Press Room
Press Release

FOR IMMEDIATE RELEASE | June 30, 2004

CONTACT: George Millington, Walt & Company, (408) 496-0900, ext. 2974 or NAVA@walt.com

Deborah Tucker, NAVA, (703) 707-8830 ext. 15 or dtucker@navanet.org

 

NAVA Urges Americans to Balance Their
Retirement Plans As They Would a Healthy Diet

By Thinking in Terms of “Four Retirement Food Groups,” Americans
Can Easily Take A Bite Out of Retirement Planning Complexity

 

Reston, VA, [June 30, 2004] – For the millions of Americans who believe that planning for retirement is just too complex, the National Association for Variable Annuities (NAVA) today issued an easy-to-digest, flexible approach to retirement planning based on a familiar formula. 

 

Similar to the four basic food groups for a balanced diet, NAVA is suggesting that retirement planning be thought of in four similar categories – the Four Retirement Food Groups.  By drawing a connection to the current public focus on healthy dieting and physical fitness, NAVA hopes that applying the food group concept to financial fitness will encourage individuals to seek the help of their financial advisors to begin developing balanced strategies for a secure retirement.  The Four Retirement Food Groups are:




 

“For many, planning for a secure retirement can be a complex and daunting task in a volatile financial world,” said Mark Mackey, president and CEO of NAVA.  “Our goal is that by offering a simple analogy, we might encourage more Americans to take the time, on their own or with the help of a financial professional, to begin the very serious process of planning for their financial retirement security.”

 

The Four Retirement Food Groups provide individuals with a diversified mix of savings, insurance and investments to minimize risk and help ensure a stable, balanced retirement strategy and lifetime income.  Given that retirement objectives, available resources and other factors are unique to every individual or family, NAVA recommends that individuals consult with a professional retirement advisor to determine the relative mix of food group components.

 

Guaranteed Income: Covering Your Core Retirement Costs

While retirement plans in years past have typically centered on Social Security benefits and company-sponsored pension plans to provide guaranteed retirement income, the decline of these retirement vehicles require that today’s plans rely on annuity products as a source of guaranteed retirement income.  An annuity is a flexible retirement vehicle that can provide pension-like payments or “living insurance”:  the security of income payments to help maintain your standard of living in retirement and the guarantee that retirees will not outlive their retirement income. 

 

“In today’s world of lengthening life spans, receiving an income payment for as long as you live becomes critical to a comfortable retirement,” said Mackey.  “Retirees must to be able to count on this income to cover their core retirement costs.  It’s the cornerstone of a balanced retirement plan.”

 

Long-Term Assets: Building Equity in Your Future

Long-term assets, such as equity in a private residence, 401(k) and 403(b) plans and IRAs, as well as deferred annuities, which provide the option for guaranteed income payments for life, offer valuable benefits for prospective retirees.  Some long-term assets, particularly residential real estate in many parts of the U.S., can also provide a significant hedge against inflation.  For example, retirees may choose to “downsize,” taking advantage of lifetime capital gains exclusions to sell their home and purchase a smaller one more suited to their needs. 

 

Two options to be considered as part of a diversified investment portfolio are fixed and variable annuities.  Fixed annuities offer investors a guaranteed fixed rate of return.  Variable annuities offer a range of investment options and allow the individual to invest in various portfolios, which provide returns based on the performance of the portfolios.  Variable annuities provide wide flexibility in investment options and the amount, timing and withdrawal of the investment.  They also offer features that can provide protection of the investment against downside market risk. 

 

Insurance: Being Ready For the Reality Of Your Retirement

Many Americans underestimate the need for health and long-term care insurance in retirement.  The reality is that Medicare is seldom adequate to cover medical bills in retirement, especially in this time of rising health care and prescription drug costs.  In addition, many retirees will require increasingly expensive long-term care during their retirement, which if not planned for can quickly wipe out savings, investments and other assets.  Therefore, it is important to off-load the risks of retirement, including poor health and the risk of outliving your retirement resources, to an insurance company by purchasing products such as long-term care insurance and annuities.

 

Investments: Making Your Retirement Years Truly Golden

Today many Americans are relying on personal savings and other investments to provide the bulk of their retirement income needs.  The problem with this approach is two-fold:  first of all, that extended economic and market downturns can seriously deplete even the most conservatively invested of these assets, leaving the retiree with insufficient income. Secondarily, with Americans living longer, there is a risk of the retiree outliving his or her assets.  The concern is that one might be living in poverty in their golden years – requiring support from relatives or the state.

 

For these reasons, it is recommended that savings and investments be used to provide for discretionary spending, including travel and luxuries, during retirement.  With basic income needs ensured by guaranteed income products, savings and investments can be used to make the retirement years truly golden.

 

About The NAVA (NAVA)

NAVA is a non-profit trade association located in suburban Washington D.C.  NAVA provides a variety of services to the industry including educational forums, research, and conferences aimed at furthering the development and understanding of fixed and variable annuities, income annuities and variable life insurance.  NAVA also maintains and supports an educational website for consumers at www.RetireOnYourTerms.com.