According to a recent study, “Reclaiming the Future” from Allianz Life Insurance of North America, this is a very common refrain regarding the sentiment of pre-retirees. In 2011, the Allianz study found 35 percent of baby boomers “feel totally unprepared financially for retirement,” and 50 percent were extremely concerned about outliving income from retirement assets.
There are at least four main risks each of us will face in retirement. First, we will all spend more money in retirement than we expect to — plan to spend at least as much as you do now.
In 1983, 62 percent of company retirement plans were pension plans (defined benefit plans) guaranteeing a lifetime income to the employee. Today that number is 13 percent and dropping. Employers have deftly shifted the responsibility for income in retirement to the employee by offering 401(k) plans (defined contribution plans) where the employer’s only responsibility is to contribute to the plan if they choose to.
The employees are left on their own to figure out how to make the income last during retirement.
What has become apparent today is the amount of income you can guarantee yourself in retirement is much more important than what your retirement assets grow to before retirement. Those serious about guaranteed retirement income need to take a hard look at FIAs. Income payments from an FIA are dependent on the claims paying ability of the insurance company that offers them. Given the historical financial stability of large insurers and the financial coverage they maintain for paying claims, there is a high likelihood they will insure a consistent and stable retirement. Read more: Deseret News
