Any reliable structure needs to have a solid foundation to withstand the test of time. As financial professionals, advice is regularly given to clients about the essentials of having a strong foundation for their savings and investments during the accumulation phase of life.
This is very good advice. But what happens when it's time to de-cumulate and convert those assets into a livable, long-term lifetime income?
Beyond yesterday's retirement
Years ago, the "traditional" company pension plan paid out a set amount of monthly income to retirees, typically for the remainder of their life. That, along with income from Social Security, were usually enough to cover living expenses. Any funds from personal savings or investments could then be used to pay for the "extras" like vacations and golf outings.
Fast forward to today. Retirement looks much different, at least in terms of income. Gone are many of the defined benefit pension plans that large corporations previously offered.
The security of knowing that fixed living expenses are covered is also gone. Coupled with increased life expectancy, meaning that income is not only unpredictable, but must also last for a much longer period of time, this is causing a significant amount of stress for today's — and tomorrow's — retirees.
Instead, many individuals and couples who are approaching retirement will have to rely on their own savings efforts to get them by in the future. That has led to one of the biggest fears of retirees and pre-retirees today: that of outliving their money.
Buying the winning longevity lotto ticket
The good news is that one create guaranteed lifetime income — a "personal pension" of sorts — that can not only eliminate the fear of outliving income in retirement, but can also allow the use of other assets for growth to help keep pace with future inflation.
