This is a very important question if you want to have a secure and happy retirement. We all have one source of guaranteed income for life through our Social Security Benefits, but we all know the monthly dollar amount probably does not cover all our monthly expenses during retirement and especially does not cover enough extra to really enjoy our retirement. But gladly we do have this one source of guaranteed income for life.
Your grandparents and maybe your parents had/have a second source of guaranteed income for life through their employer’s pension benefits, but it’s most likely that you, like me, do not have that pension benefit. This is because employers now offer 401k plans instead of pension plans. Do you know the difference? A pension plan pays you a set amount every month for as long as you live. A 401k plan is your money that you have invested in the market and you have no guarantee how long that money will last or how much you’ll receive each month. This difference is huge and it was the Employee Retirement Income Security Act in 1974 that created this change that most employers chose over the pension plan.
Luckily for you though, you have the option of purchasing a lifetime income annuity that will provide for you that second source of guaranteed income for life that you are lacking. To have a happy and stress-free retirement, you will
want your monthly social security check and your monthly income check from your lifetime income annuity to cover the cost of all your monthly expenses with some left over for the extras you desire to make your retirement fun. It is possible to make this happen with a lifetime income annuity.
Now you may not be sure what a lifetime income annuity is so let me explain a bit. A lifetime income annuity is a Single Premium Immediate Annuity that you would purchase from a financially strong and reputable insurance company. It is an annuity that provides immediate guaranteed income for life. You will be able to determine how much your purchase price, called the premium, should be by first determining how much of your monthly expenses and monthly fun money is not covered by your Social Security check. Then you’ll be able to back into the premium amount, with the help of your insurance advisor, that is required to generate that monthly income check you desire.
You’ll be happy to know that there is a very important feature of a lifetime income annuity that will generate a higher monthly payout based on age than any other type of investment used for retirement. This feature is called mortality credits and the annuity holder gets paid these mortality credits every month as part of the monthly income check in addition to the principal and interest income that will also be part of that monthly income check. Basically, mortality credits are a financial reward that increases the longer you live. The more years you live and hold your lifetime income annuity, the more mortality credits you will be paid. Another way of
explaining mortality credits: because some people will pass away earlier and will not collect income for that long, the insurance company can pay the entire pool of lifetime income annuity holders a little more than a traditional investment.
I must give credit to Tom Hegna and his book Pay Checks and Play Checks: Retirement Solutions for Life for his great explanation and enthusiasm for the lifetime income annuity. I highly recommend his book.
So, does being sure your retirement plan has enough guaranteed income for life seem a little more possible now? This article does not cover all the specifics and options of a lifetime income annuity, and all the details applicable to your situation must be reviewed, evaluated and explained if you have that interest, but this article at least gets you thinking. When that thinking generates questions, as we’re sure it will, please feel free to contact us and we’ll sit down with you to go over everything.
Safeguard Assurance LLC (941) 932-1388 or 1389
Retirement Income | Social Security Income | Annuity Income FL | Dawn Cook Parrish FL