Guaranteed Lifetime Retirement Income: A Retirement Case Study
Facts
John and Barbara are in their early 70's and have just entered retirement. They have $2 million in their retirement accounts which are in the market. They have begun to take their Social Security payments. Additionally they own their home Free and Clear. They are both in good health and fairly active.
The Challenge
The retirement accounts of $2 million, payout an RMD of 5% ($100,000). If the market were to drop, the payout would drop as well. This would be unacceptable as the full $100,000 is needed to support their lifestyle. The typical solution to this would be to take a distribution from the retirement accounts in excess of 5% which could drive the retirement account down to the point where it would LIKELY run out of money down the road.
The Strategy
We moved the retirement funds into a fixed indexed annuity, holding a fixed indexed annuity that guarantees to pay $150,000 yearly to the client, yearly for life (joint life).
Key Outcomes & Impact
- Solved the problem of running out of money
- Established a guaranteed income stream for life
- Created a $50,000 annual income raise
- Eliminated 100% of downside market risk for core retirement funds
Summary
Moving the Retirement Account out of the Market and into a Fixed Indexed Annuity with these guarantees not only insured the client's income, but it also elevated the income by a full 50%.
The real fear here is running out of money. This fear could be activated by a Market Loss, Inflation, Living Too Long.