How can you create guaranteed lifetime income? Seriously, who doesn’t want guaranteed income! Eighty-four percent of adults polled in a new TIAA-CREF survey want a guaranteed income stream in retirement, and 46% are concerned that they will run out of money, yet only 14% have purchased an annuity to secure a steady stream of lifetime income.
An annuity is not the only way to guaranteed income in your retirement, but it is one of the easiest.
Let’s say that you’re a 65 year old male, and that you need an additional $1,000/month to get by, and you want that income to be guaranteed for your life. By purchasing a Single Premium Immediate Annuity (SPIA) for $179,000, you can get guaranteed payments for $1,000/month, which equals a 6.7% income cash flow. If you die next month, the insurance company would keep the difference, so you can add a cash refund option for $197,000 and your beneficiaries would get the difference lump sum. It drops the cash flow down to 6%, and is still pretty competitive.
Another alternative is that you could buy a joint annuity, that would pay for as long as both you and your spouse were alive, and this would cost $244,000, which reduces the return to 4.9%
Instead of a SPIA, you could buy an indexed annuity for $110,000 at age 56, and structure it to start paying out at age 65 for $1,000/month as well. The benefit of going with the right indexed account is that this $1,000 can cover both you and your wife, and if either one of you were to need at home, assisted, or nursing home care, the $12,000/year income would double to $24,000/year until the money was gone. Once that happened, it would revert back to the original $1,000/month payment for life.
Shop around, because prices, payouts, and special features vary by the insurance company. I like to go to http://www.Sidebysidequotes.com to get instant side by side price comparison options.
If you want to look at your guaranteed income options, give me a call and I can run the numbers for you.