What is your plan for guaranteed retirement income? 

3 Sources of Guaranteed Retirement Income 

There is no such thing as a one size fits all retirement strategy. But everyone should think about how to make sure you have a steady stream of income in retirement that will last, even when the market is volatile. 

At DSB Rock Island, we recommend that 1/3 to 2/3 of your retirement income comes from guaranteed sources. Creating an income plan that includes money in the market and money shielded from market volatilities is an opportunity to diversify your portfolio. For the guaranteed income portion of your income plan, the 3 primary options are: annuities, pensions, and social security.  

Annuities

Annuities, sometimes referred to as private pensions, are insurance products that provide guaranteed income in retirement and can help alleviate the risk you’ll outlive your savings. With traditional pensions becoming less common, annuities are becoming more popular. 

Here, in a nutshell, is how annuities work: you pay an insurance company a premium, either in one large payment or in smaller payments over time. In return, the insurance company makes periodic payments to you in the future. During the accumulation phase, your money grows tax-deferred. When you reach the distribution phase, you will receive regular payments for a specific period. They often come with a death benefit that ensure beneficiaries receive a certain amount if you pass away before receiving all the payments.  

There are different types of annuities for different retirement goals. Some have the potential to help you grow and protect your savings leading into retirement and others help you convert your existing retirement fund into steady income in retirement.  

If you are interested in annuities, the current economic situation has put annuities into what some are calling a “goldilocks” period:  

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value.  Riders are additional guarantee options that are available to an annuity or life insurance contract holder.  While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. 

Annuities Goldilocks Period

Contact Ryan Williams to learn more about annuities and to see if they are a good fit for you: rwilliams@dsb-rockislandwm.com.

Pensions

Pensions were once a common source of retirement income provided by employers. Now, they are rare due to costs and management challenges. If you’re fortunate enough to have one, it’s a reliable source of retirement income based on your salary and years of service with a company. 

Social Security

Many people rely on social security as a main source of retirement income, but this is extremely risky. It should be used as just one of many streams of income in retirement. Having the government manage that stream of income comes with positives and negatives. A positive is that the government routinely makes cost-of-living adjustments to the benefit amount. An obvious negative is the fear of future cutbacks to the social security program.  

Most individuals can start claiming social security at 62, but it’s beneficial to delay benefits for as long as possible to maximize monthly payments. If you’re married, coordinating benefits with your spouse can offer additional financial advantages. 

Are you nearing retirement age and will soon need access to social security? Visit https://www.ssa.gov/myaccount/create.html to create your account or learn more about the process.

We can help

Whether you are 15 years away from retirement or already retired, now is a great time to have a conversation about your retirement income and plan how to identify a source for guaranteed income throughout your retirement. Get in touch with us today to start a discussion about your retirement and explore specific strategies that can help you.