Guaranteed lifetime income is exactly as it sounds – a steady income that you receive for as long as you live-it is a Guaranteed Paycheck for Life. This is achieved through certain financial products, such as annuities, that promise to pay you a set amount of money regularly for the rest of your life. This provides certainty and financial security, eliminating the worry of outliving your savings.
Why Consider Guaranteed Lifetime Income?
The market can take major up and down turns, but there’s one thing that really matters when it comes to retirement: the order of returns. With investment-based retirement plans like 401(k)s and IRAs, retirees must sell portions of their portfolios for income. If drawdowns begin after the value of investments has declined, the drawn income will deplete a greater proportion of investments than if growth had occurred first. That’s why lifetime retirement income plans are the way to go. The GAO (General Accounting Office) found in a 2011 study that these plans reduce retirees’ exposure to investment and longevity risks.
401(k)s and IRAs cannot provide guaranteed lifetime income.
Incorporating Guaranteed Lifetime Income into Your Retirement Planning
Covering your basic living expenses with Guaranteed Lifetime Income is an essential step to an optimal retirement. What are basic living expenses? Mortgage, Utilities, Groceries. We tell clients that our first step is to estimate their MUG number and then protect it with Guaranteed Lifetime Income.
To effectively incorporate guaranteed lifetime income into your retirement planning, it’s important to first understand your financial needs and goals. Do you have expenses that will persist through retirement? How much income will you need to maintain your desired lifestyle? Once you have these answers, you can work on a strategy that includes income-generating products like annuities.
Conclusion
You’re 65 and getting ready to retire.
You’re reviewing your retirement savings account to see how much money you’ll have to spend in retirement.
If you live to be 85, those funds must last 20 years.
But, if you live to be 95, that same pot of money has to last you 30 years. That’s 50% more income required from the same assets.
Navigating the retirement landscape can be challenging, but with the right strategy and focus on guaranteed lifetime income, it’s possible to secure a comfortable and financially stable life post-retirement. While interest rates and returns on investments can fluctuate, a guaranteed lifetime income remains constant, providing you with peace of mind and financial security.
