Saving for retirement is a big worry for people across the country. Many employers don’t provide traditional pensions, leaving individuals to weigh the pros and cons of 401(k)s, IRAs, and other self-directed retirement tools. But these market options don’t guarantee consistent income during retirement, or even positive returns. Diversifying your retirement plan to include the best income streams in retirement, such as a pension-like income, can give you more security and peace of mind. Learn more about how pension-like income works and how Prosperity Group Advisors can support your financial goals.
Understanding Pension-Like Income
Pension-like income is a benefit workers can access through in-plan guarantees in protected retirement solutions. In a defined-contribution retirement plan, you can decide to put a portion of your contributions into a specific fund that gives you a consistent income amount in the future, regardless of market downturns. If you’re unfamiliar with traditional pensions, you can think of them as somewhat similar to dividends or fixed withdrawal amounts.
One common retirement vehicle for getting a pension-like income is through Fixed/Indexed annuities, which are insurance contracts that distribute a regular payment to the contract recipient without giving up control of your money. Depending on your preferences, you can get annuities for a set term or life. Some people also schedule systematic withdrawals from their account, though this can be insulated from market risk. A qualified financial advisor can walk you through different options and see how each option supports your retirement goals.
The Importance of Pension-Like Income in Retirement
Pensions provided a reliable, consistent source of retirement income. Unfortunately, pensions themselves aren’t available to most workers anymore. However, the benefits that the pension income provided remain clear, and creating retirement holdings that mimic it can give you many of those same benefits:
- Longevity Protection: Many people worry about not saving enough or running out of money for retirement. Many pension-like vehicles and protected retirement income sources provide recurring income for the entire life of the participant.
- Less Risk: Investing in traditional stock market accounts or even tax-advantaged retirement accounts has some risk. Withdrawals during a bad market year can significantly hurt your retirement plan, and market swings can affect how much money you can comfortably withdraw. Adding pension-like income to your total retirement plan gives you more flexibility and means you’re less reliant on market growth.
- More Peace of Mind: Ultimately, the goal of pension-like income is greater peace of mind. Knowing that you’ll receive a well-earned paycheck at the same time and for the same amount can help everyone stay more secure during market cycles.
Strategies for Incorporating Pension-Like Income in Retirement Planning
The first step is deciding that pension-like income should be part of your retirement planning. Once you’re there, you can choose from many different strategies and find the best income streams in retirement that suit your portfolio and retirement goals:
- Learn about Social Security: Tactics like delaying access to your benefits until the age of 73 can maximize your Social Security payouts and give you more fixed income every month.
- Consider annuities: Through annuities, you can create a personal pension that is removed from direct market influence.
- Discuss plans with systematic withdrawals: Your financial advisor can help you find different plan options that give investors fixed withdrawal amounts with investments chosen for overall stability and reliability. You can also ask questions like “Is retirement income passive income?” and “How do taxes impact your total portfolio?” For example, Social Security and dividends are generally considered passive income sources.
Contact Us at Prosperity Group Advisors to Learn More About Pension-Like Income for Your Retirement
The time to learn more about retirement strategies is now, so you can choose the best income streams in retirement. By considering options like pension-like income as part of your retirement portfolio, you can have more peace of mind now and in the future. At Prosperity Group Advisors, we help people across the country build retirements. Reach out today to start building yours, and don’t forget to check out our YouTube channel for valuable videos and insights to support your retirement journey.
* Disclaimer: Any references to guaranteed income or pension-like income on this website pertain solely to insurance products. Guarantees are based on the claims-paying ability of the issuing insurance company.