Retiring at last. You have earned it by every measure. But now, you face an important transition in your personal financial plan.  You have finished accumulating retirement assets and are now beginning to distribute them as income to support your retirement lifestyle. The choices you make now can certainly impact your long-term financial situation.

Reserving Your Assets

Building a systematic withdrawal plan around a sustainable withdrawal rate is a smart effort for making your money last, but it may not be enough.  Assume you have a retirement portfolio worth $1 million.  Initially, annual withdrawals of 5% ($50,000) seem conservative.  You may be surprised to learn however, that at that rate there is only a 90% chance your money will last just 20 years.#  In other words, one in ten people following this seemingly conservative withdrawal strategy could potentially out live their retirement nest egg later in life.

In addition to careful consideration of withdrawal rates, retirees must be aware of the significant risk market volatility poses. Erratic swings in equity-based investments can decimate portfolio values without warning - seriously threatening potential future income since percentage-based withdrawals shrink as total assets are eroded.

Holding onto what you have - asset preservation – is a top priority for retirees.  Though you may not know how long you’ll live, you do know that running out of money is not a scenario you hope to experience. If only there were guarantees… The good news is: there are.

Get Guaranteed Life-long Income

A Guaranteed Lifetime Income Annuity# is a financial product that does, in fact, guarantee life-long income.  To illustrate, imagine that same hypothetical million-dollar portfolio.  From it, you could use $842,334# to purchase a Guaranteed Lifetime Income Annuity, which will provide the $50,000 per year of income you had planned to live on.  But, this $50k is now guaranteed for as long as you live, regardless of market performance.  No more worrying about outliving your savings.  Plus, you would still have $157,663 left in your portfolio to access as you wish, making the Guaranteed Lifetime Income Annuity significantly more efficient than a simple withdrawal strategy.

In case of premature death, the Guaranteed Lifetime Income Annuity has a Cash Refund option, which returns to beneficiaries the difference between the initial premium and whatever has been already paid out.  If inflation is a concern, an Annual Increase Option# can be added to the annuity contract at purchase -- initial annual payments would start off smaller, but increase each year between 1 – 10% according to the owner’s preference.  Over time, the total annually adjusted payouts would potentially provide more income than their unadjusted counterparts.

This educational third-party article is being provided as a courtesy by Lee McArthur. For additional information on the information or topic(s) discussed, please contact Lee McArthur at 229-740-2415.

Agent, D. Lee McArthur, Jr. 
New York Life Insurance Company