The Hardest Day of Your Life?

I published an article a few years ago called, “The Hardest Day of Your Life.” Believe it or not, that “hardest” day is the day that you retire, because the paycheck stops and now you have to figure out how to pay yourself.

The first thing you need are retirement withdrawal strategies that are specific to your retirement plan. A withdrawal plan is an important part of retirement because knowing how to take money out of your assets is one of the biggest retirement decisions, and it affects your tax situation as well as how long your money will last. People are just underprepared for it.

Are you withdrawing only the interest your accounts have earned? What about gains or profits? Or are you actually withdrawing from your principal? If you’re taking out money that you’ve earned in the past, are you taking away from that potential earning going forward?

A study this year by the TIAA Institute and Nuveen found that 71% of employees have “somewhat thought” about retirement withdrawals, while only 22% have thought about them “a lot.” But nearly half fail basic retirement withdrawal quizzes.

Depleting Savings Too Fast

Your withdrawal and income plan for retirement can help you plan for how long your money may need to last and help you avoid paying more than necessary in income taxes to Uncle Sam. That’s why we have to start planning ahead of your retirement date, when you can still take needed actions that might help you.

I became a Certified Annuity Advisor^SM for just this reason, and I’ve been helping people retire for decades using guaranteed products to provide them with retirement income. We also have a CPA in our office who can help you consider all the tax ramifications of your decisions.

Many people don’t really understand annuities, or claim they don’t like them. There are different types, and they have different features, costs, and contractual terms. I do my diligence for every client, and I happen to be a fan of some fixed indexed annuities because of the way the products are designed. I can go into all that with you. We are independent and work with dozens of insurance companies and have access to software that can compare features and costs in real time on any given day.

Hypothetical Example of Annuity Income

Here’s a hypothetical example that I’m just going to throw out there. Let’s say you have

$1 million at risk in the stock market that you have saved up in a taxable retirement account. And let’s say you’re trying to come up with a withdrawal plan, and that’s the money you’re going to have to live off for the rest of your life. You have Social Security and a little other income, but that’s your main nest egg you will rely on.

Let’s take half of that money, which is $500,000.

We work with a lot of insurance companies to compare annuities and benefit amounts. Let’s say you’re 65 years old, and a retirement income annuity is going to pay you $35,000 to $40,000 a year, guaranteed for life based on that $500,000. That guaranteed annuity will pay $35,000 to $40,000 per year for the rest of your life based on the strength of the insurance company issuing the annuity. Depending on the contract and income options selected, there may also be benefits available to your beneficiaries.

So, with your annuity and Social Security, you have your expenses covered for the most part. And now you have that extra $500,000 to play with. Whether you want to keep it in the market, you want to hold onto it in cash for emergencies, leave it as a legacy for your kids… whatever it might be that makes you happy. It is 100% up to you. Use it for family bucket-list vacations or whatever you like.

Protected Income Using Annuities

What we saw during the 2008 great recession that too many people who didn’t have annuities, who relied on taking 4% out of their retirement accounts in the stock market, lost everything to the global crash, because there are no guarantees with the stock market. We don’t want that to happen to anyone. We like guarantees when it comes to your income.