Three major retirement income sources and how to use them to help ensure a comfortable, steady stream of income in retirement.
The three major retirement income sources:
- Defined Benefit Plans
- Social Security Benefits
- Personal Savings
Defined benefit plans, The good and the bad!
The good or actually great part most people loved about having a defined benefit plan is that it provided an income for life. Great right? Of course it was and if you have one of these you know it.
The bad though is that even back as far as 1979, less than 33% of private sector workers were covered by a defined benefits plan and by 2011, that number dropped to just 3%.
Also bad, is that as we saw in 2006 when Delta Airlines announced it was terminating its pilot pension program that affected 6000 pilots. The pilots who participated in the program were left with reduced benefits. So even though it seemed like a sure thing, it wasn’t.
The bottom line is the defined benefit plan is all but nonexistent anymore.
So, what do you do if you don’t have a defined benefit plan?
Retirement benefits from Social Security have taken on a hugely important role in retirement for the majority of Americans.
It’s reported that:
- 90% of americans 65 and up receive Social Security benefits.
- For 23% of married couples and 46% of singles, it’s 90% or more of their income.
- For employees earning “average” wages, Social Security benefits only end up replacing close to 40% of their pre-retirement income.
Plus, it’s projected that by the year 2033, Social Security Trust funds will be completely depleted.
While we may see some changes that plump up the reserve account, there’s just no way to be sure.
What makes Social Security so popular? Three things:
It’s a guaranteed source of income for the rest of your life (supposedly).
It gives cost of living adjustments to keep pace with inflation.
The benefits can be given to your family, in case you are not there to support them.
What does this mean for you? Gaining a clear picture of what what you can expect from Social Security is more important than ever.
There are resources, such as ssa.gov or you can call a company like Retirement Solutions to help decide when to begin your Social Security retirement benefits.
You’ll also likely want to work with a financial professional to identify which filing strategy makes the most sense for you and figure out any income gaps that may be left so you can plan how to best cover them.
Did you know? There are multiple filing strategies that can be used to enhance your Social Security retirement benefits. Retirement Solutions will help you identify the right one for you at no charge. Click here to schedule a free Social Security strategy session with Ron and Christie Adams.
The third, most diverse and most exciting retirement income source is personal savings.
Made up of mutual funds, stocks, 401(k)s, IRA’s and actual savings accounts. This is the part you have the most control over as well as where you can most easily fortify your income stream.
The big question is, can you use your personal savings assets to replicate the highly desirable benefits that are enjoyed in both a Defined Benefit Plan and/or a Social Security plan?
The answer is yes, you can:
- Create a source of income for the rest of your life, guaranteed.* (Similar to a Defined Benefits plan [or pension] and Social Security retirement benefits).
- Possibly replicate the increases which are found in Cost of Living Allowances, which can help your income keep pace with inflation. (This is similar to Social Security benefits).
- Help ensure that your retirement savings are provided to your family, in case you’re not there to help support them. (Similar to a Defined Benefits plan as well as Social Security).
So, how can you accomplish these three things?
There are financial products available designed to do those exact things. Regardless of how you choose to build your nest egg, these products can help transform it into a guaranteed stream of income for life!
How to turn your personal savings money into a guaranteed income stream for life:
Fixed Index Annuities also referred to as FIA’s.
A fixed index annuity can provide you with principal protection, the potential for tax-deferred growth, a death benefit for beneficiaries, and several income options. In addition, a fixed index annuity has the potential to earn interest based on changes in the market. (Although market growth may affect fixed index annuity values, the annuity does not directly participate in any stock or equity investment. This means, by purchasing a fixed index annuity, you are not buying shares of any stock or index.
Here’s a hypothetical scenario for greater clarification:
Sarah is healthy and 58-years of age, t0 keep the math easy, we’ll say she’s currently earning $100,000 a year. During retirement she wants to attend the running of the bulls in Spain, drive the autobahn in Germany and ride a camel across Egypt. She’s done some budget planning and has determined she’ll need $50,000 per year in retirement income to support her lifestyle.
She has $500,000 in a 401(k) that she rolled into an IRA 10 years ago.
She recently visited her financial professional to choose her best option for Social Security benefits. Even though she is able to file at age 62, she made the decision to wait full retirement age of 66 to file for her Social Security benefits.
Sarah’s budget breaks down like this:
Income needed – $50,000 per year, Social Security Benefits – $32,502 per year, leaving Sarah needing to find an extra $17,498 per year to have her preferred lifestyle.
Sarah’s first option is that she can withdraw the money from her IRA, as needed.
How long can she live on the money? And, how can she be SURE she doesn’t outlive her money?
Sarah can transfer a portion of her $500,000 IRA into a Fixed Index Annuity with an optional rider available at an additional cost.
Fixed Index Annuities have long been able to provide a lifetime stream of income and purchasing an optional income rider can provide some additional features, such as the opportunity for increasing income, which can help reduce the risk of inflation.
Sarah and her financial professional carefully choose a product that allows for a potential increase in income each year and pays out a death benefit when she passes away. The projected income generated fills Sarah’s income gap, and Sarah now knows she has a strong foundation of guaranteed income to get her through retirement.
NOTE** Not all product features are available on all products. For full details on fixed index annuities, income riders, optional features, and associated costs, call Retirement Solutions for a Free no obligation consultation.
Best of all, because she’s fortified her retirement income, Sarah is now comfortable using some of her savings to travel the way she always planned.
Is Sarah’s scenario the right path for everyone? No. Understanding the options available and learning of other people’s decisions and outcomes can be very helpful. Whether you’re 10 years from retirement or already retired, if you’d like to plan a strategy designed to help you live retirement with peace of mind call Ron and Christie at Retirement Solutions, there’s no cost or obligation and they’ll help you create a retirement plan to give you the lifestyle you’re looking for.
Questions to ask yourself:
How much retirement income will I need, and am I facing any income gaps?
Should I consider fortifying my income stream through the use of a fixed indexed annuity?
Should I consider a Cash Value Life insurance policy to help supplement my income during retirement?
Questions to ask Ron and Christie:
What are the pros and cons of fixed annuities, and how do I determine if I should add them to my retirement strategy?
What are the various Social Security benefits filing strategies and which one is right for me and my unique situation?
Should I consider Cash Value Life insurance as well to help supplement the income I need in retirement.
Ready? Call now: 423-710-2009