Retirement has always been discussed in terms of income, not assets.  As of recently, this narrative has changed.  Over the last 30 years, we have seen a shift from Employer Defined Benefit Plans aka Pensions to Defined Contribution Plans such as the 401(k), 403(b) and 457.  During this shift and reduction in pension offerings, retirement savings in 401(k)s alone has grown to 4.1 trillion dollars as of 2017.  Having a 401(k) or similar plan puts employees in the driver’s seat of their own future, but can also mean many face retirement unprepared if they don’t plan adequately. If an employee is to be truly successful in making the most of their right to retire, it requires long-term planning and accountability to their goals.

The foundation of long-term planning starts with your retirement income plan.  Employees are now tasked with converting their retirement assets to retirement income.  This in itself can be a daunting task for many.  The key is creating reliable pension-like streams of income that have lifetime guarantees.  Your guaranteed streams of income should cover at least your basic needs in retirement such as food, water, housing, clothing, communication and transportation.  The optimal time to put your pension-like retirement income plan into place is at least 10 years before you plan to retire.  Doing this will secure the portion of your assets that will be converted to retirement income and allow it to grow safely with no market risk.  The longer you defer turning on the income. the more it will grow.

So, how do you get a pension-like income stream even if you don't have a pension? 

• The answer is a Fixed Annuity with a Lifetime Income feature

Outside of social security and actual pensions, annuities offered by insurance companies are the only other investment vehicle that can create guaranteed lifetime income streams.

How Does an Annuity With a Guaranteed Lifetime Income Feature Work?

When you invest a portion of your retirement assets into an Annuity with a Guaranteed Lifetime Income feature, the insurance company that offers the annuity will agree to pay a monthly or annual amount of income for as long as your live in exchange for a single premium.   

What Are The Benefits?

By investing in an Annuity with a Guaranteed Lifetime Income feature, you are transferring the top financial risks of retirement to the insurance company and hedging those risks.  These risks are Longevity Risk, Market Risk, and Sequence of Returns Risk.  By having Guaranteed Lifetime Income, you are now taking the guessing game out of retirement.  

How Much Should I Invest?

Our answer is always as little as possible and as much as necessary.  Your basic income needs in retirement such as food, water, housing, communication, transportation etc. would determine how much you would need to invest in an annuity.  You would first identify your income needs and then how much you expect to receive from social security and employer pensions if applicable.  Then however much is not covered by your social security and/or pension, you would fill with the annuity income.