Retirement Income: How Much Do I Have?
August 10, 2023
In a perfect world, we would all know the exact sum we will receive in retirement from all our different retirement savings accounts and income streams. We would not lose a wink of sleep wondering if we will have enough to last our lifetime. Unfortunately, reality is different. However, there are several avenues you can take to create a dependable income for yourself in retirement.
Social Security
Social Security has been a cornerstone of modern American retirement since its inception in the 1930s. It acts as a foundational source of income for many. However, the amount you receive could be impacted by when you decide to claim. Most people are eligible to receive Social Security benefits at age 62. But by claiming it as soon as you qualify instead of waiting to reach your Full Retirement Age (FRA), you could reduce your benefits in the long run. It is entirely up to your best judgment when you choose to claim your benefits. However, by discussing your options and how they fit into your overall plan with a financial professional could greatly help you with your decision. In addition, with reports that Social Security will be reducing benefits in 2034, it is important to understand if this funding issue will affect your retirement income.
Pensions
They used to be the expectation, but nowadays pensions seem to be a dying breed in retirement income. A pension is a fund where money is added by the employer during the years of the employee’s employment. If you are one of the people who still receive a pension, you have two ways to withdraw the money. You may take one lump sum or receive it as a stream of income. It is important to know the pros and cons of each withdrawal method based on your personal situation before you begin.
Fixed Index Annuities
A fixed index annuity uses your upfront principal (the amount you use to purchase the annuity) and then guarantees to pay you a fixed amount of income. This will be either for the rest of your life or for a set amount of time. It is managed by an insurance company.
There are some important things to keep in mind before choosing a fixed-index annuity. You have growth potential with an FIA, but it is usually capped or limited to a percentage of growth. For example, if the market goes up 20%, you might receive 6% (or whatever your specific annuity’s cap is) or only receive 60% of the 20% growth. On the flip side, as a fixed income stream, you will know the amount of income you will receive each year at any age you decide to make a withdrawal. Also, you will not lose your original principal investment if the market takes a downturn like it did in 2008 or 2020.
When it comes time to act on your guaranteed retirement income streams, you will have several decisions to make. The pressure to choose the best option can easily feel overwhelming. We are here to offer our advice and guidance to help you have peace of mind. Please contact our office to schedule your complimentary consultation!
We look forward to helping you!