As roughly 10,000 Baby Boomers turn age 65 every day, more people are concerned about generating a stable, ongoing income in retirement. Doing so can be challenging, though, especially without the right financial tools in place.
The good news is that there are options available to you – regardless of when you plan to retire – and some of these can even provide you with an ongoing stream of retirement income no matter how long you may need it.
Before committing to any type of retirement income generator, though, it is important that you talk with an experienced advisor. That way, you can be more assured that the tools you put in place are the right fit for your specific needs and objectives.
Even if you’ve “done everything right,” such as setting aside money for retirement, it could be that your future income plan is based on “traditional,” but outdated, strategies. If this is the case, you may find that your income in retirement is less than you hoped it would be.
While various income strategies may have worked for retirees in the past – such as your parents and grandparents - using these same methods today (and tomorrow) won’t likely produce the same results. There are several reasons why this is true.
For instance, up until just a couple of decades ago, many retirees could count on income from three distinct sources. These included:
In most cases, the combination of these sources of income was more than enough to allow retirees to live comfortably for the remainder of their lives. But fast forward to today, and the retirement income landscape is very different – and there are a number of reasons for this, too.
First, most employers have done away with defined benefit pension plans due in large part to the expense of paying out a stream of lifetime income to their retired employees (and in some instances, to the retiree’s surviving spouse, as well).
Next, while Social Security is still alive and well, this program is also on shaky financial ground. Because so many people are living longer these days, Social Security needs to pay out benefits for a longer period of time. This, coupled with fewer workers paying into the system, has led to some financial struggles for Social Security.
One way that the Social Security Administration (SSA) has tried to alleviate this pressure is by increasing the full retirement age (i.e., the age at which you can receive your full amount of benefit).
|Year of birth||Minimum retirement age for full benefits|
|Year of birth1937 or before||Minimum retirement age for full benefits65|
|Year of birth1938||Minimum retirement age for full benefits65 + 2 months|
|Year of birth1939||Minimum retirement age for full benefits65 + 4 months|
|Year of birth1940||Minimum retirement age for full benefits65 + 6 months|
|Year of birth1941||Minimum retirement age for full benefits65 + 8 months|
|Year of birth1942||Minimum retirement age for full benefits65 + 10 months|
|Year of birth1943 to 1954||Minimum retirement age for full benefits66|
|Year of birth1955||Minimum retirement age for full benefits66 + 2 months|
|Year of birth1956||Minimum retirement age for full benefits66 + 4 months|
|Year of birth1957||Minimum retirement age for full benefits66 + 6 months|
|Year of birth1958||Minimum retirement age for full benefits66 + 8 months|
|Year of birth1959||Minimum retirement age for full benefits66 + 10 months|
|Year of birth1960 or later||Minimum retirement age for full benefits67|
Even if you delay taking your Social Security retirement income benefits, though, the SSA estimates that “if you have average earnings, your Social Security retirement benefits will replace only about 40 percent.” So, relying primarily on Social Security income could still leave you with a “gap” between what you have coming in and what you need for paying your living expenses in retirement.
Another income source that many retirees may have available is personal savings and investments. Today, because employer-sponsored pensions have all but disappeared, retirement income that is generated from personal funds has become more important than ever.
But being able to count on this source of income can be somewhat tricky, too, given the volatile stock market, along with historically low interest rates on traditional retirement income sources like bonds and CDs.
One way to fill in the gap between the income you’ll have and the income you’ll need in retirement is with an annuity. These financial vehicles are designed for paying out a set stream of income for a specific period of time – and, if you choose the lifetime income option, you can count on incoming cash flow for the remainder of your lifetime.
There are many different types of annuities, though, such as:
With that in mind, it is essential that you have a good understanding of which type of annuity may fit your needs best.
A key component to creating a retirement income plan is understanding your current and future financial needs, as well as knowing which financial vehicles can best help you reach your goals.
Unfortunately, though, there are some financial advisors who tend to “push” products, rather than using solutions that match up with investors’ goals. This is particularly the case if an advisor works certain companies that only have access to a short list of options.
Alternatively, working with a properly registered and licensed fiduciary can open up a wider array of solutions and financial vehicles that work best for you.
Given an uncertain financial landscape today, one of the biggest fears on the minds of retirees is running out of money. Alleviating this fear can start with getting sound financial advice – which is the cornerstone of any good, solid retirement income plan.
In addition, once your plan is in place, you shouldn’t just “set it and forget it.” Rather, your plan should ideally be reviewed on a regular basis. That way, it can be updated, based on revised financial objectives and major life changes, such as marriage or divorce, a new job or promotion, or the purchase or sale of your home.
Alliance America is an insurance and financial services company. Our financial planners and retirement income certified professionals can assist you in maximizing your retirement resources and help you to achieve your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.