Retirement Income Planning Services

The first relies on historical market performance and extrapolates those returns and offers a statistical probability of future success. For baseball fans, consider that your favorite hitter may have a batting average of .300, allowing you to run the numbers and expect that trend to continue into the future. Yes, there’s a 70% chance that he’ll not find success at the plate, and injury, illness, and an occasional slump may contribute further to some tough days for his fans, but you can expect him to perform comparatively well given his history.

Not unlike a hitter in baseball, the stock and bond markets can be counted on to deliver future performance that is quite similar to past performance, but – and repeat after me – past performance is no guarantee of future results. When things go well, they can go really well. When the market stumbles, however, a retiree’s ability to draw the necessary amount of income from a probability-based stocks and bonds portfolio can result in real failure, or at least diminished income and some sleepless nights. As defined in income planning terms, that means the money runs out before you were ready for it to do so.

For those who appreciate a sure thing, and sleep better at night when not reliant on finicky and volatile stock and bond markets, there is a way to have your cake and eat it too. The answer is to get you and your closest thousands of friends together and agree that some of you will live longer than expected, while others will fall short of a very long life. As such, you pool your money together and agree to make sure everybody receives an income for life, regardless of how long each person lives. The tradeoff? Some people get a little more than their fair share and others only get their fair share.

 This annuity retirement plan arrangement, of course, involves highly regulated insurance companies, very long-term investment portfolios, more cash reserves set aside than obligations created, something called reinsurance, and a state-run guaranty fund that ensures the whole thing pays out without the risk of going it alone in the stock and bond markets. Said more simply, a portion of a person’s nest egg is placed into an annuity. 

By converting the appropriate portion of your pile of retirement money to this arrangement, a stream of payment checks arrives in your bank account each month for the rest of your life, guaranteed. The rest of the money you may have set aside is able to live in the finicky and volatile stock and bond markets described above.  Since these markets often provide superior long-term growth, that means you’ll allow yourself the means with which to manage a health care event, inflationary era, and occasional market drops…all while enjoying a retirement income that lasts for the entire life of you and your spouse.