In a perfect world, we would all know the exact sum we’ll receive in retirement from all our different retirement savings accounts and income streams, and we wouldn’t lose a wink of sleep wondering if we’ll have enough to last our lifetime. Unfortunately, reality is different, but there are several avenues you can take to create a dependable income for yourself in retirement.
Social Security has been a cornerstone of modern American retirement since its inception in the 1930s and acts as a foundational source of income for many. However, the amount you receive could be impacted by when you decide to claim. Most people are eligible to receive Social Security benefits at age 62, but claiming as soon as you qualify instead of waiting to reach your Full Retirement Age (FRA) could reduce your benefits in the long run. In the end, it is entirely up to your best judgment when you choose to claim your benefits, but discussing your options and how they fit into your overall plan with a financial professional could greatly help you in your decision. And, with reports that Social Security will be reducing benefits in 2034, it’s important to understand if this funding issue will affect your retirement income.
They used to be the expectation, but nowadays pensions seem to be a dying breed in retirement income. A pension is a fund where money is added by the employer during the years of the employee’s employment. If you are one of the people who still receive a pension, you have two ways to withdraw the money: as one lump sum or as a stream of income. It is important to know the pros and cons of each withdrawal method based on your personal situation before you begin.
Fixed Index Annuities
A fixed index annuity uses your upfront principal (the amount you use to purchase the annuity) and then guarantees to pay you a fixed amount of income either for the rest of your life or for a set amount of time and is managed by an insurance company. There are some important things to keep in mind before choosing a fixed-index annuity. You have growth potential with an FIA, but it is usually capped or limited to a percentage of growth. So, for example, if the market goes up 20%, you might receive 6% (or whatever your specific annuity’s cap is) or only receive 60% of the 20% growth. On the flip side, as a fixed income stream, you will be able to know the amount of income you (or you and your spouse) will receive each year at any age you decide to make a withdrawal and you won’t lose your original principal investment if the market takes a downturn like it did in 2008 or 2020.
There are several decisions to be made when it comes time to act on your guaranteed retirement income streams, and the pressure to choose the best option every time can easily feel overwhelming. We’re here to offer our professional guidance and opinion to help you have peace of mind. If you would like to continue the discussion about your retirement income more in depth, please feel free to contact our office at 336-450-2161 to schedule your complimentary appointment! We look forward to helping you!
Corey R. Hodges
Fortified Futures Wealth & Retirement Advisors
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