The three primary sources of guaranteed retirement income are social security, annuity income and pension benefits. Here's what you need to know about using these vehicles to maximize your own guaranteed income.
Social Security Is A Source Of Increasing Guaranteed Income
The majority of retirees receive the largest portion of their guaranteed income from social security. Not only is the income guaranteed, but each year those receiving social security benefits are given a cost-of-living adjustment, which in most years will result in an increase in benefits.
- Learn more:
- 3 Steps To Increase Social Security Benefits
- 5 Things To Know About Your Social Security Retirement Benefits
- Strategoes To Maximize Your Social Security Benefits
Create Guaranteed Income With An Immediate Annuity
What’s the easiest way to get guaranteed income? You buy it. When you purchase an immediate annuity, you use a lump sum of money to purchase guaranteed income for a set period of time and/or for your life expectancy. Immediate annuities work best when you are ready to purchase your guaranteed income starting right away.
Variable Annuity Withdrawal Benefit Riders Provide Guaranteed Income
If you want to purchase guaranteed income at a point in the future, look for an annuity that has a guaranteed minimum withdrawal benefit rider (GMWB), or lifetime withdrawal benefit (LWB). How does such a feature work? Typically you deposit your funds today, and the annuity company takes a snapshot of your account value each year; as the account value grows they are locking in the higher value as an “income base”. At such time as you activate your rider you can use the higher of the current account value, or the income base value, to generate your guaranteed withdrawal, which can vary from 4-6% of the value, depending on the terms of your contract.
- Learn more:
- Creating Guaranteed Retirement Income With A Variable Annuity
- How Are LWBs different from GMWBs?
- Compare Annuities
Almost Guaranteed Income From Pension Plans
Pension plans also provide a source of guaranteed income, although in this case the word "guaranteed" is used loosely; there have been plenty of cases where pension plans got themselves in a financial mess and were forced to reduce benefits being paid out to existing employees. There is a form of government insurance, called the Pension Benefit Guarantee Corporation (PBGC), that protects pension benefits, but the amount guaranteed has a cap, so your full pension benefit may not be insured, and for each year you retire prior to age 65, the insured amount is reduced.
