Today there are as many definitions of retirement as there are retirees. For some, retirement means a new career. For others, it’s an opportunity to pursue hobbies or travel. However you define it, retirement is lasting longer than ever, and depending on the lifestyle choices you make, it may also be more expensive.
Ø Determine sources of retirement income. When asked what they thought their most important source of retirement income would be, nearly half of the respondents to a recent survey said personal investments and savings. Just 14% said employer-funded pensions, and 20% said Social Security.1 The reality is that traditional “guaranteed” sources of retirement income (e.g., Social Security, pensions, etc.) are becoming less certain.
Ø Calculate your retirement income gap. Your retirement income gap is the difference between your expected, guaranteed sources of retirement income and what you’ll need each year to live a comfortable retirement. To get a general idea of your own situation, first consider your retirement lifestyle goals — where you plan to live, whether you plan to maintain more than one residence, what you plan to do with your time. All of those factors will affect your retirement income needs. Next, examine all sources of guaranteed income (e.g., Social Security, pensions, etc.). If that amount is less than your retirement income needs, you’ll have to use other assets to generate income to fill the gap.
Ø Balance investment growth with your need for protection.During retirement it’s quite possible that your assets will need continued growth to keep pace with inflation and your income needs. At the same time, your assets can ill afford to be exposed to market volatility. That’s why an ideal strategy is to have both growth and downside protection in your retirement investment plan. Today’s variable annuities can help you accomplish that objective.