Annuity Income Provides Retirement LifeStyle

How will one be able to keep up with the lifestyle you’ve enjoyed while in employment? Choices for retirement living without physical health limitations include remaining at home, independent living communities, or renting apartments in senior housing communities.

Most people see themselves retiring in their house.  However, many retired people have had to endure a rise in their cost of living, this, coupled with the fact that people are generally living longer is placing considerable pressure on retirement income.

Many seniors decide to live with family members who welcome them into their own homes, and many have no other choice. 

One in 10 baby “sandwich” boomers who are still supporting their children also provide some type of support to their aging parents.

Care-giving is definitely a big topic in someone’s overall financial plan because at some point in your life, whether you realize it or not, without retirement planning and saving, there is a good chance that you are going to have to take care of someone.

That’s the reality. It’s essential to address this issue right up front as the financial, emotional or time commitment impact of caring for aging parents must be built into their financial plan. 

Money and finances are a crucial factor to plan for when it comes to retirement. However, retirement is all about living a lifestyle that is low on funds and high on enjoyment. Planning for your retirement means being smart about how you invest your money. Being too conservative can cost you much money. At the same time, taking too much risk can be rather dangerous.

Some people think that residential property is the answer.  Investment theory tells us to spread our risk: don’t invest in just one asset class and certainly don’t invest in just one asset; yet relying on property, especially if it is your own home, means doing just that. The risk of disappointment is very high.

Yes you can make money from investing in a property but as we have seen in recent years you can also lose money. For some people their property will provide some or even all of their retirement income. However, this doesn’t mean you can simply dismiss retirement savings and expect your house to bail you out.

There are two key problems with relying on property to fund your retirement, they are liquidity and diversification. Firstly, if you are relying on your own home to provide you with a retirement income then you will have to find a way to convert it into an income stream.

That means either selling your home and moving out, or using equity release as a way of getting cash up front for a delayed sale later. There is no certainty over the ease of liquefying the money in your house or the price you will get.

Life still has to go on and expenses will still be there.  The goal of retirement should be to live on 50% of what your living expenses were when you were working. Life is also short and most of us have better things to worry about. So if you want to get on top of your retirement planning, it makes sense to keep it as simple as possible. 

As you near retirement you should consider switching to lower risk investments.  This may shelter your investments from market volatility prior to retirement. Some financial planners recommend that people reserve at least 40 percent of their assets for covering large unexpected expenses in retirement for unforeseen circumstances.

If your income from Social Security, and pension sources do not generate a sufficient guaranteed income for retirement, one should consider supplementing that income with a guaranteed lifetime income from an annuity issued by an insurance company.

Annuities are ideal because most annuities are designed to provide a stable income over time, and providing a guaranteed stream of income to pay the fixed expenses of daily living is just plain good retirement planning.

An example of their income choices from an annuity are:

* The high-income choice: Here, they’d buy an annuity that will last the husband’s lifetime only, and pay him $1,000 per month, or $12,000 a year. To get this, the spouse has to sign a form that will say she has no rights to any payments if the husband dies.

* The middle road: Here, they’d get an annuity guaranteed to last 10 years that will pay the husband $930 a month or $11,160 per year. If the husband dies within the 10-year guarantee period, the spouse will get the same monthly payment until that period is over. After that, she will receive no further income.

* The lower-income, high-security option: Here, they’d choose an annuity that will pay the husband $850 per month during his lifetime or $10,200 a year. After the husband dies, the annuity will pay the spouse $510 a month or $6,120 a year until she dies.

If a person puts after-tax dollars into an annuity and draws the money out over his or her remaining lifetime, that payout will be guaranteed for life, and taxation of the gain will be spread out over those lifetime payments.

These are in effect life annuities, income that cannot be outlived. This can even be done with part or all of one’s IRA or 401(k). In this way, the annuity holder can be guaranteed lifetime income for themselves and their spouses.

Do they have up-to-date wills, powers of attorney and health-care directives, and know how to access the information quickly and easily if something does happen?

Get Free!  Five Wishes is a legally-valid tool you can use to ensure your wishes and those of your loved ones will be respected even if you can’t speak for yourself. Five Wishes helps you express how you want to be treated if you are seriously ill and unable to speak for yourself. It deals with all of a person’s needs: medical, personal, emotional and spiritual. Let your family and doctors know your Five Wishes.