Where will your retirement income come from?

Thinking about retirement income can be a challenge: You don’t want to use your resources too  quickly and run out of money, but you also don’t want to scrimp and save and reduce your lifestyle if it’s not necessary. So how do you find the balance? Begin by gathering a little bit of information.

What are your income sources?

Your retirement income will come from a variety of sources, such as Social Security, your savings and investments or a pension, if you have one. Some sources are more secure but may have a lower growth potential. The most secure sources provide lifetime income you can never outlive. Others with higher growth potential can be riskier. Your mission is to find the balance that works for you and use all of the tools at your disposal to secure your financial future.

Social Security

Based on your earnings, it’s meant to supplement pensions/savings, etc., and replaces about 40 percent of your income, at best. To see an estimate of your monthly payment, go to ssa.gov/planners/retire/ and click on “Retirement Estimator.”

Strengths

• Mostly inflation-proof, since benefits are inflation-adjusted each year.
• You can start taking benefits at age 62, but the longer you wait, the higher your monthly benefit will be, up to age 70.

Challenges

• Does not fully replace the close to 70 percent of your income you may need in retirement.
• If a couple get joint benefits and one spouse dies, the lower benefit is eliminated for the surviving spouse.

Pension(s)

Pensions provide monthly protected retirement income, often from long-term employment or military service. Few companies (only 17 percent) still offer them today.

Strengths

• They can provide steady income each month. Public pension plans are often inflation-adjusted.
• Used with Social Security, they can get you closer to meeting the income you need.

Challenges

• Many pensions today are underfunded and face financial stress.
• Most private pensions do not keep up with inflation.

Annuities

Can be purchased at any time, before, during or after retirement. Income payments begin when you elect to start taking them.

Strengths

• Can provide protected income for life and can help cover essential monthly expenses.
• Doesn’t run out, no matter your age (subject to the claims-paying ability of the insurance company).
• Many annuities offer access to a portion of funds early on.

Challenges

• Less liquid than a savings account or other investments.
• Some annuities may have higher fees or costs than other financial products; ask your financial professional.
• Annuities are sophisticated tools with many options for personalization. Work with a financial professional to tailor a solution that fits your specific needs.

Market investments (Stocks, Bonds, Mutual Funds)

Investments include bonds, mutual funds, single stock investments and more. They offer greater potential returns but more risk than savings accounts and CDs.

Strengths

• Over the long run, market investments offer the greatest opportunity for growth and higher returns.
• They can continue to grow, even when you’re no longer adding money.
• Historically, these investments stay ahead of inflation over the long run.

Challenges

• Markets can be quite volatile.
• These investments can carry a relatively high risk; they can lose money.
• These risks can mean high stress for those close to retiring or retired.

Savings accounts

Generally, a savings account is available at a bank and would only allow for cash deposits and earned interest.

Strengths

• Typically very safe with a steady interest return.
• Typically easy to establish with a bank and accessible in emergencies.

Challenges

• Typically offer lower interest rates than investment funds.
  
• Low interest rates may result in a loss of purchasing power via inflation.

_{The extent to which Protected Lifetime Income is guaranteed will depend upon the claims-paying ability of the insurer that issues the annuity.}

_{Product guarantees are subject to the claims-paying ability of the issuing insurance company. Annuities are long- term products designed for retirement purposes. Partial withdrawals reduce the cash value and certain benefits, such as the death benefit amount. Early withdrawals may be subject to withdrawal charges. 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.}