Pensions that provide guaranteed income have become increasingly rare around the world, as employers have shifted from defined benefits plans to defined contribution plans. Studies in the U.S. have shown that retirees with a guaranteed income stream are more confident about their financial future.
The high costs of retirement mean that most people won't be able to rely on simply withdrawing from savings - they'll need to generate some sort of income through investments.
Far to many people believe they will be able to live in retirement by just drawing down their savings. But as people live longer and health care costs increase, this approach leaves people at risk of outliving their savings. Every withdrawal decreases the pool of assets needed to weather down markets, and rising inflation can make it necessary to draw more income than expected.
One in Three Americans Say Guaranteed Income is Top Retirement Priority
Two new TIAA-CREF surveys highlighted the troublesome facts of American retirement savings. Nearly three-quarters of Americans don't have or are unaware of lifetime income options through retirement plans, which could make it difficult for the 34% looking to retire early.
In one survey, just a third of workers who participates in a retirement plan say the primary goal is to generate guaranteed monthly income, but 72% say they either don't have or are unaware of this option. The second survey found that 21% of workers reported having not saved anything for retirement and 44% are saving 10% or less of their current income. Experts recommend saving at least 10% to 15%.
TIAA-CREF found that 44% of respondents are somewhat or very concerned they may run out of money in retirement while just 21% expect to receive income from annuities.
Retirement security is too important for wishful thinking and guesswork. All workers deserve a secure retirement, but many need help in setting realistic plans to achieve that goal. With life expectancies increasing rapidly, lifetime income options are essential to sustaining financial well-being over a lengthy retirement. A more reliable strategy is to guarantee a portion of savings as income you can't outlive to help cover essentials, like food and housing. Annuity payments create an income stream that lasts for life, even if your retirement stretches for 30 or 40 years.
Annuities sold through big insurance companies like Allianz, American Equity and ING have soared in popularity as retirees have come to understand that guaranteed lifetime income makes them more financially confident - and happier, too. In general, fixed annuities offer the best combination of certainty and cost.
So, the next time that you hear or read a financial "expert" downplay the importance of a guaranteed income stream, just remember that he/she has their best interests at heart, not yours.$
www.raybuckner.retirevillage.com
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