Retirement Income…Think About This

ThinkAboutThis 500Your estimated Social Security benefits are based on current law. Congress has made changes to the law in the past and can do so at any time in the future. The law governing benefit amounts may change. By 2033, the payroll taxes collected will be enough to pay only about 75 percent of scheduled benefits.

Whenever Dave Berry would point out some incredible, unbelievable occurrence in his columns he would add the disclaimer, "I am not making this up." Take a look at your annual Social Security statement, the "Your Estimated Benefits" section. Look down for the star (*) and the bold type. See, I am not making this up.

I do commend the Social Security Administration for notifying the public of the current resolution to the problems in the system. Your Social Security won't stop. According to current law, your benefits will be reduced.

Remember that Social Security is an important government benefit but it's only one leg in a secure retirement. Your employer may provide another leg, a pension, oops, I mean 401k.   The 401k provides several worthy features, but not the “gold standard of retirement”, a guaranteed income you cannot out live.

So, your social Security may get cut, your 401k is an asset which may produce a share of retirement income, but no guarantees. Where can you go for guaranteed income which you can't outlive? There is an industry which for hundreds of years, has thrived by providing a guaranteed amount of money for a guaranteed period of time. What industry? Insurance. What product? Annuity.

If you are close to retirement, you may want to look into a SPIA, single premium immediate annuity. You exchange one payment for a stream of income, based on your lifetime, the joint lives of you and your spouse, or a set number of years.

If you have time to accumulate retirement funds, investigate a fixed index annuity with an income rider. One of my favorites adds an 8% bonus to your money. This earns interest based on the performance of an index. If the index goes up, your account is credited with some of the gain. If the index goes down, your account remains the same. Most important, all gains are locked in.

I recommend an income rider added to the fixed index annuity. The rider will guarantee a 6% annual gain in the income account. Your income account will be about double your initial deposit in around 11 years. Two things: You can't take the income account as a lump sum; and, the company charges a fee, usually .75 to .95 of one percent annually to guarantee the income stream. This is the only fee you will pay. At retirement, you may take the income rider value as an income guaranteed for life.

What happens in Washington is anybody's guess. The only real control you have of your 401k is the amount of your contribution. But even in today's environment of questionable Social Security benefits and uncertain 401k income, there are opportunities for a secure retirement.