Never Run Out of Money For as Long as You Live

No Comments »

Deferred Annuity

Here’s the problem…

No matter where we keep our retirement savings, we cannot predict with any certainty, the rate at which our money will grow over the next 10, 20 or 30 years. And we cannot predict the rate at which we can continually withdraw money from our savings, over 20 or 30 years of retirement. Because we cannot know how long we will live, we cannot know how long we will need our money to last. So we cannot know how much money we can withdraw from our savings or how much we can spend from one year to the next, without the risk of running out of money or the need to cut back on our spending. What’s the solution?

A lifetime income Withdrawal Guarantee. It’s a conservative minimum guarantee that protects both your savings AND your income from the unpredictability of interest rates or earnings. It’s a guarantee that you can withdraw the same amount of money from your savings, each and every year for as long as you live. Regardless of what your money earns or how long you live, even if you do not earn as much as you withdraw and even if you live long enough to withdraw all the money from your savings.

Here’s how it works…

Your savings are kept in a “deferred” annuity. Contractually guaranteed to grow your savings and protect your income for as long as you live. But the interest you earn on your savings will vary from one year to the next and of course it could be LESS than 7% or 8%. So when it comes time to begin taking income, your lifetime income withdrawal guarantee, will allow you to calculate your income withdrawal as if your savings HAD earned a (for example) 7% or 8% compound annual return (NOTE: income riders are subject to change and can vary from one annuity contract to another. Check your specific annuity contract for details about your income rider and how it affects you).

The guarantee will allow you to withdraw 5% of this “calculation” value if you begin taking income at age 60. 6% of this “calculation” value if you wait till your age 70. 7% of this “calculation” value if you begin your withdrawals at age 80. So the longer you wait to withdraw income, the more you can withdraw each and every year for the rest of your life (check your contract to find out what your specific withdrawal rates are – withdrawal percentages can vary from company to company).

No matter how long you live or how much is left in your savings, these ratesare not actually credited to any of your savings at any time. These rates are ONLY hypothetical and are ONLY used to calculate your annual income withdrawal. Your income is actually withdrawn from the money in your savings. But it’s guaranteed to never run out, even if you withdraw all the money.

For example…

If you chose to begin your income withdrawal at age 70 and your hypothetical calculation value was $200,000, you could be guaranteed 6% of $200,000, that’s $12,000 guaranteed each and every year for as long as you live. Even though you don’t actually have $200,000 in your savings and you don’t actually earn 6% on your money, you could still withdraw the same income every year. Even if you live for 20, 30 or 40 more years and withdraw ALL the money from your savings. Because a Lifetime Income Withdrawal Guarantee is insurance on your savings, contractually guaranteed by a “legal reserve” insurance company. Required to maintain capital reserves equal to ALL of its contractual obligations. And the cost of this insurance is typically about ½ of 1% automatically, deducted from your savings each year until you begin to withdraw income (check your specific annuity contract for income rider charges).

So ask yourself this…

Does it make sense to rely on earnings or interest rates that you cannot guarantee for your retirement income?
Does it make sense to assume that your savings and your income will last as long as you do? Even if you live to be 100?
Or does it make better sense, to know for certain, how much you can withdraw from your savings each and every year guaranteed? For as long as you live?

Even if your interest rates drop. Even if you live to be 100.

This content is for informational purposes only. It does not reference, represent or recommend any specific product or company. References to interest rates, tax rates, growth rates or earnings assumptions are hypothetical, and all tax or legal implications should be verified by a qualified professional.

 

Author: Frank J Zakrocky

Frank believes in helping people by guiding them with sound, practical direction. Things like cutting expenses, trying to help people save more and helping to implement low risk money making plans.

Leave a Comment

*
*