If you’ve worked in the field of education for many years, you may be looking forward to a well-deserved break when you retire. Unlike many other professions, most teachers can rely on a defined benefit pension plan that typically includes ongoing income for the remainder of their life.
Although you pay into this benefit system, your contribution amount is not directly connected to your future income. Rather, your monthly pension check will be the result of a formula that takes into consideration the number of years you’ve worked, your average paycheck amount at the end of your teaching career, and a factor that is based on your retirement age.
Even though having a regular income to depend on can provide you with added peace of mind down the road, the reality is that the amount you bring in from your pension might not be enough. So, then what?
Bridging the Gap Between Future Income and Expenses
While you may have a good handle on your current monthly expenses now, once you leave the world of employment, it is likely that some of your regular living costs will change. As an example, once you’ve retired, the cost of transportation and food are likely to go down. However, travel and health care expenses can often go up.
Your future living costs will be, in large part, dependent on how you spend your time, as well as which goods and services you need. It is important to determine whether or not your pension will be enough to cover these expenses each month. If not, you will need to find a way to bridge the income “gap.”
One way to bridge the gap could be through a fixed indexed annuity. An annuity is designed to pay out a regular stream of income for a set amount of time or even for the remainder of your lifetime, regardless of how long that may be.
Depending on how you choose to receive your annuity income, it may even continue for an additional recipient, such as your spouse or partner. So, in many ways, a fixed indexed annuity is similar to your current pension plan. But there are other possible benefits that a fixed indexed annuity may offer, as well.
How a Fixed Indexed Annuity Could Provide the Income You Need in the Future
An annuity can allow you to have added control over when your income begins, as well as how long it will last. Because of this flexibility, you can essentially “customize” your annuity to help fit your specific income-related objectives.
With many options for fixed indexed annuities, you can opt for additional features, such as an income rider, that will provide a guaranteed minimum monthly income for life. This is the case regardless of what happens in the market.
So, with your principal protected from a downturn in the market and the opportunity for fixed growth, you can worry less about adjusting your future lifestyle because of a market correction. Furthermore, by bridging the income gap between what you’ll have and what you will need in the future, you could also alleviate the worry about running out of income when you need it the most. Having a regular income you can count on could help reduce stress and produce long-term benefits for retirees.
Additional Benefits of Fixed Indexed Annuities
As you approach retirement, it is likely that one of your trial financial goals is to continue growing assets without worrying about the risk of losing principal. While stocks and other equities can offer you the opportunity for growth, these types of investments can also be quite risky. On the other hand, investments that have been traditionally considered “safe” will often provide only miniscule returns that may not even be enough to meet, much less beat, future inflation. With a fixed indexed annuity, your funds are protected from market risk while also allowing you the opportunity to benefit from the upside of strong market indexes, such as the S&P 500.
There are other benefits that can be obtained with a fixed indexed annuity compared to more “traditional” investments like stocks or bonds. For instance, if you do not live long enough to receive the amount of your annuity contribution back, a beneficiary (or multiple beneficiaries) that you choose may receive the remaining funds. These funds may be accessed as one lump sum or as a series of payments over time. Likewise, in certain situations, such as you being diagnosed with a serious illness or the need to move to a skilled nursing facility, you may be able to access some or all of the funds that are in the annuity. That way, you could leave your other savings and investments intact.
So, while some financial vehicles can provide you with specific benefits, only a fixed indexed annuity can offer you the ability for growth during up markets, protection in down markets, and an income you can count on for the rest of your life.
Planning for Income Now Can Provide You With More Options Later On
The way that you plan today can have a direct impact on how much you’ll be able to spend tomorrow. Waiting until it is too late to plan can drastically reduce your alternatives for filling in the difference between what you have and what you actually need.
Being able to depend on income from your teachers’ pension can provide you with a “base” amount of income down the road. Coupling that with income from a fixed indexed annuity can add an additional level of security and control. It can also give you the option to do more of what you really want to do without concern of running out of income during the next phase of your life.
This content was brought to you by Impact PartnersVoice. Annuity guarantees are backed-solely by the financial strength and claims paying ability of the issuing insurance company. Guaranteed lifetime income is available through annuitization or the purchase of an optional income rider for a charge. Annuities are long-term products of the insurance industry designed for retirement income. They contain limitations and exclusions, including withdrawal charges and a market value adjustment that will affect contract values. Insurance and annuities offered through David H. Tran, CA Insurance License #0G38212. DT #832829-0420