Turn retirement savings into income you can plan around.
Retirement planning is not only about how much you accumulate. It is also about how your savings, Social Security and other resources may work together to support the income you need over time. Safe Money Guys helps you understand insurance-based retirement income options and the tradeoffs involved before you decide how to proceed.
Your paycheck may stop. Your expenses don't.
A retirement income conversation starts with the expenses and lifestyle your resources may need to support — and the risks that could affect that plan.
Will your money last as long as you do?
Saving for retirement is only part of the challenge. Once you retire, the question becomes how to turn the resources you've accumulated into income while accounting for an unknown retirement timeline, changing expenses, market conditions and the need for access to your money.
The right approach depends on your goals, resources, time horizon, liquidity needs and other individual circumstances. Insurance and annuity products are not appropriate for every person or objective, and product features, guarantees, fees, surrender provisions and tax treatment vary by contract.
Start with the income you need — then determine how your resources may support it.
Retirement income planning connects the money you expect to spend with the income sources and assets available to support those expenses. The objective is not to force every dollar into one strategy, but to understand what role each resource may play.
Estimate Your Income Needs
Begin with essential expenses and the lifestyle you want to support. Consider which costs may be relatively predictable and which may change over time.
Account for Income Already Available
Social Security, pensions, employment income and other dependable sources may cover part of what you need. The remaining amount becomes the income gap your other resources may need to address.
Decide How to Support the Gap
Savings, investments and insurance products can have different purposes, risks and tradeoffs. The combination that may be appropriate depends on your circumstances and objectives.
Income, liquidity and growth are different needs.
Money intended for near-term spending may need different characteristics than assets intended for long-term growth, emergencies or legacy goals. Separating those jobs can make the retirement-income conversation easier to evaluate.
Create a clearer relationship between the income you need and the resources available to provide it.
Annuities and other insurance products may be considered as one part of that broader plan when their contractual features, liquidity limitations, costs and guarantees are appropriate for the individual. Guarantees are subject to the claims-paying ability of the issuing insurance company.
One way to create an income stream from part of your retirement assets.
An annuity is an insurance contract. Depending on the type and contract terms, an annuity may be used to accumulate value, create income, or address both objectives. Whether one belongs in a retirement plan depends on the job you need that portion of your money to do.
You place money with an insurance company under a contract.
In return, the contract provides specified features that may include accumulation, income options or guarantees. The details vary substantially by annuity type, insurance company and contract.
Use a portion of retirement assets for a defined income objective.
For someone who wants more predictable income, an appropriate annuity may help transfer certain longevity or income risks to an insurance company. That does not mean every retirement dollar belongs in an annuity or that an annuity is appropriate for everyone.
Income You Can Define
Certain annuity contracts can provide scheduled income for a specified period or, when selected under the contract, for life. Available income options and amounts depend on the contract.
Different Accumulation Approaches
Depending on the annuity, credited interest or contract value may be determined in different ways. Some contracts offer fixed rates, while indexed annuities may credit interest using a formula linked to the performance of an external market index, subject to contract terms.
Contractual Guarantees
Some annuities offer guarantees related to principal, credited rates or income features. Guarantees vary by contract and are backed by the claims-paying ability of the issuing insurance company.
The benefits only make sense when the tradeoffs make sense too.
Annuities are long-term insurance contracts and may involve surrender charges, restrictions on withdrawals, tax consequences, fees or other limitations depending on the product. Optional benefits may have additional costs or conditions. Understanding both the benefits and the limitations is essential before deciding whether a particular contract is appropriate.
Annuities are insurance products and are not bank deposits. Product availability, features, rates, crediting methods, income options, fees, surrender periods, withdrawal provisions and guarantees vary by insurance company and contract. Indexed annuities are not direct investments in a market index, and interest credited under an indexed strategy may be subject to caps, participation rates, spreads or other contract provisions. Withdrawals may be subject to ordinary income tax and, when applicable, additional federal tax penalties. Consult an appropriate tax professional regarding your individual tax circumstances.
Evaluate the income strategy before you evaluate the product.
An annuity should not begin with a product illustration. It should begin with the retirement problem you're trying to solve. Our role is to help you organize the income need, understand available insurance options and examine the tradeoffs before you decide whether a particular strategy makes sense.
Start With Your Retirement Income Need
We discuss the income you expect to need, the sources you already have, the assets available to support the difference and the other priorities those assets may need to serve.
Identify the Job an Insurance Product Might Do
If an insurance-based strategy may be appropriate, we focus on the objective first — such as accumulation, future income or a contractual guarantee — rather than starting with a predetermined product.
Compare Available Contract Features
We help you understand relevant differences among available options from multiple insurance companies, including income provisions, crediting methods, liquidity, surrender periods, fees, optional benefits and other contract terms.
You Decide Whether It Fits
You decide whether and how to proceed after reviewing the benefits, limitations and available alternatives. If you apply, we help guide the application process and explain the next steps.
Recommendations involving insurance products should reflect your individual circumstances, objectives, liquidity needs and suitability considerations. Product availability and contract terms vary by insurance company.
Common questions about annuities and retirement income.
Retirement income products can involve unfamiliar terminology and long-term contractual commitments. These answers address several of the questions worth understanding before deciding whether an annuity belongs in your plan.
An annuity is a contract issued by an insurance company. Depending on the type and contract terms, it may provide accumulation features, income options, guarantees or a combination of these. Annuities vary significantly, so the specific contract matters.
Certain annuity contracts offer income options designed to provide payments for life. The amount and terms depend on the contract, the income option selected and other applicable factors. Guarantees are subject to the claims-paying ability of the issuing insurance company.
Access depends on the contract. Many annuities permit withdrawals subject to specified provisions, but surrender charges, market value adjustments, tax consequences or other limitations may apply. An annuity should be evaluated alongside your liquidity needs before purchase.
Not all annuities work the same way. For example, a fixed indexed annuity is an insurance contract and does not directly invest your contract value in a market index. Interest may be credited using a formula linked to an external index, subject to provisions such as caps, participation rates, spreads or other terms.
Some annuity contracts include guarantees related to contract values, credited rates or income benefits, but the guarantees differ by product and contract. Insurance guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company, not by the federal government.
It depends on the contract, beneficiary designation and any income option or optional benefit selected. Some contracts provide a death benefit or remaining contract value to beneficiaries, while other payout structures may operate differently. The applicable provisions should be reviewed before purchase.
Tax treatment depends on how the annuity is funded, the type of distribution and individual circumstances. Earnings may be subject to ordinary income tax, and some distributions may be subject to an additional federal tax penalty. Tax rules can be complex, so individual tax questions should be discussed with an appropriate tax professional.
Start with the objective you need the money to accomplish. Income needs, other assets, time horizon, liquidity, risk considerations, contract features and alternatives all matter. An annuity may be appropriate for some retirement objectives and inappropriate for others, which is why the strategy should be evaluated before the product.
A licensed professional can help you understand available insurance options and the contract details that may apply.
You've worked to build your retirement savings. Now give those dollars a job.
A licensed professional can help you organize your retirement income needs, review the resources you already have and understand whether available insurance or annuity options may have an appropriate role in your plan.