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Outliving your income…different strategies…different results !!

by Jerry Ricketts 06/15/2014

I remember 30 years ago most people when thinking about retirement focused on two things. First, was accumulating as much money as possible. Second, was to be able to retire early. Boy have things really changed. Baby boomers today are concerned with health care expenses and making sure that they don’t “outlive their income”.

With the shift in people’s thinking about their financial future, our industry is making changes to address today’s financial concerns and develop a new and improved game plan for success in generating a more secure retirement income. This involves new approaches combining traditional vehicles with income guarantees that can reduce the risk of failure and improve the odds of creating a successful income-generating strategy.

Are Variable Annuities and Mutual Funds alone up to the task? According to recent surveys by major organizations, roughly one third to one half said they are no longer focused exclusively on the size of their retirement accounts. Instead, their chief concerns are the safety of principal and achieving a life-time income stream. Relying on Variable Annuities and Mutual Funds alone (even when properly balanced between growth and security) are less and less attractive when one focuses on the safety of principal and achieving a life-time income stream.

We see many of our clients add to their portfolios a contemporary oriented IA (Indexed Annuity) combined with a GLWB (guaranteed lifetime withdrawal benefits). Over the last 5 years we have witnessed some exciting product enhancements that have really upped our clients returns.

Finally, a resent study that examined a mutual fund systematic withdrawal paired with a contemporary Indexed Annuity with GLWB increased the probability of success to over 97%, when a 50 percent allocation to the Indexed Annuity (remember, no downside market risk) was combined with a mutual fund mix of 25 percent equities and a 75% fixed income.

For both pre- and post-retirees, the popularity of guaranteed income riders attached to Income Annuity products is increasing and for good reason. Positioning clients for little to no market risk, a guarantee of principal, potential for portfolio growth and retirement income requires planning. Improved retirement outcomes, flexibility to respond to a variety of needs and market conditions, and retaining control of assets are driving today’s retirement decisions. Combining a contemporary Indexed Annuity with GLWB with a mutual fund draw-down strategy makes for a well executed strategy.

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