Retirees with a Guaranteed Income Are Happier, Live Longer
Everyone with savings can secure a lifetime income, and that goes a long way toward peace of mind in retirement.
![A retiree smiles as he warms up his softball swing.](https://cdn.mos.cms.futurecdn.net/ngqQDz2NWYnPnPzJkDpBKm-415-80.jpg)
Retirees who are surrounded by their family and friends — and who also have a substantial check coming in every month for the rest of their lives — are much happier, according to an articles published in Time and The Wall Street Journal. They also live longer, studies show.
That makes sense because the No. 1 worry of retirees is of running out of money. Individuals who have a set income for life remove a great deal of stress from their lives.
Retirees used to get enough money from Social Security and a traditional pension to cover their living expenses. But few employers now provide pensions, putting the onus of saving on the employee. Social Security payments equal only about 40% of the average wage earner's pre-retirement income.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Income That Lasts as Long as You Do
How can you get additional guaranteed income? Income annuities provide an often-overlooked solution. With income annuities, a lump sum or series of premium deposits is converted by an insurance company into an income stream that will begin either immediately, or in the case of deferred income annuities, at whatever future age you choose, typically starting no later than 85. Most annuities offer an option for guaranteed lifetime income. Many also let you name a joint income recipient so that your spouse can also receive a guaranteed lifetime income.
Research shows that annuities provide both psychic and financial benefits. Retired annuity owners feel more confident they’ll be able to afford their preferred retirement lifestyles — even if they live to age 90 or older — than retirees who do not own an annuity, according to a LIMRA Secure Retirement Institute study.
Some 73% of retirees who own an annuity believe they will be able to live the retirement lifestyle they want, compared with just 64% of retirees who don’t. Nearly 7 in 10 retirees who own an annuity are more confident their savings and investments will not run out if they live to age 90, compared with 57% of retirees who don’t own an annuity, the 2016 LIMRA survey found.
An annuity offers a solution for creating long-term income security along with the happiness that goes along with that.
Don’t Invest Unless It’s Right for You
Annuities are powerful, but they’re not for everyone. Don’t invest unless you know it’s the right product for you.
Before buying, ask yourself:
- How much income will I need in addition to Social Security and other sources to cover my expenses?
- Will I need supplemental income for anyone else besides myself?
- How long do I plan on leaving money in the annuity?
- When do I expect to need income payments?
- Will I be able to gain access to the funds from the annuity if I should need them?
- Do I have enough cash reserves to meet my expected needs?
- Am I using the funds to save for retirement, to generate a retirement income — or both?
Once you’ve decided that an annuity is the right choice, then you can decide which type would be best. There are many different types of annuities available in the marketplace today, so knowing how you plan to use the product, will help you to make the best choice.
Many annuities offer a guaranteed interest rate and guaranteed principal. Most variable annuities, however, offer a chance at higher returns but don’t guarantee earnings or principal. Immediate annuities begin paying out income within one year, while deferred annuities let you make deposits for many years before you start taking out an income stream.
Just like a car, there are lots of models that can get you from Point A to Point B, but the one that's best for your specific needs will depend on its particular features and benefits.
An annuity can be bought with a lump-sum payment using cash or by rolling over funds from an IRA, 401(k) or another retirement account. You may also choose to make a series of regular, smaller deposits over time. Until you make withdrawals, you pay no tax on earnings.
A secure retirement depends on having enough dependable income for your lifetime to meet your basic needs and afford the extras that make life enjoyable. A lifetime income annuity can supplement Social Security and take the worry out of retirement because your monthly payments are guaranteed to keep coming even if you live past 100.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Retirement-income expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed and immediate-income annuities. Interest rates from dozens of insurers are constantly updated on its website. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities. More information is available from the Medford, Oregon, based company at https://www.annuityadvantage.com or (800) 239-0356.
-
Eight Key Steps to Take When Investing in the Stock Market
The stock market can be a confusing place for beginners, but it doesn't have to be.
By Kiplinger Advisor Collective Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published