Starting the retirement income conversation
Key points to discuss with your financial professional about protecting your retirement income
The first step in developing a successful income plan for retirement is understanding your options. Here are points you should discuss with your financial professional to make sure you’re on track for the retirement you want.
1. WHY IS PROTECTED MONTHLY INCOME IN RETIREMENT IMPORTANT?
How we fund -- and live -- in retirement has fundamentally changed.
- Too often the retirement planning conversation focuses on accumulation -- growing the pool of savings to have a larger pool to "drawdown" in retirement.
- But this model forgets one important fact: the need for regular, reliable monthly income -- income you can budget on that doesn't go away when you retire.
- At a time when people are living longer and facing risks to their savings, having a monthly income that's protected for life can be a vital part of your income planning in retirement.
2. HOW MUCH PROTECTED MONTHLY INCOME WILL I NEED IN RETIREMENT?
- Ask your financial professional for help in calculating your expected monthly income in retirement.
- Ask your financial professional for help calculating your accumulated savings, so you have an idea of how much income you can generate and how long that might last.
- And don’t forget to take into account future issues, such as rising prices and unforeseen health-care expenses. Then work with your financial professional to outline the income you’ll need in retirement.
- Ask your professional to calculate your expected monthly income based on current investments and other sources of income, like Social Security, and identify if there is a gap.
- Then you should discuss how much of that income can or should be protected or shielded from potential changes due to market downturns.
3. WHAT IF MY EXPECTED MONTHLY INCOME IS LESS THAN WHAT I NEED TO LAST MY LIFETIME?
- If income from your current savings and investments, when combined with Social Security, is not enough to meet your monthly retirement income needs OR you are concerned about outliving your retirement savings, you should discuss your options with your financial professional.
- One solution is to consider an annuity, which can provide protected monthly income to supplement your savings, investments, and Social Security. An annuity can provide you with a guaranteed monthly income that you can’t outlive. Consider a discussion about annuities with your financial professional. Annuities can provide protected monthly income to supplement your savings, investments, and Social Security.
4. WHAT IS AN ANNUITY?
- An annuity is a contract with an insurance company designed for retirement purposes. It can provide you with a guaranteed monthly income that’s protected and can last for as long as you live. The guaranteed lifetime income from an annuity can be used to supplement your other sources of retirement income, such as income from your savings, investments, and Social Security.
- Ask your financial professional if a portion of your retirement plan should be invested in an annuity to give you the peace of mind that you’ll have a protected income for the rest of your life.
5. ARE THERE COSTS ASSOCIATED WITH GUARANTEED PROTECTED INCOME?
- There are a range of different types of annuities, all of which offer protected lifetime income. Depending on the type of annuity you choose and the benefits offered, there may or may not be direct costs. With certain annuities, expanded optional income protection is available for an additional cost.
- Ask for a personalized illustration to determine if the benefit of protected income is valuable to your situation.
6. WHAT IF I NEED ACCESS TO MY MONEY IN AN ANNUITY?
- With all investments, it is important to consider when you will need to access your money.
- Some annuities carry withdrawal or surrender charges that may limit when you can access your money without incurring a charge. Be sure to ask how this works.
- Be sure to ask what, if any, costs are associated with withdrawing money early (e.g., in the case of unexpected expenses such as health care or long-term care needs).
- If you want protected income to be received right away, make sure you understand all your options.
7. CAN ANNUITIES HELP PROTECT ME FROM INVESTMENT LOSSES?
- Annuities can provide you with monthly income that’s protected from market volatility.
- Some annuities can also protect your principal from losses.
- Be sure to ask about and discuss the variety of annuity options with your financial professional.
8. HOW DO I KNOW THAT MY PROTECTED INCOME IS SAFE?
All insurance companies have a rating for financial strength provided by rating agencies like A.M. Best, Standard & Poor’s, Moody’s, and Fitch. Ask your financial professional about the financial ratings of the insurance company you are considering.
9. ARE THERE OTHER STRATEGIES FOR PROTECTED MONTHLY INCOME?
Ask your professional if there are other investment strategies that provide protected lifetime income that can help mitigate the impact of rising costs of living and health care, market volatility, interest rate fluctuations, and longer lifespans. A few that come to mind are home equity and cash-value life insurance.
Annuities are long-term investments designed for retirement purposes. The value of variable annuities is subject to market risk and will fluctuate. Product guarantees are subject to the claims-paying ability of the issuing insurance company.
Earnings, when withdrawn, are subject to federal and/or state income tax, including a 10% tax penalty for withdrawals before age 59½.
Some income guarantees offered with annuities take the form of optional riders and carry charges in addition to the fees and charges associated with annuity products.
There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Investments in annuity contracts may not be suitable for all investors.
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