Redefining retirement: A little of this and a little of that.
Income annuities gain popularity as retirees and pre-retirees look for safety.
Remember when you first started off in your career? Fresh-faced and ready to take on the world, the concept of retiring in the future seemed pretty cut and dried—and distant: Work hard, save, and then retire with your pension plan—supplemented by Social Security. Easy, right?
The landscape of retirement has changed dramatically over the last few decades, however, and with traditional pension plans dwindling, the future of Social Security uncertain, the rising costs of health care, and now retirement right around the corner, people are rethinking their approach to retirement income.
Consider this: Since 2007, the share of retirees (70% in 2013) indicating that Social Security is a major source of income in retirement has increased steadily. Unfortunately, according to the Social Security Administration, the average monthly benefit in 2014 for retired workers was only $1,294 after a 1.5% cost of living adjustment (COLA).1
Now, think of your monthly expenses, including housing, food, utilities, and health care, as well as your retirement goals and dreams. Whether your plan is to finish your master’s degree, hike the Appalachian Trail, start your own business, or perfect your tennis game—you need to ask yourself: Will I have enough money to do it and live comfortably?
A new approach to retirement planning: A mixed bag of income sources.
For many pre-retirees, their anticipated retirement income may be less reliant on traditional pension plans and Social Security, and more reliant on a “pieced-together” approach. Indeed, according to the 2014 EBRI Retirement Confidence Survey,2 while a majority of retirees (89%) report that Social Security provides a source of income for retirement, pre-retirees expect to live on retirement income from a wide variety of sources:
- 79% of future retirees expect Social Security to be a major or minor source of income in retirement, but believe that personal savings will also play a large role.
- 71% anticipate receiving retirement income from an employer-sponsored retirement savings plan.
- 65% expect to collect income from an IRA.
- 68% anticipate personal savings and investments will supplement their income.
- 74% will supplement income with employment, and
- 56% intend to rely on employer-sponsored traditional pensions or cash-balance plans.
Income annuities meet the need for a guaranteed stream of income.
In addition, income annuities are growing in popularity for those looking to fill the retirement income gap. With so many products to choose from, you might want to plan ahead and consider adding New York Life’s Guaranteed Future Income Annuity (GFIA), a flexible-premium, deferred-income annuity, to your retirement income arsenal.
How a Guaranteed Future Income Annuity works.
When you purchase a Guaranteed Future Income Annuity (GFIA), you make an initial premium payment and select a future date in which your guaranteed lifetime income will start (two to 40 years from the initial premium payment—certain age restrictions may apply). Then, during the deferral period—the time between your initial premium and your income start date—you have the option of making subsequent premium payments at any time (up until two years prior to your income start date). The initial minimum premium payment is $5,000, and minimum subsequent premiums are $100. Additional premium payments will receive the payout rates in effect when premiums are received.3
After your deferral period, you’ll begin to receive guaranteed income payments, which will last for the rest of your life—no matter how long and full your life may be. You can customize your payment stream to include another annuitant, legacy options, and inflation protection. (Note, limitations and restrictions may apply. Please ask your agent for more information.)
Getting ahead of the game.
GFIA appeals to pre-retirees between the ages of 55 and 65 who plan to retire in five to 10 years—allowing them to look ahead with peace of mind. Pre-retirees can benefit from a guaranteed, sustainable way to maintain income in retirement, potentially higher income payments than they could achieve elsewhere, and a reduction of some market risk from their overall portfolio during the final years of their pre-retirement, when they can’t afford to endure the consequences of a market downturn.
A flexible, secure, simple retirement solution.
Consider this: According to the COUNTRY Financial Security Index® survey,4 only one-third of Americans overall think a middle-income family can save for a secure retirement. Those nearest retirement are most skeptical, with just 28% of 50 to 64-year-olds thinking it’s possible. Why the skepticism? Because despite an earlier start on saving for retirement, these baby boomers’ savings were the hardest hit by the economic downturn.
Income annuities can offer them—and you—the security and peace of mind needed to face the future with confidence—and make retirement dreams a reality. And the flexibility of a GFIA can help jump-start a customized retirement income solution.