Many retired workers of past generations received pension checks that lasted their entire lives. Your parents or grandparents may have worked for one employer for the majority of their lives, and upon retirement began receiving monthly pension checks in perpetuity. It was commonly used as a main source of income in retirement, along with Social Security.
Pension plans are extremely rare these days, especially in the private sector. In today’s world, most people put build a nest egg retirement savings by contributing to a 401(k) or IRA. Once they retire, they’re responsible for making sure the money they saved up lasts for the remainder of their lives.
Many retirees are concerned about unexpected medical expenses, market crashes, and other factors that could diminish their savings. Others are concerned that they’ll simply live longer than expected and run out of money. Social Security is helpful, but it’s typically not enough to survive on by itself. Some retirees use lifetime annuities, which are contracts offered by insurance companies, to provide them with guaranteed income that they can’t outlive. For some, the income it provides is similar to having a pension.
You typically purchase an annuity using a lump sum of your retirement savings. The insurance company then provides regular payments for the rest of your life, even if you live to be 100. Some annuity contracts may even continue to pay to your surviving spouse after you die. The benefit is having a steady check that, combined with Social Security, can provide substantial income throughout your retirement.
There are various types of lifetime annuities such as fixed, variable, and fixed indexed annuities. They all have different terms and different ways of determining if and how your money may grow with interest. Depending on your situation and your personal goals, some may be more effective than others.
If you are concerned about not having regular income in retirement and potentially outliving your savings, you may want to consider a lifetime annuity. You should speak with a professional to determine if an annuity fits into your overall retirement plan and if so, which contract matches your goals. Contact Absolute Retirement Solutions today to speak with an annuity professional in the Kansas City Metro Area.
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