When you reach retirement, you expect to reap the rewards for decades of hard work and diligent saving so you can live happily ever after. Well, as many Americans are finding out, it’s not always a fairy-tale ending. In fact, one of the biggest concerns people have about retirement is that they won’t have the income to sustain their current lifestyle or, even worse, that they could run out of money altogether.
These concerns can often lead to a less enjoyable retirement because people are afraid they might spend too much of their savings in the early years and not have enough later when their health is declining and inflation has driven up healthcare costs.
The good news is that there is a way to improve your chances of achieving a more secure and satisfying retirement through retirement income planning. Studies show that people who have a protected lifetime income stream are generally more secure financially than those who don’t.
In addition, people with protected lifetime income have a higher level of satisfaction in retirement, which is a key factor in enjoying your retirement years.
A 2018 Guaranteed Lifetime Income Study conducted by Greenwald & Associates and CANNEX gathered information from 1,003 individuals between the ages of 55 and 75 and whose household assets were at least $100,000. Respondents said the greatest benefits of having a protected lifetime income are protection against longevity risk, peace of mind, and being better able to budget – all of which can make for a less stressful and happier overall retirement.1
The study also found that the perceived value of protected lifetime income continues to grow. More respondents now considered protected income “a highly-valuable addition to Social Security” compared to one year earlier. Of these individuals, nearly three-quarters said protected lifetime income is “extremely important” to their financial security.
While both Social Security and pensions can provide this kind of income stream, they don’t always cover your retirement income needs. You may also be one of the many Americans who doesn’t receive a pension. In that case, putting money into an annuity can supplement your protected lifetime income, helping you maintain your lifestyle.
The study found that concerns about long-term healthcare, losing money in a market downturn, and fear of outliving retirement savings were among the factors that respondents said increased their interest in protected lifetime income.
Between 1998 and 2010, the University of Michigan conducted the Health and Retirement Study, which gathered data from approximately 26,000 Americans over the age of 50 on an array of retirement issues, such as wealth, income, job security, health and cognition.2
The results revealed that satisfaction scores for all of these retirement issues were significantly higher for people who had more than 30% of their assets invested in protected lifetime income products. For example, when it comes to nursing home expenses, individuals with at least 30% of their retirement portfolio made up of protected lifetime income products were more confident that they’d be able to afford it.
While the study did not indicate a “magic number,” it did find that when people have more protected lifetime income, their overall satisfaction levels rose accordingly. And even though retirement satisfaction has been declining over time, satisfaction rates remain higher for people with a guaranteed monthly income stream, according to the study.
There’s no question that financial uncertainty can impact your happiness in retirement. That is why protected lifetime income products as a portion of your retirement portfolio can help ease a lot of that worry. Schedule a meeting with a financial professional and see how an annuity could help protect your retirement income and pave the road to a less stressful and happier lifestyle.
1 Baker, Gary and Doug Kincaid. “2018 Guaranteed Lifetime Income Study.” Survey. Feb. 2018.
2 “Health and Retirement Study, ALI public use dataset. Produced and distributed by the University of Michigan with funding from the National Institute on Aging (grant number NIA U01AG009740). Ann Arbor, MI, 1998-2010.”
Annuities are long-term products 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.
Northern Lights Distributors, LLC, a FINRA/SIPC member, has been retained to facilitate FINRA review of the material in order to meet certain requirements of its business partners. Northern Lights Distributors, LLC is not affiliated with The Alliance for Lifetime Income.
AIG is a founding member of the Board of Directors for the Alliance for Lifetime Income.