Retirement Planning: The Method versus the Objective

{3:54 minutes to read}  If I could just get a guaranteed income for life of $10,000 per month, boy, would I ever be on easy street. Life would be grand. No worries, no stress, no fear of big market swings. If I could just get one of those old-time pensions where they guarantee me income for my entire lifetime, that would be amazing.

As we continue on the path in this low interest rate environment, many people would love the idea of having an old-time pension that provides income for the rest of an individual’s life, or for an individual and a spouse. A guaranteed income for life. Whether it be $3,000, $4,000, $5,000, or $10,000 a month, it would provide a tremendous amount of benefit to people. They would, as we like to say, “sleep well at night.”

Sadly, the days of those “old-time pensions” known as Defined Benefit Pension Plans are going the way of the dinosaur. We live in a low interest environment and corporations have found the cost of those plans have become prohibitive. A few still offer them, but most retirement savings have moved to investments in 401(k)s, IRAs, etc.

There is a way to accomplish creating your own guaranteed income for life, however, and the key to this concept has to do with the method versus the objective.

The objective that I’m talking about is that guaranteed income for life, but the method of getting there is a word that people don’t want to hear, and that word is ANNUITY. When the word comes up, most people respond with “No, I don’t like those. My brother-in-law told me they are no good etc. etc.” and that is the end of the conversation.

An annuity can create the same guaranteed income for life that a defined benefit pension or your Social Security provides, but in a different form. Annuities can be what is known as a single payment immediate annuity, or in the form of a deferred income annuity. In either case, you give the insurance company an amount of money and later — whether one year, two years, three years, etc. — the policy begins to deliver a stream of income that will continue for the rest of your life.

Because we are in such a low interest environment, these vehicles can be of great benefit. For example, someone who has $1,000,000 in a bank account would be earning interest at less than 1% which would give them an income of $10,000 a year. By purchasing an annuity, they could have four, five, six and even seven times that amount of income per year.

Annuities are a great opportunity for people who want or need to make sure that they have a sustainable, guaranteed cash flow for life. Don’t let the method get in the way of the objective.

If you have any questions, or you’d like to learn more about how annuities could help you, give us a call or send us an email.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.  Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

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