In another blog, we provided a few tips for success in retirement. Let’s take a step back and explore what it can be like to consider retiring, some realities in today’s retirement and a possible solution to common financial concerns.
For many, the word “retirement” can bring a variety of emotions.
Some dream of spending every day on a golf course, at the beach, with grandchildren, gardening or traveling. After 40+ years of working hard, raising a family and paying college bills, some feel ready to embrace those hobbies and enjoy their time away from work.
For others, retirement can feel a lot like the dog who caught the bus: something we must do but aren’t sure what will happen after we get there. We can only golf until our hands are blistered and can only travel until our bank accounts need a break. And we know that our bank accounts are used to being kept up with a regular paycheck from our employers — which can leave us with valid concerns and questions.
- Am I prepared?
- What happens to that bank account in retirement?
- How do I keep up with my finances?
- How do I guarantee that I’ll have income throughout retirement?
Put a retirement income plan in place that works for you
You can ensure you’re prepared for your retirement by planning ahead.
To help yourself grow your retirement savings, you can start building the habit of saving what you need to and only spending what’s left.
Additionally, a financial professional can help you put a retirement income plan in place that works for your needs — one that can keep money coming in after you’ve stopped working.
Realities of retirement income today
Retirement today may not look the same as it did for earlier generations.
For example, pension plans — which would pay you a monthly check for the rest of your life — were a multi-decade trend for companies to offer employees. But they’re no longer common and have been declining over the last couple decades.
According to Willis Towers Watson, only 14% of Fortune 500 companies in 2019 were still offering a defined benefit plan, compared to 59% in 1998.1
Behind this shift is that people are living longer and needing income longer than they used to.
According to the CDC, the average life expectancy in the United States in 2019 was 78.8 years old,2 compared to 73 years old in 1980.3 The growth in average life expectancy tells us more and more people are living well into their 80s, 90s, and even 100s.
This increased life expectancy created a need for more years of guaranteed retirement income. And sources like Social Security and pensions may not be enough to meet your income needs in retirement.
1 "Retirement offerings in the Fortune 500: 1998 – 2019", 2020
2 “Mortality in the United States,” 2019
3 “Mortality Trends in the United States, 1900-2018”
The reality today is the importance of investing wisely and planning how you’ll generate income after retirement.
One way of doing this? Income annuities.
Give yourself protected income for retirement
So often, the focus of planning for retirement is on growing our retirement savings. We should also focus on turning our accumulated assets into income in retirement.
That’s the end goal, right?
For those looking to retire, one purpose of accumulation is to create monthly retirement income. By purchasing an income annuity, you will be generating checks that you can’t outlive. This is a guaranteed way to secure income during your retirement years.
If guaranteeing your income sounds good, the next step is to talk to your financial professional. Here are a few questions you’ll want to ask your financial professional:
- How much money do you need in retirement?
- What are your guaranteed sources of income (e.g., Social Security)?
- What is your income gap between how much you’ll need and how much you currently have guaranteed?
- How can you fill that gap with other retirement assets that create lifetime income?
Talking through these questions with your financial professional will help you determine if an income annuity might be a solution for your situation.
In the next part of this series, we’ll dig in a bit deeper into income annuities and how they could work for you. Subscribe to the Aspirement to stay in the know!
