Planning for retirement used to be a bit simpler. For instance, 68 years old was the typical life expectancy in 1950. 1 Your retirement plan could only require six years of retirement income if you retired at age 62. Additionally, just 14% of workers in the private sector now get pensions due to the decrease of defined benefit pension plans. 2
They are falling short compared to the days of employer-sponsored retirement income and lower life expectancies because more people are responsible for determining how much income to save aside for retirement and how to invest that money. In fact, according to recent studies, families of retiring baby boomers without pensions are more likely to swiftly exhaust their 401(k) funds, which increases their risk of outliving their resources. 3
This is why it’s crucial to think outside of the retirement plan offered by your employer. You can blend tax-advantaged IRAs, taxable investment portfolios, guaranteed annuity income, cash-value-building life insurance products, and even passive income from a business venture (royals, residual income, or rental property) to generate your income. We can assist you in the early stages of retirement planning while you weigh your alternatives. It’s a good idea to think about what kind of retirement income sources interest you the most and work toward those goals even if you are unable to finance specific income streams at this time. Please get in touch with us to talk about other retirement income stream alternatives.
Actually, the Boston College Center for Retirement Research discovered that seniors who get a larger share of their income from annuities burn down their assets more slowly. A pension, Social Security, or an annuity from an insurance company are all considered forms of annuity income for the purposes of this research. 4
Investors may wish to think about creating a portfolio of laddered bonds or laddered certificates of deposit in addition to annuity choices. 5 Despite the fact that this plan locks money away for extended periods of time, it offers the chance to supplement assets at various phases of retirement and can prevent you from running out of money. An investment portfolio made up of bonds, bond funds, certificates of deposit (CDs), and dividend-paying equities can produce an income stream through interest and dividends. While reducing the danger to your capital, this technique does raise your risk exposure to inflation and fluctuating interest rates. 6
Although Social Security is essentially a lifetime annuity, many people are unaware of the payment amount they might anticipate, particularly if they are just beginning their retirement planning process. Online registration at my Social Security is one resource that everyone, regardless of age, may utilize. You can keep track of the estimates for your individual retirement benefits and spousal benefits, which alter as you advance in your career. 7
People who use the Social Security website are more likely to be educated and financially competent, according to a recent research. That’s bad since workers with lower salaries and less education would likely gain more from being aware of their potential advantages. 8 Although the website is free, it’s important to note that it may be quite beneficial in developing a long-term retirement income strategy.
Content prepared by Kara Stefan Communications.
1 Macrotrends. 2022. “U.S. Life Expectancy 1950-2022.” https://www.macrotrends.net. Accessed March 3, 2022.
2 CNN. 2021. “Just how common are defined benefit plans?” https://money.cnn.com. Accessed March 3, 2022.
3,4 Center for Retirement Research at Boston College. Feb. 24, 2022. “Retirees with Pensions Slower to Spend 401k.” https://squaredawayblog.bc.edu. Accessed March 3, 2022.
5 Lisa Smith. Investopedia. Sept. 28, 2021. “4 Sources of Income for Your Retirement.” https://www.investopedia.com. Accessed March 3, 2022.
6 Fidelity. 2022. “Retirement income strategies.” https://www.fidelity.com. Accessed March 3, 2022.
7 Social Security Administration. 2022. “Create your personal my Social Security account today.” https://www.ssa.gov/myaccount/. Accessed March 3, 2022.
8 Center for Retirement Research at Boston College. Feb. 10, 2022. “Workers: Social Security Info is Eye-Opening.” https://squaredawayblog.bc.edu. Accessed March 3, 2022.