Searching for Guaranteed Income in Retirement? You Are Not Alone

August 8, 2019

Instead of pensions, most Americans today have defined contribution plans, such as 401(k)s. At retirement, these accumulated savings can be rolled into an IRA but with little direction from many financial advisors on how that money can be used as income. 

If you have adequate savings in an IRA, how much of that can you safely spend each year to support your lifestyle in retirement? This question isn’t a simple one to answer.

Deciding the amount of income you can spend each month in retirement is difficult primarily because retirees don’t know how long they’re going to live. This leaves many individuals with two choices. Spend a lot and enjoy retirement to the fullest at the expense of maybe running out of money, or spend little in the hopes that your money won’t run out later in life. 

However, there is an additional choice. An annuity can provide guaranteed income in retirement. At the most basic level, an annuity is a contract between an individual and an insurance company. In exchange for paying a set amount of money, usually a lump sum upfront, the insurance company agrees to pay out monthly income to that person for a set period of time. For those planning for retirement, annuities can provide an interesting benefit that cannot be found in many other financial products: guaranteed lifetime income.

Annuity contracts with this feature offer the certainty that the customer will receive the same payout no matter how long he or she lives. This lifetime benefit provides protection against what is known as “longevity risk” which is really just a fancy name for the risk of outliving your money. 

When considering the options available to modern retirees, it is important to ask yourself a few questions: 

  • How much of my savings would I be comfortable setting aside to fund a guaranteed amount of income? 
  • How much would I be comfortable having invested in a low-cost portfolio for growth? 
  • How much do I need in the event of an emergency or to cover medical expenses?
  • Do I plan on passing on some portion of my retirement savings to my heirs?

By looking at your own goals and what is important to you as you plan for retirement, it can help you understand what types of financial products may be the best fit for your needs, your risk tolerance, and your lifestyle.

As part of that holistic retirement picture, the guaranteed lifetime income offered by an annuity may be a helpful tool for getting through retirement without running out of money. At Kindur, we believe in providing our customers with the tools and knowledge to understand their options, decide what their particular retirement should like, and retire fearlessly.

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