Retirement income that’s guaranteed for life can be a valuable resource. It provides you with financial certainty so you can make informed spending decisions. Guaranteed income isn’t impacted by market volatility, which could reduce your anxiety about the future. Best of all, you can’t outlive guaranteed income, so there’s no risk of running out of money in the later years of retirement.
Unfortunately, guaranteed* retirement income isn’t as common as it used to be. Most retirees can count on Social Security benefits, which are guaranteed for life. For most people, however, Social Security is likely to be insufficient to fund a full retirement. Pensions are also disappearing from employer benefit offerings. Many retirees will likely have to rely on withdrawals from savings to pay for their retirement expenses.
However, you have the option to create your own stream of guaranteed lifetime income by using an annuity, specifically something called a single premium immediate annuity (SPIA). A SPIA is an insurance policy in which you convert a lump sum of assets into an income stream that lasts for a specified period of time, usually life. SPIAs aren’t right for everyone, but they can be helpful tools for some retirees.
What will be your biggest financial challenge in retirement? Will it be trying to protect your assets and avoid market risk? Or perhaps you’re worried about managing your spending so your funds last through your lifetime. Maybe you’re concerned about taxes or keeping up with inflation.
For many seniors, the biggest challenge may be long-term care. Long-term care is extended assistance with basic daily activities such as eating, bathing and mobility. It may include a medical component, such as administering drugs, or it could simply consist of help with day-to-day tasks.
Long-term care is often provided either in an assisted living facility or in the home by family members or home health aides. The U.S. Department of Health and Human Services estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point. It’s usually needed for a few years, but nearly 20 percent of those who need care require it for more than five years.1