As you approach retirement, securing a stable and protected monthly income becomes important. This necessity exists because you have reached your golden years, and the income you can still earn is much lower than in the earlier stages of your life. Retirement is not just about accumulating savings; it’s about ensuring a steady flow of income that can withstand market fluctuations and unforeseen expenses. When you understand the significance of guaranteed monthly income, it can transform your approach to retirement planning. This guide will delve into the importance of guaranteed monthly income and some questions to discuss with your financial advisor.
Why Is Guaranteed Monthly Income Important?
A guaranteed monthly income, shielded from market fluctuations, provides a reliable foundation for your retirement planning. The average amount of money a person aged 55-64 is $408,420, according to Federal Reserve SCF data. Unlike relying solely on a lump sum of savings, which can be vulnerable to market volatility and unexpected expenses, a guaranteed income stream ensures that you consistently meet your financial needs. This approach allows for precise budgeting and peace of mind, knowing your lifestyle is protected.
Questions To Ask Your Financial Advisor
You should engage in detailed discussions with your financial advisor when considering guaranteed monthly income opportunities. Your advisor should be very knowledgeable on the subject and be able to answer all sorts of questions for you in many different scenarios. Here are some of the big questions to ask and spark the conversation:
- How much monthly income will I need? Having a keen focus and understanding of your future income needs is the first step in retirement planning. Discuss your current and projected expenses, and consider inflation and potential healthcare costs. Your advisor can help you calculate a monthly income to maintain your desired lifestyle. The rule of thumb is that you’ll need about 80 percent of your pre-retirement income to maintain your lifestyle in retirement, although that rule requires a pretty flexible thumb.
- What if my expected income is less than I need? If there’s a gap between your anticipated income and needs, explore various options to bridge this difference. Annuities might be a viable solution, providing a reliable income stream to cover shortfalls. The safety of an income stream that will guarantee payments becomes more attractive every day; the benefits of an annuity are hard to ignore.
- How Can Annuities Protect Me from Market Volatility? Annuities can offer protection from market downturns, ensuring your principal amount remains safeguarded. Some annuities even provide a guaranteed return, which can be particularly beneficial during economic instability. Although no financial product is completely recession-proof, annuities might help you create a steady income stream in times of uncertainty.
- How do I know that these options are safe? Assessing the financial strength of the insurance companies offering annuities is paramount. Look for providers with high ratings from independent rating agencies, and discuss these ratings with your advisor to ensure you’re making a secure choice. Your advisor should be able to offer different products with the highest-rated carriers for you.
Monthly Income Strategies Other Than Annuities
While annuities are a popular option for guaranteed income, it is wise to explore other strategies that can offer similar benefits. Here are a few alternatives:
- Dividend-Paying Stocks
- Real Estate Investments
- Bonds
Final Thoughts
By engaging in thorough discussions with your financial advisor and exploring an array of income strategies, you can build a retirement plan that offers stability and gives you peace of mind. After all, you have worked your entire life for this moment. Why should you not savor it and enjoy it? Whether you choose annuities or other investment options, your goal should be to create a reliable income stream that supports your financial needs and lifestyle throughout your retirement years.
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We hope that this information on protected monthly income has been useful to you.
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This article was updated on 6/13/2024.
