GUARANTEED LIFETIME INCOME

 

Running out of money in retirement is a major concern for many Americans. Today’s retirees and those nearing retirement face new and complex financial challenges. With more than 10,000 Americans retiring every day, the vast majority do so without a pension to provide a lifetime income stream, relying solely on Social Security and their accumulated assets. Traditional pensions have virtually disappeared, and most can no longer rely on the pensions that many workers in prior decades enjoyed. Instead, employees and employers tend to contribute to employer-sponsored retirement plans where the employee takes on the majority of the risk and must make investment decisions.

 

Half of U.S. households are at risk of not having enough income to maintain their standard of living in retirement, according to the Center for Retirement Research at Boston College. Several of the biggest factors that cause people to run out of money in later life include:

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• Longevity risk: living outliving your savings

• Market risks, such as poor stock returns

• The increasing cost of health care, especially long-term care

• Inflation

• Shocks and unexpected expenses

 

Fears of running out of money prevent many retirees from tapping the nest egg they’ve worked a lifetime to save. Social Security alone is likely not enough for many retirees to maintain an appropriate standard of living. One solution is to create a guaranteed stream of monthly income that, similar to a pension, provides a steady source of income for the lifetime of the retiree. Guaranteed lifetime payment strategies are less about maximizing your returns and more about ensuring you have the necessary income to spend if you live longer than you might think.

 

You may be able to take a percentage of your portfolio and create your own pension that you can never outlive. This strategy, when combined with social security, can provide you with enough monthly income to cover your expenses in retirement. You’ll still have the remaining percentage of your portfolio to invest and can perhaps invest more aggressively than you would if you were not receiving that supplemental guaranteed income stream.

 

You want peace of mind in retirement. Should you be blessed with long life, you don’t want to worry about how to pay for it.

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