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A major retirement fear is running out of cash too soon. Having a steady stream of guaranteed income can curb the odds of retirement funds running low. Setting up guaranteed income can give you peace of mind that you will be able to cover any retirement financial shortfalls.<\/p>\n<\/div>\n
Guaranteed income is a steady flow of cash that a retiree can count on to cover some or even most household income needs in retirement. The most effective guaranteed income streams are launched well before retirement age. <\/p>\n<\/div>\n
Here are eight moves you can make to build reliable streams of retirement income.<\/p>\n<\/div>\n
<\/react-trigger><\/p>\n Create a comprehensive retirement plan that accounts for the consistent expenses<\/a> incurred during retirement. <\/p>\n<\/div>\n \u201cOften, these expenses can then be offset with consistent income, such as income from a bond or annuity,\u201d says Harman Johal, a private wealth management market leader for Texas and Illinois at U.S. Bank in Houston.<\/p>\n<\/div>\n Many people have several guaranteed income sources, rather than a single strategy. <\/p>\n<\/div>\n \u201cTypically, pre-retirees will have a Social Security benefit, which will provide a guaranteed income,\u201d Johal says. \u201cUnderstanding when someone will be eligible for full retirement age benefits is important, as this will help them maximize income payouts through their lifetime with other income streams.\u201d<\/p>\n<\/div>\n Retirement investors need to create a financial plan that reviews expenses and determines how to best meet those expenses with available financial resources. <\/p>\n<\/div>\n \u201cKnow what percentage of those expenses need to be covered by guaranteed income strategies and what percentage will be covered by variable income sources,\u201d says Evan Potash, a wealth management advisor at TIAA in Philadelphia. \u201cSome people will want 100% of their expenses covered by guaranteed income sources and others may say the opposite.\u201d<\/p>\n<\/div>\n A financial advisor can help you understand the options for retirement income and create a financial plan. <\/p>\n<\/div>\n \u201cNo matter what stage of life you\u2019re at \u2013 repaying student loans, buying a house, sending your kids to college, or already in retirement \u2013 a trusted financial consultant can help tailor a plan that achieves your goals, improves your financial wellness and provides guaranteed incomes strategies that provide peace of mind when you retire,\u201d Potash says.<\/p>\n<\/div>\n Professional guidance can also help minimize the risk of outliving your money. <\/p>\n<\/div>\n \u201cMany people don\u2019t realize they can create another guaranteed income sources besides Social Security,\u201d Potash says. \u201cMeet with your financial consultant to understand how to create additional income strategies, including ways to keep pace with inflation and potentially leave a larger legacy to your family.\u201d<\/p>\n<\/div>\n An annuity<\/a> can provide you with guaranteed payments in retirement based on the amount of the up-front annuity investment. <\/p>\n<\/div>\n \u201cAnnuities can provide guaranteed income and peace of mind to the retiree and the retiree\u2019s family,\u201d says Robert Johnson, a professor at Heider College of Business at Creighton University. \u201cHaving an annuity cover your basic living expenses is a terrific cornerstone to a retirement income plan.\u201d<\/p>\n<\/div>\n \u201cA longevity annuity is a stream of payments that starts when an individual reaches a certain age, say 85,\u201d Johnson says. \u201cIf you have a longevity annuity, you have a secure source of income late in your life at a reasonable cost.\u201d<\/p>\n<\/div>\n Given the rise in interest rates in the past year, annuity consumers can generate the same level of guaranteed income with less savings.<\/p>\n<\/div>\n \u201cWhile annuities always provide lifetime income protection, the amount of income varies based upon where interest rates are when you purchase the annuity,\u201d says Sri Reddy, senior vice president of retirement and income solutions at Principal Financial Group in Des Moines, Iowa. \u201cFor example, with today\u2019s environment, a 65-year-old male retirement saver can generate nearly $7,000 per month for $1 million in savings.\u201d<\/p>\n<\/div>\n For individuals who are looking to retire soon, look into your guaranteed income options before you retire. <\/p>\n<\/div>\n \u201cAn immediate annuity can provide an income stream immediately, and for pre-retirees who may need income a few years later, a deferred annuity can provide an income stream at a later date,\u201d Johal says. \u201cBond ladders are another immediate guaranteed income option, as you can receive a combination of interest payments from the bonds now and also earn principal as the bonds mature down the road.\u201d<\/p>\n<\/div>\n A reverse mortgage<\/a> can provide income in retirement for people who have liquidity in a home, but haven\u2019t saved enough cash for retirement. If you\u2019re 62 or older, a reverse mortgage can provide guaranteed cash, and the ability to remain in your home may also have appeal. <\/p>\n<\/div>\n However, keep in mind that the home can revert to the lending institution once you pass away or move out of the home.<\/p>\n<\/div>\n Many people count on Social Security<\/a> as their main source of guaranteed income in retirement. Social Security beneficiaries enjoy regular cost-of-living adjustments that generally boost payouts each year. <\/p>\n<\/div>\n However, taking Social Security early can reduce payouts in retirement. Delaying claiming Social Security until age 70 and coordinating Social Security benefits with a spouse can help you to maximize your guaranteed payment in retirement.<\/p>\n<\/div>\n To get a good grip on guaranteed income needs and options in retirement, you\u2019ll need to get realistic about the money you\u2019ve saved for retirement and your expected expenses<\/a> once you leave the workforce.<\/p>\n<\/div>\n \u201cMost people are aware of the fixed costs in their budget, but underestimate travel, medical expenses, dining out, spending money on kids and grandkids, among other big spending issues,\u201d says Brad Aham, a financial planner at Equitable Advisors in Boston. \u201cMaking sure you have flexibility in your income to handle these variable costs is critical, and guaranteed income strategies often will not provide that flexibility.\u201d<\/p>\n<\/div>\n Be realistic about inflation and the challenges it brings to financing retirement. <\/p>\n<\/div>\n \u201cWhile guaranteed income strategies can be comforting and useful, you\u2019ll likely still need to own stock-based funds and ETFs that can try to earn strong inflation-adjusted real returns over time,\u201d Aham says. <\/p>\n<\/div>\n Keeping some money in the stock market can complement your guaranteed income strategy. More people are living longer, and you don\u2019t want to run out of money. <\/p>\n<\/div>\nGuaranteed Retirement Income Action Steps:<\/h2>\n<\/p>\n
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Look At Your Retirement Income Needs<\/h2>\n<\/p>\n
Talk To a Retirement Savings Professional<\/h2>\n<\/p>\n
Consider an Annuity<\/h2>\n<\/p>\n
Leverage Higher Rates<\/h2>\n<\/p>\n
Act Now If You\u2019re Retiring Soon<\/h2>\n<\/p>\n
A Reverse Mortgage Can Be a Last Resort<\/h2>\n<\/p>\n
Maximize Social Security Payouts<\/h2>\n<\/p>\n
Manage Your Expenses<\/h2>\n<\/p>\n