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Jim Lentini: Moving to guarantees

Posted: February 22, 2010 10:37 p.m.
Updated: February 23, 2010 4:55 a.m.
 
Today’s economic turmoil has shown a need to create a guaranteed steady stream of income in retirement. Annuities are beginning to gain some popularity among consumers and formerly skeptical financial professionals.

Most people cannot sustain a comfortable living in retirement with only one or two investments in traditional product classes, such as mutual funds and money market accounts.

The longevity risk of depleting investments without lifetime guarantees is too high.

It is generally understood by most investors and professionals that annuities can provide guaranteed income for the rest of a person’s life.

That is a critical component to any retirement plan since all retirees face a longevity risk (noted in a previous article).

In addition to income annuities, other retirement income vehicles should always be considered. A personalized combination of three different income solutions could be considered to maximize the sustainability of income in retirement:

1. Systematic withdrawals from traditional investments. This gives flexibility for unforeseen needs withdrawals without penalty.

2. Variable annuities with guaranteed living benefits.

3. Fixed-income annuities.

This combination can result in a higher level of retirement income than you would get by relying on a traditional withdrawal approach, and also benefits from a higher level of guarantees.

It helps replenish depleted portfolios in a volatile market and helps provide peace of mind for the retiree.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.

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