Generating Lifetime Income From Your Retirement Savings

For many, the “savings” part of retirement planning is the easy part. It’s figuring out how to turn that savings into a steady income that can be tricky, especially when wanting that income to last a lifetime. Are you confident about having enough income to last for your retirement?

Social Security, while providing a steady supplement, only makes up approximately 40% of the average wage earner’s pre-retirement income, according to a recent article from The Street. With the disappearance of traditional employer-paid pensions, retirees are left responsible for the remaining 60%.

Even if you’ve done all of the right things – stashed away money in your 401(k), 457 or 403(b) and invested in an IRA, and maybe even a Roth IRA – how can you be sure that your savings will generate lifetime income? Many financial experts recommend annuitizing a substantial part of your retirement savings.

“Begin by annuitizing enough of your assets so that you can provide for 100% of your minimum acceptable level of retirement income,” says a study from Wharton Financial Institutions Center, “investing your Lump Sum at Retirement. Annuitization provides the only viable way to achieve this security without spending a lot more money.”

A deferred lifetime income annuity, also called a longevity annuity, guarantees income for life, even if you live to be 100 (or more). With a lump sum of cash, you purchase the product from an insurance company who then promises to pay you a set income starting on a future date of your choosing. Many buyers choose to begin payments at 72, the same age you must begin taking annual required minimum distributions (RMDs) from a standard IRA, 401(k) or other qualified plan. 

If that plan doesn’t suit you, you could fund an income annuity with qualified 401(k) or IRA funds and begin payments beyond age 72, but you’ll need to purchase a Qualified Longevity Annuity Contract (QLAC) instead. This type of product allows you to allocate up to 25% of the total of all of your IRAs or $135,000, whichever is less, to a QLAC while delaying RMDs until age 85. 

When you purchase any annuity product, you’ll know the exact amount of monthly income you’ll receive as well as the exact date the payments will begin. Annuities can also be purchased as single-life or joint-life, which typically covers both spouses. Those who need retirement income right away may opt for an immediate annuity. 

The many available options help in making annuities one of the most efficient ways to protect yourself from outliving your assets. For more information about annuity products contact AnnuityFYI by sending an email to or calling 1-866-223-2121.

Written by Rachel Summit

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