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April 22nd, 2018 by

future stability

In a recent survey of 3,000 Americans ranging in age from 20 to 70, almost two-thirds of the respondents said they feared running out of money during a long retirement more than they feared death.1 Fear may not be a helpful response, but this concern is not surprising considering changes in the American retirement landscape.

People are living longer during a time when traditional pensions are disappearing and medical expenses continue to climb. Social Security may provide a dependable, supplemental income throughout retirement, but benefit levels are not high enough to fund a long retirement for most people. In January 2018, the average monthly benefit was just $1,404, and the maximum benefit at full retirement age was $2,788.2

Even people with a substantial nest egg face a challenge in making their dollars last throughout a long retirement. Withdrawing too much too quickly can put you at risk of running out of money while being overly cautious and withdrawing too little might lead to a less satisfying retirement lifestyle than you might otherwise enjoy.

Planning for a long retirement

One way to help solidify your long retirement income is by purchasing a longevity annuity. It is a deferred fixed annuity that delays lifelong income payments until a future date. Often it is when the contract owner reaches age 80 or 85. Because the annuity income is deferred, the payouts are typically higher in relation to the premiums than they would be if the annuity income had been paid immediately. Purchasing the annuity at a younger age with a longer deferral period would generally give you a better premium-to-income ratio.

A longevity annuity may give you more confidence that you will have income for a long life. It also makes it easier to manage the near-term income from your dollars and financial instruments. For example, if you retire at age 65 and feel comfortable that the combined income from your annuity and Social Security will meet your income needs after you reach age 85, you could focus on funding your earlier retirement years from other monies and vehicles for a 20-year period, rather than guessing how long your nest egg dollars might have to last.

Source:
1) Money, October 19, 2017
2) Social Security Administration, 2017

Find out how to never outlive your resources.

Let me show you how to get the most from your planning! I want you to enjoy a long retirement without fear of running out of money. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me 1-833-313-7233.

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