Find An Annuity To Replace Pension Income of the Past

Many of our parents and grandparents received a monthly pension check from the day that they retired until the day they died.  Today, many people think that this income stream sounds like a dream.  But Baby Boomers whose parents or grandparents had such a pension stream hoped for something different.  That’s a big reason that the pensions of the past started disappearing.  People with pensions knew the exact amount of income that they would receive every month.  This was both a good and a bad thing because the fixed amount had no hope for growth.  Baby Boomers wanted more than the fixed income of their parents and grandparents.  401k plans came about to give more control of retirement finances to individuals.  The responsibility to save for and finance retirement shifted from employers to employees.  Montgomery Taylor says that “The right annuity can fill in retirement income gaps” in his article for the North Bay Business Journal.

Everyone was really excited about 401k plans because they offered more freedom over your retirement choices.  You could put money into them or decide against it.  You could make risky investment choices within your plan and create your own flexible retirement plan.  Without the forced fixed income in retirement you could be free to do what you wanted without being tied down.  But then people came to realize that it wasn’t a perfect scenario.  You still needed income in retirement, but now you had to figure out how to get it on your own.  That is a challenge in and of itself.  The solution to getting guaranteed income from your 401k or other retirement savings is an annuity.  Annuities give you the certainty of a guaranteed income in retirement like the pension plans of the past did.

Many executives at major corporations have annuities in their retirement package.  They make sense for companies and executives for a few reasons.  Executives receive guaranteed income because the longevity risk is transferred to an insurance company.  Payments are not affected by the performance of a company’s stocks years after an executive has retired.  Not only do the executives receive guaranteed income for their annuity, they also have their assets protected in the case of a lawsuit or bankruptcy.  Many people like the idea of annuitizing their retirement plan.  They pay a lump sum to an insurance company, which then pays them regular income payments for the rest of their life.  A lot of worries and risks are alleviated by using an annuity product in retirement.  You transfer market risk, interest rate risk, and your annuity bypasses probate if you have a death benefit, leaving the remaining money to your heirs.  Your guaranteed annuity income makes tax planning and cash flow decisions much simpler.

A previous blog post showed that Federal Reserve Chairman Ben Bernanke owns millions of dollars of annuities to fund his future retirement.  He also has money in the stock markets, which may be a lesson to everyone.  A combination of annuities and stock market investments allows you to take advantage of the benefits of both.  The right annuity can be the best way to fill in gaps in your current retirement plan.  As we’ve said before, you have to do your research when it comes to annuities.  It is crucial to find the right annuity expert to help you find a product that works in your individual situation.  Annuities are a great way to guarantee the type of retirement income payments that your parents and grandparents may have received from a pension.

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