When preparing for retirement, your primary objective is to set up income streams that you can rely on to pay for your monthly expenses when you are no longer working. Social Security income unfortunately is woefully inadequate for meeting these needs, and most people need to find other sources of reliable income to count on during their later stages of life. At one time, pensions from employers were used for this purpose, but pensions are no longer commonplace. Retiring individuals and couples must explore other options to fund their lifestyle and to pay their bills.
The Decreased Popularity of Pensions
For decades, it was common for workers to stay in a single job and to accrue pension benefits that they could rely on throughout their later years in life. It is estimated that 80 percent of workers in the public sector and 67 percent of union workers still have access to a pension. However, you can see that many individuals in this group are no longer covered by a pension. In addition, only 13 percent of workers in the private sector have access to a pension. This means that individuals must fund their own 401(k) or IRA accounts in an effort to prepare for retirement through their own investments. However, with the average worker retiring with less than $100,000 in these accounts, you can see that many people fail to achieve their goals. The last thing you want is to struggle financially after retiring, and proper planning efforts can prevent this from happening.
Building Your Own Pension
Have you thought about how long you may need to support yourself financially after retiring? Many people are living into their 80s, 90s and even early 100s now. If you retire at the age of 60 or 65, you can see that you will need to plan for at least two to three decadesâ€™ worth of income in order to be financially secure. How can you possibly accomplish this through your own investments? One idea is to purchase a lifetime annuity. This is a type of investment that can serve as your own pension. Essentially, you set up the annuity today as a lifetime product. When setting up an annuity, you can choose to make a smaller or larger initial deposit to establish the account. In some cases, you may deposit most of the saved funds you have accumulated so far. Then, you will make regular monthly deposits into your annuity until you are ready to retire. Some annuities let you make your own investment decisions so that you can control the growth of your assets.
Seeking Planning Advice
There are a wide range of annuity products that you can choose to invest in. For example, some of these products have only a short term of 10 to 20 years. Others can be established to provide you with guaranteed income throughout your life. You can even set up the annuity so that your spouse receives the funds when you pass away. Another option is to choose between quarterly and monthly income payments. As you can see, there is a great deal of flexibility to choose from when planning your annuity. These products are typically sold by life insurance companies, and you can reach out to your current insurance agent for more information. However, because these products can vary in terms of cost, return and features from provider to provider, it can pay off to shop around to find the right option for your needs.
June is Annuity Awareness Month, preparing for the future can be challenging, and you may be inclined to simply put this process off for another day. However, the sooner you begin saving and investing, the more money you will likely be able to enjoy after you retire. You understandably want to feel comfortable and free of financial concerns later in life, so now is the time to act. Learn more about how annuities can provide you with the guaranteed stream of income you are looking for after you retire, and begin researching product options as a first step today. You may find that this is the perfect way to establish your own pension that returns a reliable source of income for you to count on later in life.
Eric and Jennifer Lahaie
JEHM Wealth & Retirement
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