How to increase income

As you begin to plan your retirement, you may or may not have a good picture of how risky income planning can be. The truth is that a frightening percentage of individuals do not adequately save for retirement and if you are on the border of not having enough, or even if you think you do have enough, there is a very real chance you could come up short later in your retirement years. While there is no easy fix for the lack of inadequate savings, the only way to guarantee you a lifetime income stream that cannot be outlived is through an annuity. By taking a portion of your retirement savings and purchasing an income annuity, you can ensure that you will not outlive your assets.

A recent study done by Met Life, in cooperation with Rand, found that across all net worth and total household income levels, guaranteed income streams pensions, annuities, etc. have a positive impact on retirement satisfaction. Those who fund more of their retirement income with guaranteed pensions versus just savings are more satisfied. Deferred annuities are asset accumulation products often sold to younger investors for the purpose of added tax-deferred wealth accumulation. However, a study by LIMRA among annuity owners disclosed that only 22 percent of annuity owners realized they could convert their contract to a lifetime income. Only a very small percentage of contract holders actually do take advantage of the lifetime income guarantees.

Fortunately for the consumer, the insurance industry has realized that as our society ages and the number of seniors’ skyrockets over the next 10-20 years, retirees will be looking for better ways to “deaccumulate” their retirement. Future retirees will live longer and will expect a better lifestyle during their retirement years. The result of this is that the industry has responded with a whole new generation of products that provide the necessary lifetime guarantees while including a myriad of options to provide flexibility to the investor, and overcome the concerns that some people have to annuitization.

Among the more popular features is a product that offers a withdrawal option, permitting withdrawals during the first two years. Another option that is popular is the ability to elect to have full transfer flexibility among the variable investment and fixed investment options within the contract. This can be both useful and add peace of mind during volatile markets. It’s possible to get a high fixed return on your money with an immediate annuity. An immediate annuity is simply the payment of a premium to an insurance company. In exchange, the company converts your premium to a monthly income for life. You cannot outlive this income Monthly payments are based on the claims-paying ability of the insurer, so picking a financially solid insurance company is important.


Here’s a hypothetical example. A 76-year-old gentleman paid $50,000 in premium to an insurance company. He now receives $388 per month, every month. That’s $4,656 each year of checks in the mail. For $50,000 where else can you get guaranteed $4,656 every year for the rest of your life? Regardless of how long a person lives, he gets his check every month. If he dies early, his beneficiaries will receive the $388 monthly until $50,000 in payments have been received in total. This is called the “installment fund” provision. If the owner does not need or does not elect the installment refund provision for his beneficiaries, the monthly payments would be even higher at $473 per month.

A retiree needing increased monthly income, A person with no heirs or who is not concerned about leaving an estate, Someone who has set aside other funds to leave to heirs if they desire to leave an inheritance, A retiree desiring the fixed payment and wanting to avoid maturities, rolling over investments and the maintenance and administration required of investing on one’s own. It is currently possible to access your retirement pension plans after age 50 although the minimum age is rising to age 55 from April 2010. For most people however age 60 or 65 is a more realistic age from which to start drawing on your retirement savings.
Retirement is no longer a single point in time when you stop work at 5 o’clock on the day before your 60th or 65th birthday. Many people will continue to work, albeit in a reduced capacity, and use retirement savings to supplement income until some future date when they wish to give up work entirely. When you have spent many years saving for retirement it is vitally important to make sure that you chose the most suitable way in which to obtain income for the years ahead.