Retirement Income

What is retirement income planning?

The goal of retirement income planning is to make sure you never run out of money during the retirement stage of life. According to the Employee Benefit Research Institute, 42% of baby boomers will run out of money during retirement. Having a proper plan in place will prevent that from happening. The most essential piece of a sound retirement portfolio is a permanent income stream.

What are my retirement income sources:

There are a few sources of income that future retirees should keep in mind when looking at their retirement income plan. These may not apply to everyone but some examples will include:

  • Social Security Income
  • Part-Time wages
  • Passive income from a business
  • Qualified & Non-Qualified plan drawdown
  • Investment dividends & drawdown
  • Permanent income from annuities
  • Life Insurance cash value withdrawals
  • HSA drawdown

Retirement Income is just as important as retirement accumulation.

Whether you self-manage or use a financial advisor, most retirement portfolios are designed for the most effective accumulation strategy. In other words, the goal is to have as much money as possible at retirement. This is only step one in the retirement planning process. The second step involves making sure your money lasts.

How can I create a permanent income?

There are many ways you can create a permanent income, but the most common & simplest to understand option is to use an income annuity. There are several misconceptions about annuities that should be addressed. First, many underqualified insurance professionals are selling annuities without fully knowing the true benefits they can provide. Second, there are several different types of annuities, some with riskier features that may not be right for you.

How does an income annuity work?

It’s simple. You use a portion of your retirement assets to pay a lump sum premium to an insurance carrier. In return, the insurer provides guaranteed monthly income payments to you for life. If you pass away before your money is paid back, a beneficiary can receive your remaining proceeds. If you fully exhaust your annuity funds, the insurer will fulfill their promise and make sure you keep receiving the same guaranteed monthly income payments. To make sure you receive the highest monthly income, it’s important to compare several carriers. That’s what we do here at Twin Cities Mutual!

Can I lose money in an income annuity?

In most cases, you cannot lose money. Some people, who do not have heirs choose to have a life only payout method. This is because it will usually provide the highest monthly income, but will not provide any money to a beneficiary. This option is only suitable for certain people. Inflation is also a risk factor that an income annuity can address if this is a concern.

The Retirement Income Plan

The retirement income plan addresses three areas:

  1. Budgeting: How much income will be required to maintain the existing lifestyle?
  2. Income Sources: What assets can be used to pay living expenses?
  3. Longevity: Based on your retirement start date & your projected life expectancy, when will your retirement assets be depleted? How much permanent income will be required?

Working with a financial planner

In most cases, your financial planner will not help you with an annuity or life insurance, either because they are not licensed or they provide fee-only advice. However, most financial planners will advise the necessity of permanent income within your retirement portfolio. Twin Cities Mutual provides information on how income annuities work, potential tax implications, and information on fees & the purchase process. We encourage working with your financial planner, as we do not provide financial advice on investment portfolios.

To learn more about retirement income planning, please visit our Scheduling Page

Helpful Resources:

How annuities work

Qualified Annuities Protected From Creditors