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Income For Me... Or Money For The Kids?

Society Of Actuaries One of the great challenges of retirement income planning is balancing the need for lifetime income with the dream of leaving an inheritance. While both goals are worthy and sometimes possible, they are not always compatible.

Inheritance planning assumes you have more than enough money to live on.  You have enough to support yourself, and then some for your heirs.  That may mean a charity, grand kids, or your dog. In any situation, you can take care of yourself first.

So while these are laudable goals, are they possible in your situation? What if they aren’t? What could be worse than becoming a burden on the ones you love instead of leaving them a nest egg?

Not thinking ahead can leave you short of income in a long retirement, and if you’re planning for others and neglecting your own needs, or relying on others to take care of you while simultaneously hoarding your savings, you’re not doing yourself or your caregivers a service.

Now, the flip side of that coin is that spending recklessly is also a risk.

What Is The Balance?

A new study by the Society of Actuaries offers some heavy but useful reading on the topic. Not surprisingly, it echoes many of the facts you will find on this site, namely:

Each retirement income solution has its pros and cons, and the amount of retirement income delivered to retirees depends significantly on their choice of a retirement income generator. Because there’s no “one size fits all” retirement income solution, retirees will need to make calculated tradeoffs when considering the amount of retirement income they need based on their individual goals and circumstances.

A few more gems from the report:

  • Given improvements in life expectancies, the money set aside for retirement may need to last a long time — potentially 20 to 30 years or more. But many retirees are not prepared to manage this critical task on their own. Furthermore, there’s much uncertainty around how long an individual retiree will actually live.

  • Market volatility complicates the challenge of managing savings in retirement. Since 1987, there have been four major market meltdowns. With retirements potentially lasting 20 to 30 years or more, it’s prudent for retirees to expect and plan to survive more meltdowns in their future.

  • Many employees don’t know how to calculate the amount of savings that’s needed to generate lifetime retirement income. They often guess at this amount, and usually they guess too low. This results in retirements sooner than financially prudent based on the amount of retirees’ savings.

  • There’s also evidence that retirees are doing a poor job of managing retirement risks; many lack a formal plan to generate retirement income from their savings, and as a result, they’re planning to spend down assets at an unsustainable rate. Others are under-spending in retirement for fear of running out of money. Surveys show that employees and retirees want and need help generating retirement income.


When making your retirement income plans, think of your own situation first- this is not a selfish act, but a compassionate one. If you truly care for your heirs and family, you’ll not become a burden to them and will be able to supply your own needs.

Retirement annuities might not be the ONLY answer, but they are a very useful tool in the toolbox. For a portion of assets, they do handily eliminate the risk of outliving your money, and offload that longevity risk onto an insurance carrier. It’s worth considering.

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“For all time periods and for all portfolios, the addition of the annuity leads to a decline in the portfolio failure rates.”

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