Will You Run Out of Income Before You Run Out of Time?

Longer life expectencies today can mean longer time in retirement – and that can lead to more travel, more time to spend with family and loved ones, and more time to do the things that you really want to do in life.

But living longer also means that the savings you’ve built up during your working years must last for a longer period of time – and, given a historically low interest rate environment, a roller coaster stock market, and additional years of living expenses to pay, this can also lead to one of the biggest questions on the minds of both retirees and those who are approaching retirement today:

“Will I have enough money to last for the rest of my life?”

We’re Not Planning Yesterday’s Retirement

Throughout the years, retirement income has typically come from three key sources. These have included pensions, Social Security, and personal savings. In the past, these have usually been enough to support most retirees throughout their “golden” years.

But fast forward to today and you’ll see that a lot has changed that has caused a shift in the way people must plan. First, fewer and fewer companies are offering defined benefit pension plans. This means that instead of having a set amount of retirement income that they can depend on, individuals must now take the reins themselves to ensure that they have enough.

Social Security has also become uncertain over the past several years. And, while this program will still likely be in place in the future, what many people may not realize is that these benefits really only replace about 40% of an average wage earner’s pre-retirement wages.1

This leaves personal savings. While in the past, retirees would often use a particular strategy for “drawing down” a set percentage of their savings each year in order to supplement income, today that doesn’t typically work.

Why not?

The primary reason is because, given today’s volatile stock market, coupled with longer life expectencies – strategies such as this can run the risk of a retiree depleting their savings much more quickly, and therefore their income, at the time that it is needed the most.

So, How Can You Bridge the Gap

The good news is that there are options available for providing a safe retirement income that will provide an ongoing, guaranteed incoming cash flow – regardless of how long a retiree lives. This can be accomplished through an annuity.

There are many different types of annuities to choose from, including fixed, variable, and indexed annuities – and each has certain benefits, depending on your specific needs.

When it comes time to convert your savings into an income stream, you can guarantee income for life by choosing the lifetime income option. You can even opt to guarantee income for a second individual such as your spouse by choosing the joint life option, so that you will both receive income for the remainder of your life – regardless of how long you live.

Taking the Next Step Now

The retirement that people plan for today is quite a bit different than how it was planned for in the past – and because of that, it will take an entirely different approach in order to be successful.

The best time to identify and bridge the gap of a potential income shortfall is right now – so that you’ll be ready when the time of your retirement arrives. To determine which type of annuity may be right for you, we can help you to compare the different plans, options, and benefits.

 

Source:

Social Security – Understanding the Benefits. Page 4. http://www.socialsecurity.gov/pubs/EN-05-10024.pdf