How Much Income Do I Need in Retirement?

So, how much income do I need, you need, we need, all of us need in retirement? Never ask anyone that question except Stan The Annuity Man, because that is a layup for most salespeople. They'll try to sell you something.

‌Hi there. I'm Stan The Annuity Man, America's annuity agent licensed in all 50 states, including the one you're sitting in. We're going to dig down into that topic so that you fully understand the amount of money you should put in and you won't make any mistakes.

‌In this blog, we will discuss a lot, including my two questions and an acronym I've come up with called the PILL; you'll love that acronym. We're also going to talk about inflation and legacy, reverse engineering the quotes, and pretty much everything you need to know. So, hang in there with me.

‌The 2 Questions

‌I've come up with two very unique ways to determine if you need an annuity and if you do, what type works best contractually for you. The first two questions that have come up with every single person that calls Stan The Annuity Man, I encourage you to do that. Go to The Annuity Man and set an appointment to speak with us, but we ask them two questions. The first question is, what do you want the money to contractually do? And the second is, when do you want those contractual guarantees to happen?

‌Let's take those two questions, and I'll give you a couple of examples. What do you want the money to contractually do? I want income. Second question, when do you want those contractual guarantees to start? I want income to start now. Well, then, we've determined that you might need a Single Premium Immediate Annuity. Let's do it again. What do you want the money to contractually do? Income. When do you want those contractual guarantees to start? Seven years from now. Okay, we've narrowed it down to two product types. Deferred Income Annuities could also be a QLAC, and Income Riders. From those two questions, I'll quote all carriers to find the highest contractual guarantees, and then we will discuss them.

‌The PILL

‌Let's do it again. What do you want the money to contractually do? I want to protect the principal and get some interest. When do you want those contractual guarantees to start? Now. Okay, great. That is a Multi-Year Guarantee Annuity. That's the annuity industry's version of a CD. See how simple that is? So, let's do it again. What do you want the money to contractually do, and when do you want those contractual guarantees to start? Now, the second thing I've come up with is an acronym called PILL. P stands for principal protection, I stands for income for life, L stands for legacy and the other L stands for long-term care/confinement care. So, let's do it again. Principle protection, income for life, legacy, long-term care/confinement care. If you do not need to contractually solve for one or more of those items in the PILL acronym, you do not need an annuity.

There's no G for growth. There's no M for market. There's no S for stocks. It's PILL, principal protection, income for life, legacy, long-term care/confinement care. You can contractually solve for those four items using annuities.

‌Let's do it again, two questions. What do you want the money to contractually do? Then, use the PILL, principal protection, income for life, legacy, and long-term care/confinement care. That's it. That's the way to determine if you need an annuity and what type. And even better than that, if you don't need an annuity.

‌Income Floor

‌Now, how much income do you need in retirement? I get that question all the time. I think we need to go backward a little bit and talk about the income floor. The income floor is the guaranteed amount of money coming in every month. But what is that covering? That's covering your mortgage, your light bill, your electricity, your food, your travel, and your lifestyle. Figure out what that is. Put the pen to the paper and say, okay, this is the income floor that I need. This is the guaranteed amount to cover those lifestyle expenses every single month. And then what that means is that's your income floor. And then you start adding up, what's my Social Security? What's my pension, if you're so fortunate to have one? Dividend stocks, whatever's coming in monthly. And then from that income floor amount that you need to hit, if there's a gap, then we can contractually solve for that.

‌Reverse Engineering Quotes

‌Let's talk about reverse engineering the quote. No, I'm not an engineer. I did not get an engineering degree, but I have an annuity engineering degree because I'm Stan The Annuity Man, America's annuity agent. So, let's talk about reverse engineering the quote. What does that mean? That means instead of saying, "Hey Stan, I've got this lump sum, this couple hundred thousand, 300, 400, whatever, that I want to find out what the income stream will be." Instead, let's reverse engineer the quote. Let's go the other way. Let's say, okay, I need this amount of income per month. Let's just say $2,500 a month. How much premium will it take after Stan The Annuity Man quotes all carriers, how much will it take to guarantee contractually that monthly income? That's reverse engineering the quote. And that's a really efficient way to do it.

‌Inflation

‌When you're talking about lifetime income in retirement, the gorilla in the room, that thing in the back of your head, I'm getting ready to yank out, is the word inflation. "Stan, what happens with inflation? What do we do about hyperinflation? What happens when there's inflation?" Well, if any agent out there says that they have the annuity that solves inflation, they are telling a lie. I mean, there's no way to track something that's unknown. I always tell people that you buy the highest contractual guarantee and if inflation hits, then we can reverse engineer and solve for that inflation amount that you need to cover for your income floor.

‌Do some annuities have inflation components that will increase the income? Absolutely. But understand this and listen to me closely. Annuity companies have the big buildings for a reason. They have the big logos on the planes for a reason. They don't give anything away. That doesn't mean that you don't need to buy an annuity with an inflation rider. Just understand that it's not going to be what you think it is. You already own the best inflation annuity on the planet, which is called Social Security, and you can add an annuity with an inflation rider. But just understand that the annuity company is going to lower those payments to make up for that inflation increase.

‌Legacy Income Planning

‌So, how much money do you need in retirement? Some people say, "Hey Stan, I really don't need an income stream, but I want to create a legacy for my spouse or partner or my children or grandchildren." You can do that. You can have them be a joint owner or a joint annuitant on the policy so that when your Learjet hits the mountain and you die, the income stream continues uninterrupted and unchanged for their life. That's what I call legacy income planning. And if you don't need the income personally, but you're thinking about others and your family, you can set up this legacy income planning by putting them on the policy as joint annuitant and that way you know when you pass away, they're taken care of.

‌Again, how much income do you need in retirement? That's a really good question. You can visit The Annuity Man and run the quotes yourself; no one will bug you. You can schedule a call and get my books for free and with no obligation. But if you go to The Annuity Man, you can start punching in numbers and seeing what the guarantees are, and then you can schedule a call with us, and we can go over those things in detail. Thanks for reading with me today. I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.