What Guarantees a Steady Stream of Income in Retirement?

What guarantees a steady stream of income in retirement?

Let’s start with what you already know.

Social Security.

Social Security is the best inflation annuity on the planet.

It provides income for life, and the increases are political, not actuarial.

Key Takeaways

• Social Security guarantees lifetime retirement income
• Pensions can also provide guaranteed retirement income
• Only about 9% of people still have pensions
• Annuities are the only financial product category that can guarantee lifetime income
• The four annuity types for lifetime income are SPIAs, DIAs, QLACs, and Income Riders
• The goal is to build an income floor that supports chapter two of your life

Social Security Is the First Income Guarantee

Social Security is the income stream most people already have.

It pays as long as you are breathing.

That makes it an annuity-style income stream.

But Social Security was never designed to be the entire retirement plan.

It was designed to be part of the income floor.

Pensions Can Also Guarantee Income

If you have a pension, you are fortunate.

Only a small percentage of people still have one.

Most pensions belong to:

• government workers
• military retirees
• some labor union workers

For everyone else, the responsibility shifted to 401(k)s, 403(b)s, 457s, SIMPLE IRAs, SEPs, and other defined contribution plans.

Those are accumulation vehicles.

They are not automatic lifetime income streams.

Annuities Guarantee Lifetime Income

Here’s the softball answer.

If you want guaranteed lifetime income beyond Social Security or a pension, the product category is:

Annuities.

There are four main annuity types that can create lifetime income:

• Single Premium Immediate Annuities
• Deferred Income Annuities
• Qualified Longevity Annuity Contracts
• Income Riders

Those are the tools.

Why Annuities Work for Income

Annuities are issued by life insurance companies.

When you buy lifetime income, you are transferring the risk to that company.

They are on the hook to pay:

• as long as you live
• as long as your spouse lives, if joint life
• even if you live much longer than expected

That is the transfer of risk.

What About Inflation?

Social Security handles inflation better than commercial annuities.

Commercial annuities can sometimes offer Cost of Living Adjustments, but the annuity company does not give that away.

The starting payment is usually lower, and the break-even point can take years.

That is why inflation should be addressed through planning, not fantasy sales pitches.

Build Your Income Floor

The real goal is your income floor.

That means the guaranteed money coming into your bank account every month.

Your income floor might include:

• Social Security
• Pension income
• Required Minimum Distributions
• Dividend income
• Lifetime income annuities

If that floor covers your lifestyle, you are in good shape.

If not, you solve the gap.

How to Solve the Gap

If you need an additional $750 per month, then quote for $750 per month.

If you need $1,000 per month, quote for $1,000 per month.

The goal is to use the least amount of money possible to contractually solve that income gap.

The Two Questions That Matter

Before buying any annuity, ask:

What do you want the money to contractually do?

When do you want those contractual guarantees to start?

Those two answers determine whether an annuity fits and which type provides the highest contractual guarantee.

Where to Compare Guaranteed Income Options

If you want to see what it would take to create additional guaranteed income, you can compare options using our annuity calculators here: https://www.stantheannuityman.com/ annuity-calculator/

The Bottom Line

A steady stream of retirement income can come from Social Security, pensions, and lifetime income annuities.

Social Security is the foundation.

A pension is great if you have one.

And if you need more guaranteed income, annuities are the product category designed to provide it.

Build your income floor first.

Then live chapter two.