Not Outliving Your Income

One of the most common fears people share when considering retirement is the very real possibility of outliving the money they’ve worked so hard to save.

One of your concerns when planning retirement is to ensure your money lasts through­out your life. After all, you worked hard and saved your entire life — you shouldn’t have to worry about reducing your lifestyle.

Making sure your retirement is properly funded remains an ongoing challenge given the num­ber of risks and concerns you’ll face — risks like market volatil­ity and economic uncertainty. On top of that, we’re living lon­ger than we used to.

The steady income for life pro­vided by company pension plans — if you were lucky enough to have one — countered some of those risks, but pensions are disappearing from the American landscape.

Only 26 percent of American workers have access to a defined-benefit pension plan, according to a Bureau of Labor Statistics survey in 2018.

Even with all of the risks and concerns a person has as they face retirement, and even in the absence of a pension, there is some good news: You can get that kind of protected monthly income by investing in an annuity.

“Put simply, an annuity is the only financial product that can generate income that will last as long as someone may live, whether that is to age 80, 90, 100 or 110,” explains Frank O’Connor, Vice President of Research and Outreach at the Insured Retirement Institute.

Annuities are long-term investments offered by in­surance companies that can provide this lifetime guarantee because they’re able to pool the risk among a wide range of individuals. All guarantees are backed by the claims-paying ability of the issuing insurance company.

Allocating a portion of your re­tirement savings into an annuity also helps avoid a second issue associated with working with lump sum investments, says William G. Gale, the Arjay and Frances Miller Chair in Federal Economic Policy and Director of the Retirement Security Proj­ect at the Brookings Institution think tank in Washington, D.C.

If you draw down your lump-sum savings too aggressively, and live longer than you expected, you might have to rely on less in your later years, he says. But, conversely, if you draw down your savings too conservatively and pass away earlier than you expected, your thrift will have been unnecessary, and you won’t have enjoyed your retirement years as much as you could have.

Having some portion of your retirement assets in an annuity reduces these two risks, Gale says. You can have a standard of living that’s higher than in the conservative draw-down case and be assured that protected lifetime income will last as long as you do.

O’Connor believes that the temptation to overspend is greater when you see your savings as a lump sum. “Retirement savings will seem like a financial windfall at first,” he says, “but using that ‘pot of gold’ without a plan creates a high probability of ex­hausting those savings while you still need them.”

Remember — not all annuities are alike. For ex­ample, some annuities provide a family benefit, beyond one person’s life, whether a joint benefit or a death benefit. Your need for an annuity will also depend on your other sources of retirement income, such as Social Security, required minimum distributions from retirement plans and other sources of regular income. Confer with a financial professional before investing in an annuity.

Whatever your asset mix is, all retirement planning comes down to one thing: being more secure. The protected lifetime income of an annuity can free you to focus less on financial concerns and more on enjoying your golden years to the fullest.

Connect with your financial professional to learn if an annuity is right for you.

Read more about lifetime income and annuity solutions


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.

This material has been prepared in conjunction with Milliman Financial Risk Management LLC (Milliman FRM). Milliman FRM retained Northern Lights Distributors, LLC, a FINRA/SIPC member, 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 Milliman FRM or The Alliance for Lifetime Income.

AIG is a founding member of the Board of Directors for the Alliance for Lifetime Income.