In Retirement, ROI is Reliability of Income. Helping you shift your focus from asset accumulation to guaranteed income will create more security in your retirement plan. Economists, professors and thought leaders all over the world are helping planners and their clients change the dialogue about why sufficient levels of lifetime income are more beneficial and valuable than asset accumulation in retirement. If your goal is maximum security without principal risk, you will benefit from this shift in focus.

The financial risks of living longer.

We strive to create a long, healthy and enjoyable retirement. That is a reality if you are well positioned in retirement with reliable sources of income supporting your lifestyle. The financial downside of living longer is the increased risk of outliving your wealth – referred to as longevity risk. Many professors and economists believe it is the single biggest threat in retirement.

Warren Buffett (that wise, wise man from Nebraska) said, “that in order to succeed, you must first survive.”

When it comes to retirement income, investors are dramatically underfunded, but that trend might be changing: Willis Towers Watson’s 2016 Global Benefits Attitudes Survey found 59 percent of millennials and 66 percent of Baby Boomers are willing to pay a higher amount for a guaranteed retirement benefit. The data suggests that people with guaranteed income in retirement are happier than those without it.

Protecting your spouse.

For couples, joint annuities allow a steady flow of income during each spouse’s lifetime and after the first death.  Compared with a single-life payout, a joint payout will pay less each year, but the guaranteed lifetime income for your spouse will take care of her in a way that nothing else can. Managing a complex investment portfolio for a surviving spouse is challenging on nearly every level. Converting your retirement assets into guaranteed income streams is retirement planning state of the art. The assets remain 100% liquid and there can be no losses. Gains are added to the principal.

Further, I believe that guaranteed monthly income payments are perfectly suited to offset the risks of health changes and normal cognitive declines.

How to Manage Longevity Risk.

Ideally, you need guaranteed, lifetime income streams that provide income for as long as you are alive, under any conditions. You, nor your spouse, can outlive guaranteed, lifetime payments from an insurance company. Too many people in or near retirement are invested too heavily in the stock market, creating a real threat to their nest egg when the market has a normal correction. By re-balancing your portfolio, you can move these assets out of harms way and put a protective wrapper around them.

Absolute security in retirement requires that you convert a portion of your retirement assets, including IRA monies, into reliable lifetime income from insured contracts that create guaranteed income from insurance companies. Working with experienced retirement professionals ensures your heirs will receive all unpaid principal if that is your goal. 

According to Yale Professor, Roger Ibbotsen:

“Investors should be willing to pay an insurance premium to hedge away the longevity risk.”

You need guaranteed income solution if you are:

  • At or planning for retirement.
    • Concerned about outliving your money.
      • Concerned about spouse’s well-being upon your death.
      • Currently have retirement assets invested in bonds, stocks or real estate.
      • Have insufficient guaranteed lifetime income.
      • Concerned about losing investment control as you get older or if health is compromised.
      • Do not have a plan for retirement or longevity risk.

A Private Pension – How it Works.

There is no principal risk. A longevity annuity is designed using indexing strategies. Simply put, this means there is a guaranteed floor of 0% and reduced gains on the upside. When the market is up, the contract will capture some of the gains and when the market is down, there are NO LOSSES as you contractually cannot earn less than 0%.

Return of Premium – I recommend contracts that are 100% liquid from day one (minus any disclosed contract fees). With this special guarantee in place, you are protected from unforeseen events or a bad decision. With all of your capital GUARANTEED and LIQUID, you have the freedom to take advantage of “better” contracts if it makes sense to do so in the future. Without the traditional surrender penalties levied against your account if you change your mind, threats from inflation are minimized.

Mortality Credits.

There is no other investment that guarantees income for life without ANY principal loss – ever. Because insurance companies create assets called mortality credits and then share them with their annuity clients, they are able to do what no other investor or company can do. The word guarantee does not apply to the world of equities. Longevity annuities are built around guarantees and this is quite a distinction offering you real choices.

Income for life, 100% liquid from day one, guaranteed principal protection and tax deferred growth. A secure retirement plan should be built on this foundation. An advisor who is experienced in retirement and longevity planning will prove to be invaluable to helping you create reliable income you cannot outlive. In retirement, an income advisor will become the most important member of your team.

If guaranteed lifetime income is a primary retirement goal for you, please contact me to arrange a discussion about helping you with retirement security and the power of guaranteed income. You will not learn about these strategies from traditional money managers. Please email me or call Ted Bernstein directly at 561-869-4500.

Ted Bernstein, Life Cycle Financial Planners

Also published on Medium.


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