As an annuity owner, you take comfort in knowing that you have planned for an uninterrupted lifelong retirement income stream. Working alongside other income sources from your nest egg, it will pay out, like clockwork, to fund the retirement you have always imagined.
But have you considered whether your income streams are as “efficient” as possible? Whatever retirement strategy you choose — income and all — needs to be “tax-efficient” to ensure you get the most mileage out of your money.
This is just one more piece in the retirement planning puzzle that each of us must solve. When we don’t plan for retirement, we run the risk of underspending or overspending our retirement dollars.
What if underspending doesn’t seem like a problem, but rather like an advantage? Consider what events and opportunities to which you may say “no.” And simply because underspending pressures you to have a scarcity mentality, or when you don’t really know if you can afford them.
If you are gearing up for retirement, take heed. Here are eight common mistakes that people make when engaging a financial advisor. These blunders occur more than they should, but the good news is they are easily preventable.
Up until this point, you may have worked with a financial advisor in growing the value of your nest egg. With their help, you created a personal investment strategy and built a portfolio to meet your goals.
But with people spending as long as one-third of their lives in retirement, your next phase-of-life requires careful planning as your working years did. This calls for a financial professional who can help you navigate the unique retirement challenges facing you.
Today, Americans bear more financial responsibility for their retirement than ever.
The days of receiving monthly pension checks are gradually fading. According to Willis Towers Watson, only 16% of Fortune 500 companies were offering pensions to new hires in 2017, down from 59% of firms in 1998.
Defined-contribution plans like 401(k) accounts are taking their place. And this shift is huge. Now, people must count on them, IRA assets, and personal savings to create income streams that might need to last for a very long time.
How long? Potentially decades. The Society of Actuaries estimates that among married couples who are 65, there is a 72% chance that one spouse will live to 85. Not just that, one of them has a 45% chance of reaching age 90.
In other words, someone may spend as much as one-third of their life in retirement. In the face of that, how do you ensure your nest egg lasts for the rest of your lifetime?
While the answer is different for everyone, a new study offers some fresh insights. The Georgetown University Center for Retirement Initiatives partnered with Willis Towers Watson to explore different ways to generate income in defined-contribution retirement plans.
Their findings show how various lifetime income options, whether as a combination or as stand-alones, can help retirees better enjoy lifelong financial confidence. Read More
Editor’s Note: This article presents some simple ways to strengthen your income confidence in retirement. As you read about how you can make your money last in retirement with different income strategy options at your disposal, check out this debate by two economists on the security of the $3 trillion Social Security trust fund. It’s just another personal reminder of how our personal financial security is ultimately up to each of us.
With new swells of Americans turning 65 each day, it’s one of the most-pressing questions in financial planning: How can I make my money last in retirement?
Today’s retirees aren’t just sitting back. As they live longer, they are delving into new opportunities with full steam.
Second-act careers. Entrepreneurship. Volunteering for personal causes. Cross-country tours. Worldwide travel. All of this is breaking the boundaries and redefining how we think of aging.
But the increasing lifespans also bring new trials. Longevity risk and other risk hazards compound with additional years of retirement living.
One of the biggest challenges is creating a dependable stream of monthly income for cash-flow needs. And not just that, but a monthly income stream that you might need to count on for a very long time.
While a one-size-fits-all answer won’t work for everyone, new research tees up some fresh insights on how to make your money last as long as you might need it.
Three retirement experts, hailing from the Stanford Center on Longevity Studies and the Society of Actuaries, completed a study on retirement income strategies. Using a variety of forecasting techniques, they tested nearly 300 strategies in order to see which one would best allow retirement investors to generate income safely and efficiently.
Their findings were aimed at middle-income households – or among investors with some portfolio assets (but not over $1 million in asset values). Read More
Photo Credit: Reason.com and Soho Forum, Featured in Reason.com podcast, Source Link. Photo is strictly the intellectual property of its owner. All rights reserved.
Millions of retirees depend on Social Security benefits as a major income source. For many people, it’s their primary income stream.
