How can you convert your retirement savings into retirement income?
During pre-retirement most people focus on accumulating assets for retirement. Once they reach retirement, the next step- the distribution of assets- is equally important to help ensure retirees can maintain their financial indenpendence. Here's a retirement planning scenario: Using a combination of guaranteed sources and his $1 million dollars of savings, this 65 year-old man wants to create a $90,000 per year retirement income stream: He needs $65,000 to cover his basic living expenses (food, rent, utilities, etc.), and wants $25,000 to spend at his discretion (entertainment, gifts, vacation, etc.).
His pension and social security guarantee him a life-long income of $36,000. But, he still needs an additional $29k/year just to ensure that his basic living expenses will always be covered regardless of market ups and downs. He would also like to cover his discretionary expenses, but that is a secondary concern at this time.
To address the basic expense shortfall, he can convert a portion of his savings into a lifetime income annuity, guaranteed* to pay the $29k/year he needs for the rest of his life.
This hypothetical example is for illustrative purposes only and is based on a Lifetime Income Annuity, Life-Only policy for a male age 65 years old. This example assumes an annual income of $29,000 beginning one year after the policy is purchased. Annual income amounts are based on rates in effect as of 1/27/09. Rates are subject to change, and payout amount will vary depending on premium amount, age, gender, the number of lives the policy covers (either one or two) and payment option. Actual amounts are dependent on interest rates in effect when the policy is purchased. Other payment options are also available. In most jurisdictions the policy form number for a lifetime income annuity with life only is 203-169.
*Guarantee based on the claims paying ability of the issuer.
