Rethinking Retirement: Focus on Income You Can Count On
After 27 years as a public high school teacher, Harry Sawyer was looking forward to a more relaxed life in retirement. But his monthly pension of $1,100 a month after taxes and health insurance was less than he and his wife, Liz, needed to cover their regular monthly bills.
Fortunately they had both invested in individual retirement accounts (IRAs). The big question: how to transform their IRA into income that could be counted on, month after month, whether the market was up or down.
As baby boomers keep marching into their 50s, 60s and 70s, this dilemma will become more and more common. For many retirees, the answer will be an income annuity.
An income annuity allows you to convert a sum of money from your savings (the premium) into a lifelong series of steady, guaranteed income each month, depending upon the option you choose.1 It’s a reliable and affordable way to help make sure you will have the income you need to cover living expenses in retirement.
That’s why Union Plus is offering union members an Annuity Program with more features and lower costs than similar programs offered through AARP and other sources. Free of agent fees or sales commissions, annuities offered through this program may provide higher monthly income than you may be able to generate on your own. In exchange for these higher payments, an income annuity permanently converts your principal to a guaranteed income stream.
Make a plan for reliable income
During your working years, the emphasis is on growing your retirement savings. Once you retire, your strategy needs to shift to from growing to maintaining. (See http://retirement.unionplus.org for recommended steps to take.) But the income has to be sustainable, so you don’t outlive your money.
That’s where income annuities really shine. You can ensure your savings last for the rest of your life, your and a loved one’s life, or a specified number of years. Your income will vary depending on which annuity option you choose.
Four reasons to consider an income annuity:
1. Consistency. The payment is guaranteed, and you can count on being paid every month.
2. Stability. Your income won’t depend on the stock market and its ups and downs.
3. Simplicity. You don't have to study financial reports, monitor a portfolio, or buy and sell investments. Look for your monthly deposit into your checking/savings account each month.
4. Control. An American General income annuity purchased through the Union Plus Annuity Program isn’t at risk in the market, since it is a fixed annuity product purchased by you2. It’s like having a retirement paycheck.
How much income can I receive from an income annuity?
Four factors determine your annuity income:
The amount of your premium. The more money you put into an income annuity, the more monthly income you’ll receive.
Current annuity rates. The higher the rate, the higher your monthly payment will be. This rate is determined when you buy your annuity, based on factors such as the current rates of corporate bonds and long-term Treasuries. Your payment will also include some returned principal, not just interest.
The amount of agent fees and commissions you pay. The Union Plus Annuity Program eliminates this expense for union members, maximizing your monthly income.
The income option you choose. You can choose guaranteed payments that continue for the rest of your life, your and a loved one’s life or for a specified number of years. You may also choose how often you receive annuity payments -- on a monthly, quarterly, semiannual or annual basis.
Would an income annuity be right for you?
First, estimate the amount of reliable monthly income you need by adding up all your fixed, nondiscretionary monthly expenses, such as mortgage or rent, groceries, insurance, and so on. Then subtract your expected monthly Social Security benefit and pension benefit. Whatever remains is spending that needs to be covered by another source of dependable income.
If you can easily pay your expenses out of savings, you may want to postpone buying an annuity. Just be sure not to wait until your savings are too depleted to generate the steady income you need. In any case, it’s highly likely that you shouldn’t plan to tie up more than 50 percent of your savings in an annuity. You’ll want to reserve the rest for discretionary spending, unexpected needs and growth.
What will you need to maintain your standard of living?
To find out how much income an annuity purchased through the Union Plus Annuity Program might provide, try the online calculator at UnionPlus.org/Annuities or call 1-877-244-1539 and speak with an experienced, non-commissioned annuity specialist. They’ll answer your questions and help determine if an income annuity is the best way for you to create sustainable income in retirement.
1 Guarantees are subject to the claims-paying ability of the life insurance company.
2American General Life Companies, www.americangeneral.com, (“American General”) is the marketing name for a group of affiliated domestic life insurers.
American General Life Companies insurers offer a full line of life insurance, annuities, accident & health products and worksite benefits to serve the financial and estate planning needs of its customers throughout the United States.
This contract is not insured by the FDIC, the Federal Reserve Board or any similar agency. The contract is not a deposit or other obligation of, nor is it guaranteed or endorsed by, any bank or depository institution.