachusetts Mutual Life Insurance Company, Springfield, MA 01111 and its subsidiary CM Life Insurance Company, Enfield, CT 06082.

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Long Term Care

For most of us, it is unpleasant to envision a time when performing routine tasks may become difficult as the result of injury, illness or aging. If the time comes when you need substantial assistance performing daily tasks, it is unlikely you will want cost to be the primary decision-making factor for your long term care. Long term care (LTC) services can be expensive and costs generally continue to rise. Planning early can help ensure that you have more control in receiving the type of care you want — in the setting you choose, should the need arise.

What is Long Term Care?

Long term care includes a variety of services and supports to help meet personal care needs over an extended period of time. The services include help performing Activities of Daily Living (ADLs), such as: bathing, continence, using the toilet, transferring to/from a bed or chair, dressing and eating. Long term care services are generally not covered under personal health insurance or Medicare because they are not intended to cure, improve or treat a specific medical condition. Medicaid may help individuals with income and assets below state requirements.

Whether long term care services occur in a nursing home, assisted living facility or your own home, the costs can be a huge expense. The average stay in a nursing home is 835 days (2.3 years) and $183,700.2 The national median hourly rate for a home health aide is $20 and that can add up quickly.

Potential Ways to Pay for Long Term Care

A variety of sources may be used when expenses do not qualify under Medicare or personal health insurance.

In some cases, family members and friends may be able to help with some of the care you need — preparing meals, providing transportation; helping with housework, bills or medication for example. Caregiving can be rewarding, but it can also be stressful. It’s important to recognize when family caregivers need a break and/or can no longer provide the care you require.

When professional long-term care is necessary, one option is paying with your own resources such as savings, investments, income (pension, Social Security, annuities) or even your home or home equity. Consider how long these sources might last and what other goals may be unfulfilled if these funds were used for care.

Another option is insurance designed for long term care expenses, or with the option to use the policy’s primary benefits for long term care if needed. For example, your existing life insurance or annuity may contain provisions to utilize benefits early in the event you need long term care. It is important to have an insurance professional review your existing policies and carefully explain the differences in the types of coverage available today.

Finally, you may be able to qualify for your state’s Medicaid program. Medicaid only pays after you meet eligibility requirements, including specific restrictions on income and assets.

Making it Work

As you can see, there are many alternatives to consider when preparing for the possibility that you may need long term care. Generally, beginning early has advantages. First, at younger ages, you are more likely to be healthy and qualify for various types of insurance. Second, starting early means you may be able to meet your goal with lower installment savings amounts or annual premiums.

You don’t have to prepare for long term care expenses alone. Our Financial Services Representatives can review a variety of solutions that may help you meet your goal

Tools and Resources

We offer a wide range of useful resources – from calculators to educational articles – that will help you better understand your financial needs.

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Trust Services

A trust is a fiduciary arrangement through which the trustee manages assets for the benefit of third parties. A trust is commonly used to transfer wealth to heirs or to favored charitable organizations. Insurance products, such as life insurance policies, annuity contracts and disability policies, may be used to fund trusts in appropriate circumstances.

Trusts are very flexible and may be drafted to meet the specific intent of the individuals creating the trust and customized to meet the specific needs of trust beneficiaries. You can use trusts as a key element in a comprehensive estate and wealth transfer plan, or to otherwise direct how your legacy will be managed and distributed after your death.

Advanced estate planning and trust services require specific knowledge typically not provided by many financial advisors. Using trust services means collaborating with a third party that has your best interests in mind while the trust is set up through an attorney. Trust services include:

  • Investment management & prudent diversification of account assets;
  • Periodic statements, annual tax reporting and investment reporting; cash management, safe custody and prompt distribution of assets;
  • Processing of capital changes such as stock dividends, splits, exchanges and tenders;
  • Bill paying, automated deposits and disbursements (ACH and wire);
  • Income collection and allocation

Traditionally, advisors had to refer clients to other providers. The person appointed as your trustee should have the knowledge and capability necessary to administer sometimes complex arrangements and to meet the fiduciary duties and responsibilities that are imposed under trust law. If properly drafted by an attorney and administered by the trustee, a trust can ensure that trust assets are managed and distributed after your death as you had desired.

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