I plan on living to 100. You might have a different age in mind, but when it comes to retirement income planning, we share the same goal: we do not want to outlive our money.
Clients sometimes tell me they only need their income to last until 85 or 90. My next question is always, “What happens if you live longer?”
That is much easier to address today than when you are in your 80s. Let’s look at what planning to 90, 95, or 100 really means, and how lifetime income can help take some of that uncertainty off your shoulders.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using my annuity calculator
Should You Plan for Retirement Income to Age 90, 95, or 100?
The problem with choosing one age is that your life may not follow the plan. If you retire at 60, planning to 90 means funding 30 years, while planning to 100 means funding 40.
I want you to look beyond whether a calculator says your money lasts to a particular birthday. Ask what happens if you live longer, returns disappoint, or managing your investments becomes harder.
If you are married, think about both lifetimes. Your plan needs to account for the possibility that one spouse will need income long after the other passes away.
💡 Pro Tip: Use ages 90, 95, and 100 to test your plan. Then ask what income would continue if you outlive those projections.
What Could $650,000 Provide in Lifetime Retirement Income?
In the video above, I use an example of a married couple who are both 52. They are considering putting $650,000 into an annuity and waiting until age 60 to start joint lifetime income.
The illustrated payout is approximately $83,000 per year. That is an example from the contracts and assumptions shown in the video, not a quote that applies to everyone.
Your available payout depends on factors such as your age, income start date, state, whether you choose single or joint coverage, and the contract you select.
The purpose of this example is income. The couple is effectively creating a personal pension, rather than prioritizing a large remaining account balance for their heirs.
In the illustration, the account value could be depleted in their early 70s. Under the lifetime income rider’s terms, however, eligible payments can continue after that value reaches zero.
Over 35 years, $83,000 annually totals about $2.9 million in payments. That is cumulative income over decades, not a $3 million cash balance or an investment return.
👉 Want to compare the income available for your situation? Visit my website to use my calculators and schedule a call with me.
How Is Guaranteed Lifetime Income Different From Withdrawals?
Taking money out of an account does not automatically make those withdrawals guaranteed for life. An account without a lifetime income feature can run out.
In the video above, I discuss what I call a hybrid pension: a fixed indexed annuity with a lifetime income rider. That rider establishes a contractual income benefit, subject to its rules and any applicable fees.
Other options include a single premium immediate annuity, or SPIA, and a deferred income annuity, or DIA. When structured for lifetime payments, these can also provide income for as long as the covered person or people live.
With traditional income annuities, you generally exchange access to your premium for the promised payments. Liquidity and beneficiary provisions depend on the product and payout option.
An indexed annuity with an income rider may preserve access to a remaining account value. However, surrender charges can apply, and withdrawals beyond the rider’s limits can reduce or terminate the income benefit.
All annuity guarantees depend on the issuing insurance company’s claims-paying ability and the contract’s terms. The important question is what the contract promises, not simply what an illustration projects.
What Happens When Investment Returns Disappoint?
In the video above, I compare the same $650,000 starting amount and $83,000 annual income goal under very different return assumptions.
Under the unfavorable sequence shown, the account is depleted in the couple’s mid-to-late 60s. Under the favorable illustration, the balance continues growing while supporting withdrawals.
Neither outcome is a prediction. The contrast shows how much the result depends on the assumptions.
This is where sequence of returns risk becomes important. Losses leave you with a smaller balance, and subsequent gains are applied to that smaller amount.
Once withdrawals begin, you are also removing money that could otherwise participate in a recovery. Strong later returns may not be enough to repair the damage.
I also questioned whether the favorable historical illustration fully represented the period it claimed to show. Before relying on a projection, I want to understand the data and assumptions behind it.
Does an Indexed Annuity Automatically Solve Longevity Risk?
No. In the video, I also examine an indexed annuity without guaranteed lifetime income and illustrate withdrawals starting at 60.
One scenario shows approximately 9.82% growth, while a revised allocation produces an illustrated average around 7.5%. Both appear to support the requested withdrawals under the assumptions shown.
Those figures are hypothetical illustration results. They are not guaranteed returns or rates you should automatically assume for retirement.
A fixed indexed annuity can protect against negative index credits under its contract terms, but withdrawals and applicable charges can still reduce its value. Protecting against market losses does not mean an account cannot be depleted.
Several years with little or no credited interest could change the outcome. Participation rates, allocation choices, and other contract provisions also matter.
💡 Pro Tip: Look separately at the guaranteed values, hypothetical growth, and lifetime income provisions. They answer different questions.
👉 If you want help understanding those differences, schedule a call with me through my website, and we can review the illustrations together.
Why Does Simplicity Matter Later in Retirement?
When you evaluate retirement income, consider how much ongoing work the plan requires. You may feel comfortable managing investments today, but your needs and abilities can change.
The same applies to your spouse. If you have always handled the finances, would your spouse feel comfortable deciding what to sell and when?
A properly structured joint lifetime income benefit can help simplify that transition. Payments continue according to the contract’s survivor provisions, without requiring the surviving spouse to immediately manage investment sales.
That simplicity is one reason people choose annuities. They may value a dependable income arrangement more than trying to outperform the market.
I sell annuities, and I am transparent about that. I work with more than 70 carriers, earn commissions when clients purchase contracts, and want you to compare the available options before deciding.
My goal is to help you understand the payouts, trade-offs, and contract details. You should have time to review illustrations and brochures without feeling pressured.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have