According to data from the Social Security Administration, and analysis by the Center on Budget and Policy Priorities, nearly two-thirds of elderly benefits recipients count on Social Security as their major cash income source.
But some news headlines in recent years have stirred public concerns about the program’s future. Dour, and even alarmist, news coverage of reports by the program trustees led many onlookers to wonder about the program’s solvency.
To help cut through lingering confusion, two economists participated in a public debate, hosted by the Soho Forum. Set up as an Oxford-style debate, the discussion tackled this resolution: “Given Social Security’s nearly $3 trillion trust fund, the system cannot add to the federal deficit.” Read More
While retirement has many hard-to-predict moving parts, like what your spending might look like, perhaps one of the most difficult questions to answer is this: “How long will you live?”
Thanks to advances in healthcare and technology, people are living longer. According to the Social Security Administration, the statistical average for a 65-year-old man is to age 84. For a 65-year-old woman, it’s 87.
Economists call the possibility of spending decades in retirement a “longevity risk.” Still, keep in mind those numbers are just averages. What someone’s longevity looks like on a personal level will depend on their family history, health status, and lifestyle choices over the years, among other things.
For many people, the uncertainty adds up to financial concern. In one survey, almost two-thirds of surveyed Americans said they worried about running out of money in retirement more than death!
However, if you are to have a Retirement Plan that guides you across the Arc of Retirement, you will need some guestimate of how long you might live. That way you don’t underspend or overspend your financial resources.
Here are five steps to help keep longevity risk at bay and tame the uncertainty. Read More
Before you add an annuity to your income strategy, it’s prudent to understand what an annuity does and what it doesn’t do.
Essentially, annuities are insurance contracts. They are built to pay lifelong streams of fixed income, protect money from market losses, or offer tax-deferred money growth.
Indeed, billions of dollars sit in these contracts. A large part of that is due to their popularity for lifetime income, or for higher growth potential than with other low-risk interest-earning vehicles.
This isn’t to say that annuities don’t have a place in a retirement portfolio.
Just like with any other financial vehicle, though, they must have a specified role. That can include solving for particular retirement risks, working in tandem with other parts of a portfolio to reach certain goals, or even simply providing peace of mind with predictable retirement income streams.
If you are approaching retirement, chances are you have been started exploring how you might enjoy a financially confident retired lifestyle.
This includes maximizing the value of your retirement portfolio – and creating dependable income streams that last as long as you need them to.
For retirement investors, one way to solve for this concern is drawing on a lifetime income stream from an annuity. But how appealing are annuities in the face of historically low interest rates? Especially ones such as those we have experienced for the last several years?
Since 2009, in the aftermath of the Great Recession, most developed countries have experienced a low-interest rate environment. Monetary authorities have sought to use low-interest rate schemas in order to spur economic growth and prevent deflation.
The U.S. saw rates cut to effectively 0% until 2016, when they began to inch higher. Still, today, the federal funds rate is only 2.5%, up just half-a-point from this time last year when it measured 2%. Read More
United Income found that retirees might lose $3.4 trillion in potential income due to timing of when they enroll for their benefits. The research was a joint effort between the fintech company and former top policy officials from the Social Security Administration.
What about the income effect on retirees at a personal level? On average, each retired household would miss out on $111,000 of lifetime benefits. And for current retirees, premature decisions could add up to collective losses of roughly $2.7 trillion.
That would average out to roughly $67,000 in lost income per household. Read More
“Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man,” Ronald Reagan once famously said.
And the worst time to try to fight this formidable foe is when you are in retirement, living on a fixed income. Many people have some employment, or some involvement with entrepreneurship, for a stream of retirement income.
But chances are they don’t offer wage increases, or other inflation-countering benefits that you might have had in your working years, to help you keep pace.
Annuities are one of the few ways to obtain retirement income that is paid out as long as you live, making them a popular component of many retirement plans.
But if the annuity payout is fixed at the outset of the contract, by design it can’t be increased to keep pace with inflation. Should inflation rise 10% over time, for example, the buying power of a $3,300 monthly annuity payout erodes to $2,970.
This threat has the potential to affect a retiree’s lifestyle and could even require making unwelcome cuts in spending.
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