According to the Bureau of Labor Statistics, less than 16% of private sector workers are covered by a pension plan, down from 80% just 25 years ago. This reality has created new challenges for people planning for retirement. Americans must save more for their retirement, usually via 401K plans and IRAs. But here’s the million-dollar question they face: How much money do I need to save before I retire?
It would be easy to answer this question if everyone knew how long they were going to live, but none of us is stamped with an expiration date. So there is justifiable fear that we may run out of money if we outlive our savings. Additionally, stock market investments carry risk and uncertainty as they fluctuate in value and income potential.
For those who don’t have the security of a traditional pension plan, annuities are a way to re-create the kind of guaranteed retirement income that most Americans enjoyed in the past. There are several kinds of annuities, but the basic feature that makes them attractive for retirees is that an annuity provides income you can count on for the rest of your life. You pay a lump sum “premium” initial investment, often a conversion from a 401K or IRA, and then your annuity pays you back a predetermined amount on a set schedule until you die.
Basic forms of annuities include Immediate vs. Deferred, Fixed vs. Variable, Equity-Indexed, and several other options that can include a death benefit for your heirs. If you’re thinking about retirement, and need to create your own “pension plan”, we have the tools to help you determine which annuity may be right for you, as a part of your portfolio that includes a life-long income stream.
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