If someone you trusted—say your mom, your best friend or your boss—offered to give you $500 every month for the rest of your life, you’d say yes, right? Yet many people turn down guaranteed monthly income in retirement.

Why?

Because they don’t realize it’s an option.

They also may not realize just how much they may need that money in their retirement years. Even now, the average full-benefit payout from Social Security is just $16,000 per year, which is barely above the poverty line.1

And if you’re counting on getting more from Social Security when you retire, don’t get your hopes up. The Social Security Administration is expected to stop paying benefits in full by 2034, and with a growing U.S. budget deficit, further cuts to benefits may occur before then.2

No wonder so many Americans are afraid they won’t be able to live on Social Security alone during retirement.

What’s more, life expectancy continues to rise. If you and your spouse live to age 65, there’s a 25 percent chance that one of you will live well into your 90s,3 which is why more than half of financial advisors expect at least some of their clients to run out of money.4

With the possibility of receiving less in Social Security while facing greater costs for food, housing, healthcare and other expenses during what could be three decades or more of retirement, no wonder many of us worry that we may face a “retirement income gap.” Simply put, this occurs when retirement expenses exceed retirement income.

Insured Retirement Institute and Jackson, “The Language of Retirement, June 2017.

Annuities are a valuable retirement ally

Enter annuities. Often misunderstood and sometimes forgotten altogether, annuities can be a valuable retirement asset that can give you a much-needed financial boost every month throughout your retirement years.

That’s one of the reasons why 73 percent of respondents to a recent survey now consider the protected income of annuities to be a highly valuable addition to Social Security, up from 61 percent just one year ago.5

And that percentage is expected to increase as more and more people realize that Social Security alone won’t come close to meeting their expenses in retirement. Neither will they be able to rely on their savings. The average working-age couple in the U.S. has only $5,000 saved for retirement.6

Thus it comes as no surprise that 80 percent of people say they’d purchase an investment product providing protected lifetime income—even if it cost more than an alternative.7

Another reason is peace of mind. Two-thirds of annuity owners report being highly satisfied with their annuity, and three out of four say their annuity is important to their financial security.8 In addition, those who own an annuity are more confident about maintaining their current lifestyle throughout their retirement years.9

Unfortunately, many people don’t understand the value of an annuity or how it can make the difference between “just getting by” in retirement … and thriving.

From confusion to clarity

To help clear up misperceptions around protected lifetime income and how it can help you enjoy a safe, secure retirement, 24 financial services organizations have joined forces to form the Alliance for Lifetime Income.

Based in Washington, D.C., the nonprofit Alliance has one simple yet powerful goal: to educate Americans about the importance and availability of protected lifetime income.

To achieve this goal and empower individuals from all walks of life to tap into the power of protected lifetime income from solutions such as annuities, the Alliance has launched a multi-faceted, multi-year educational program that highlights how annuities can help people of all ages fund their retirements with greater confidence.

Among other important resources, the site features a checklist you can use to start the retirement income conversation with your financial advisor. It also includes profiles of retirees making the most of their retirements thanks to annuities, a much better strategy than hoping your mom, your best friend or your boss will hand you that $500 monthly gift.

To learn more, visit allianceforlifetimeincome.org today.

 

1 Paul N. Van de Water and Kathy Ruffing, Center on Budget and Policy Priorities, “Social Security Benefits Are Modest,” August 7, 2017.

2 Paul N. Van de Water and Kathy Ruffing, Center on Budget and Policy Priorities, “Social Security Benefits Are Modest,” August 7, 2017.

3 Merrill Lynch, “Annuities for Lifetime Income,” 2016. Merrill Lynch Wealth Management, IMG Retirement Strategies calculations based on Society of Actuaries, 2012 Individuals Mortality Rate Tables, Basic.

4 Insured Retirement Institute and Jackson, “The Language of Retirement, June 2017.

5 Fourth Annual 2018 Guaranteed Lifetime Income Study, Greenwald & Associates/CANNEX, 2018.

6 Kathleen Elkins, CNBC, “Here’s How Much the Average American Family Has Saved for Retirement,” September 12, 2016.

7 Insured Retirement Institute and Jackson, “The Language of Retirement, June 2017.

8 Fourth Annual 2018 Guaranteed Lifetime Income Study, Greenwald & Associates/CANNEX, 2018.

9 Fourth Annual 2018 Guaranteed Lifetime Income Study, Greenwald & Associates/CANNEX, 2018.

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*What is an annuity?

Annuities are long-term, tax-deferred investments designed for retirement. Variable annuities involve risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½. Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity.

Annuities are not for everyone. And, it’s important to remember that these products are meant to be long-term investments designed for retirement, so there are restrictions in place to discourage you from withdrawing all of your money at once or taking withdrawals before age 591/2. However, most annuities do allow for exceptions based on specific circumstances such as a terminal illness or other emergencies.

 Guarantees are backed by the claims paying ability of the issuing insurance company. 

 Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity.

Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses, which are contained in the same document, provide this and other important information. Please contact your representative or the Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.

The latest income date allowed is age 95, which is the required age to annuitize or to take a lump sum. Please see the prospectus for important information regarding the annuitization of a contract.

The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.

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