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Elder Law Minute TM
Pros and cons of using annuities for retirement income
BY RONALD FATOULLAH, ESQ.
Typically, individuals who are in the midst
of their child rearing years are not worrying
about the costs that they might incur in
their post retirement years. Unfortunately,
recent studies have shown that more attention
should in fact be paid to the health care
costs that might loom in one’s golden years.
Planning for retirement and possible health
care costs is one of the best things you can
do for your spouse and children.
Th ere are several retirement devices that
can be benefi cial when planning for retirement.
In this article, we will discuss using
annuities for retirement income and critical
points that should be taken into consideration
should an individual ever need to
apply for Medicaid.
An annuity is a contract between a life
insurance company and an individual (the
annuitant) whereby the annuitant pays a
premium, either in a lump sum or over
time, in return for the insurance company’s
promise to pay income to the annuitant.
Th ere are two types of annuities:
fi xed annuities and variable annuities. A
fi xed annuity provides a guaranteed rate of
return, regardless of the fi nancial markets,
while a variable annuity provides a rate of
return that is dependent on the fi nancial
markets. Th us, if the market is doing well,
the rate of return may be higher than that
of a fi xed annuity, but if the market is doing
poorly, the variable annuity may provide
a lower return. Most retirees want to rest
ELDER LAW
assured that they will receive a fi xed payout,
and therefore the fi xed annuity tends to be
more popular.
Th e time at which the insurer starts making
payments is called “annuitization,” and
an annuitant can receive immediate payments
or defer the payments to a date in the
future. In an immediate annuity, the annuitant
initiates the policy with a lump sum
payment and can begin collecting funds
from the annuity right away. An example of
this might be an individual purchasing an
annuity aft er receiving a large inheritance
and annuitizing the fund right away. Th is
way the money can complement an income
stream and still be gaining interest.
In contrast, with a deferred annuity, an
annuitant pays premiums over time, and
this money accumulates during “the accumulation
period,” which is the period set by
the contract between when the premiums
are paid and the policy begins to be annuitized.
Th is allows an individual to build an
account over time which is also receiving
a rate of return. When the fund is annuitized,
it can complement an individual’s
income stream at a later date such as during
retirement.
Annuities also off er certain benefi ts or
enhancements called “riders,” which cover
circumstances unrelated to income. For
example, an annuitant may add a death
benefi t rider so that if the annuitant dies
before using all the income, the balance of
the annuity will pay the annuitant’s designated
benefi ciaries. An annuitant may
also consider a terminal illness rider, allowing
the annuitant to access the principal of
the annuity without having to pay an early
withdrawal penalty or surrender fee. Th e
addition of this rider will, of course, add
to the cost.
It is also important to be aware that should
an individual require long-term health care
in the future and need to apply for Medicaid
in New York, there are requirements regarding
annuities. If an individual is applying for
Medicaid and he/she has already annuitized
the policy, the income from the annuity will
be counted as available income by Medicaid
along with his or her other income when
determining eligibility. If the individual is
married, Medicaid will require that the state
be named the secondary benefi ciary on the
policy. If an individual is single, the state
will need to be named the primary benefi -
ciary. In addition, as Medicaid uses a more
aggressive life-expectancy table than the
IRS, Medicaid may require that the annuitant
withdraw a higher payout than previously
planned.
If a policy has not been annuitized, the
money will be counted as an available
resource, and will have to be considered
when determining eligibility for Medicaid.
Medicaid is a means-tested program and
for 2019, an individual can have no more
than $15,450 in liquid assets to be eligible.
In addition, purchasing an annuity could
be considered a transfer of assets and would
aff ect eligibility for nursing home Medicaid
if completed during the fi ve years prior to
the application being submitted. To date,
Medicaid has not released the income and
resource standards for 2020.
Th ere is a great deal to consider with
regard to purchasing an annuity. Some criticism
has stemmed from the costs associated
with annuities and, in particular, the
commissions paid to agents to sell them.
If an individual is contemplating the purchase
of an annuity, it is important to ensure
that his or her fi nancial advisor is a fi duciary
and will recommend a product in his/
her best interest. In addition, if an individual
is considering the possibility of needing
long-term health care, it is wise to consult
an experienced elder care attorney prior to
purchasing an annuity.
Ronald A. Fatoullah, Esq. is the founder
of Ronald Fatoullah & Associates, a
law fi rm that concentrates in elder law,
estate planning, Medicaid planning, guardianships,
estate administration, trusts, wills,
and real estate. Th e law fi rm can be reached
at 718-261-1700, 516-466-4422, or toll free
at 1-877-ELDER-LAW or 1-877-ESTATES.
Mr. Fatoullah is also a partner advisor with
Advice Period, a wealth management fi rm,
and he can be reached at 424-256-7273.
RONALD FATOULLAH
ESQ, CELA*
editorial
Employment Matters
What is Your Personal Brand?
Whether you are looking
for your fi rst job, transitioning
into a new career, or cultivating
new business it is
important to know how to
brand and market yourself.
Most of us will change
positions and make career
transitions several times in
our lives. Th at means marketing
yourself, resume
building, and networking will
become a permanent part of
your career development in
the years ahead.
What is personal branding
and why is it important?
Your “personal brand” is language borrowed
from the marketing
world that communicates
who you are, what you do
and why you do it. Knowing
how to articulate your personal
brand will make networking
and introductions
to people you don’t know
more interesting and eff ective.
You will also use your
personal branding information
when you develop
your resume, cover letter and
LinkedIn profi le. It is important
to take some time to fi gure
out how to describe who
you are and why people would
want to get to know you.
Follow these ABC’s to showcase
your personal brand:
Assess your appearance: Your appearance
is an important refl ection of your
personal brand. Take the time to stand
in front of the mirror and make an honest
assessment of what you see. If you’re
not sure if your appearance is the best
refl ection of your personal brand, ask a
trusted friend or colleague for their honest
opinion.
Be interested and interesting:
Actively participating and contributing
to the conversation in meetings, networking
events or social media groups
demonstrates that you are engaged and
care about your work. If you appear
distracted or disinterested while others
are speaking, or spend too much
time talking about yourself or looking
at your phone you may be creating more
of a negative impression than a positive
impression.
Communicate well: Th e way in
which you communicate is a strong
refl ection of your personal brand. To
ensure that you are demonstrating a
polished, professional brand listen to
your outgoing voice mail to be sure
that it sounds inviting and professional.
Make sure that your personal email
address looks professional and eliminate
email addresses that sound juvenile
or unprofessional.
Your appearance, communication,
behavior, and online presence are all
refl ections of your personal brand. Pay
attention to details to strengthen your
image, elevate your reputation and
advance your career.
Th is column is excerpted from Mindy
Stern’s new book, “You Are the CEO of
Your Career – Mastering the Job Search
in 10 Easy Steps”. To learn how to accelerate
your career contact Mindy at info@
aimresourcegroup.com.
EMPLOYMENT
MATTERS
MINDY STERN
SPHR, SHRM-SCP,
/WWW.QNS.COM
/aimresourcegroup.com
