7 Smart Ways to Secure Guaranteed Retirement Income (2024)

It might seem like an intimidating challenge at first glance, but you have numerous options for guaranteeing retirement income. Some are more suited to long-term planning, but others can be last-minute moves just before you pull the plug on working. Your best results might come from a combination of both.

  • Your options for securing your income in retirement can vary depending on whether you're young and just beginning to save or you're looking for a plan later in life.
  • Annuities can provide you with money now or in the future. You can make the choice.
  • Taking out a reverse mortgage can help if you've paid off your first mortgage or if you've built up substantial equity in it.
  • A major factor in retirement income planning involves avoiding some common Social Security pitfalls.

Buy an Immediate Annuity

What’s the easiest way to achieve guaranteed retirement income? Buy it. This is exactly what you do when you purchase animmediate annuity. You use a lump sum of money to purchase guaranteed income.

You can choose an option where the income will pay out for your entire ​lifetime or for joint lifetimes if you're married. Thepurchase could be the deal of a lifetime for aspiring centenarians! There's no way you can outlive your income with an immediate annuity.​

As the name implies, "immediate" means the income starts right away, so the best time to look at this option is when you're ready to retire. You want anincome source that will begin immediately. Exactly how much monthly income you can receive depends on your age. The older you are, the higher the income you'll get per dollar that you invest.

Use a Withdrawal Benefit Rider on a Deferred Annuity

Look for an annuity that has a guaranteed minimum withdrawal benefit rider (sometimes called a GMWB) or a lifetime withdrawal benefit (an LWB)if you want to purchase guaranteed retirement income at somepoint in the future,

You deposit your funds today with the intention of taking out income at some point 10 years or more in the future. The annuity company takes a snapshot of your account value each year as you go along. The new higher value is locked in as the new “income base” as the account value grows. You can use the larger of the current account value or the income base value to generate your guaranteed withdrawals when you activate your withdrawal rider.

Note

The amount you can withdraw typically varies from 4% to 6% of the account value/income base value. The exact percentage depends upon your age at thetime of withdrawal and the terms of your contract.

Using this option can be a good way to protect account values from the impact that a major market decline would have if you're 10 to 15years away from retirement. This is particularlytrue if the decline should happen as you get nearer to your retirement age.

Work Toward Getting a Pension

It's great to retire with a pension. Some professionals spend the last 10 years of their careers working at a government agency just so they can acquire one. It's a smart move for those who didn't save enough toward retirement earlier in their careers. Look for employers that offer pensions and check to determine their vesting schedule.

Note

You might want to wait a bit longer if you're thinking about changing employers and if working the extra time means you'll have more guaranteed retirement income. These choices can help make your retirement more secure.

Some people worrythat their pensions might not pay out all the benefits they were promised. The older you are when you start your pension, the more secure your income will be. There's a form of government insurance called thePension Benefit Guarantee Corporationor PBGC.

It protects pension benefits, but the amount that's guaranteed has a cap. The insured amount is reduced for each year you retire before age 65. Begin benefits at 65 or later to maximize the insured amount if your pension is covered by the PBGC.

Get a Reverse Mortgage

Guaranteed retirement income is just that: income that you can count on for life with no risk. Areverse mortgagecan provide that level of security, and the income is tax free. So why don’t more people use them? Two reasons: fear and fees.

First, people fear that the bank can take their home. This was true long ago, but regulations have changed dramatically since 1985 or so. This product is now safer, stronger, and less risky for the borrower.

Second, some people think that the fees are too high. Once again, regulations have improved this situation. Fees can no longer exceed limits set by the government. A reverse mortgage might be a viable option if you're age 62 or older, you're looking for guaranteed retirement income, and you've paid off your home or have plenty of equity in it.

Be Careful About When You Claim Social Security

Most retirees receive the largest portion of their guaranteed incomes from Social Security. Those receiving Social Security benefits get a cost-of-living adjustment each year, which usually results in anincrease in benefits.

The problem is that most people still take Social Security too early, or they don't coordinate with theirspouses if they're married. Hundreds of thousands of dollars of income that would be paid out in the form of spousal benefits and widow/widower benefits can be foregone because one spouse made an unwise decision about when to begin their benefits.

Note

Try to avoid claiming Social Security at age 62. Starting benefits at a later age will often deliver a better outcome for you and more guaranteed income over your lifetime.

Put Money in a Deferred Income Annuity or QLAC

Longevity insuranceis a form of adeferred immediate annuitythat will guarantee you a minimum amount of income at a specific future age, such as 85 or 90.

There's a special form of this product called a QLAC or Qualified Longevity Annuity Contract. It's purchased inside an IRA or 401(k). The QLAC allows you to defer the start of your required minimum distributions.

People with longevity insurance feel more secure about spending their retirement money on fun and travel while they're younger because they know they have a future source of guaranteed income to provide for them later.

Build a Bond Ladder

Many retirees are afraid to spend principal, but it can be perfectly OK if it's structured the right way as part of a plan.

You can build a bond or a CD ladder. This involves buying a certificate of deposit or a bond that will mature in a specific year in an amount you'll need at that time to cover expenses. When the bond matures, you spend it.

Another option is to useTreasury securities. These are bonds issued by the U.S. government, and they're considered to be one of thesafest investmentsyou can own. Financial institutionscan strip the interest portion of the bond from the principal portion, creating something called Treasury STRIPS. You can buy these strips with maturities that are laddered out, creating a guaranteedstream of income with each strip maturing in the year you'll need it.

Frequently Asked Questions (FAQs)

What is a good monthly income in retirement?

The median average retirement income in the U.S. was $47,357 for those age 65 and older in 2021, according to Annuity.org. "Median" means that half of all retirees had more income than this, and half had less. Your income could therefore be considered "good" or at least better than half of all retirees in this age group if you had more than the median.

Can you live off an annuity?

Living off an annuity depends on the type or types of annuities you've chosen and when you've elected to receive the most significant payouts. It also depends heavily on your expenses in retirement. Create an anticipated budget, then factor in any other sources of retirement income you're planning on. Determine whether the annuity you've chosen or are considering will be sufficient to make up any shortfall.

7 Smart Ways to Secure Guaranteed Retirement Income (2024)

FAQs

What is the $1000 a month rule for retirement? ›

According to the $1,000 per month rule, retirees can receive $1,000 per month if they withdraw 5% annually for every $240,000 they have set aside. For example, if you aim to take out $2,000 per month, you'll need to set aside $480,000. For $3,000 per month, you would need to save $720,000, and so on.

How do I guarantee my retirement income? ›

Annuity basics

There are two main types of annuities--"fixed" and "variable": Fixed annuities earn a guaranteed minimum interest rate on your contributions. When you retire, they can offer you stable income for life that is consistent, reliable and guaranteed.

How much money do you need to retire with $100,000 a year income? ›

More? Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle after you retire. This means that if you earn $100,000 per year, you'd aim for at least $80,000 of income (in today's dollars) in retirement.

Is SGRA legit? ›

When you invest with an SGRA, your money will be taken care of by the insurance company offering it; they guarantee a minimum rate of return on your investment. Additionally, due to this protection from market fluctuations provided by the insurer, your money is safe no matter what happens in financial markets.

How long will $500,000 last year in retirement? ›

You can retire at 50 with $500,000; however, it will require careful planning and budgeting. As the table above shows, if you have an annual income of either $20,000 or $30,000, you can expect your $500,000 to last for over 30 years. This means you will run out of retirement savings in your 80s.

What is a good monthly retirement income? ›

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

Is $1500 a month enough to retire on? ›

Living on $1500 per month in retirement may seem challenging, but with careful planning and smart strategies, it is achievable.

Can I retire at 62 with $400,000 in 401k? ›

However, a popular approach is to invest in stocks and other growth assets while saving up, then convert your portfolio into an annuity upon retirement. With $400,000, if you buy an annuity at age 62 and then retire, you might expect monthly payments of around $2,400 for the rest of your life.

What is the average nest egg in retirement? ›

What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000. Taken on their own, those numbers aren't incredibly helpful.

What is considered wealthy in retirement? ›

To be considered wealthy at age 65 or older, you need a household net worth of $3.2 million, according to finance expert Geoffrey Schmidt, CPA, who used data from the 2019 Survey of Consumer Finances (SCF) to determine the household net worth needed at age 65 or older to determine the various percentiles of wealth in ...

How to pay no taxes in retirement? ›

Roth IRA or Roth 401(k) qualified distributions are tax-free. Social Security income is taxed at your ordinary income rate up to 85% of your benefits; the rest is tax-free.

What is the best tax-free retirement account? ›

Two of the most commonly-used tax-exempt accounts in the U.S. are the Roth IRA and Roth 401(k). Contribution limits for Roth IRAs and Roth 401(k)s are the same as for traditional IRAs and 401(k)s.

What is better than a 401k for retirement? ›

Good alternatives include traditional and Roth IRAs and health savings accounts (HSAs). A non-retirement investment account can offer higher earnings but your risk may be higher. Investment accounts don't typically come with the same tax advantages as retirement accounts.

Can you live off $3000 a month in retirement? ›

But if you're past that phase of your life, setting realistic retirement expectations and moving to an affordable home can put you on track to a nice lifestyle while keeping your living costs below $3,000 each month.

How many years will $300 000 last in retirement? ›

$300,000 can last for roughly 26 years if your average monthly spend is around $1,600. Social Security benefits help bolster your retirement income and make retiring on $300k even more accessible. It's often recommended to have 10-12 times your current income in savings by the time you retire.

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