FEATURE — When planning retirement, do you depend on projections based on future conditions, or do you plan your retirement based on guarantees? Both answers can be correct. It all depends on your situation and what time period you are focusing on retirement.

Let’s start with a projection or estimate of future value planning. If you base your future retirement income solely on United States (or foreign) stocks, the volatility factor must be included.

But how chosen stocks perform over time and how easily they convert to a retirement account to fund a desired income level depends on outside influences, such as the overall world economy, the valuation of the dollar, inflation or deflation and a third party’s view of the stock’s profit results.

A group of top stock strategists can predict anything from a single-digit loss to a double-digit gain.

You may ask yourself the following:

• How do you plan for your future retirement income?
• Whom do you trust?
• How do you estimate future market values?

Experimenting with discretionary funds is one thing, but significant retirement funds could be a poor choice. Once again, it all depends on your situation.

Many people lose sight of the actual goal of retirement planning, which in its most basic form is to make retirement income lasts as long as possible. This seems like a relatively straightforward objective, so why do so many people start with a retirement income strategy that leaves so much to chance?

Let’s consider the choices again by category: one is an estimate and the other is a guarantee. Depending on asset values and desired lifestyle, there can be room for both types of planning. The key is that essential expenses must be covered first and be fully funded by lifetime income sources.

You’ll enjoy some significant advantages if your lifetime sources of income are sufficient to fund essential lifestyle expenses. The question and problem are the same: How do you do it?

First, you should avoid market volatility risk and accept a reasonable rate of return.

New studies show, if given a choice, most people would choose safe, secure income over yields. When the funds have to be there, and the income is essential, safety becomes the first decision. Having this sort of income planning eliminates the possibility of outliving your source of income – or what is called longevity risk. Knowing that your necessary expenses are covered with a guaranteed source of income is a great comfort and sense of freedom to enjoy your retirement years, no matter how long you live.

Given all the uncertainties, the unpredictable outcomes and the unending list of “what ifs” facing investors, it’s no surprise that drawing an accurate road map to where financial markets are headed is no easy task – even for the Wall Street players who admit there are too many variables that are beyond our capabilities to absorb and forecast.

That is precisely why it’s a top priority for those retired or about to retire to understand the risk they face without having put into place a guaranteed retirement income solution to alleviate the risk of running out of money.

Let’s take a look at the state of America’s retirement system.

A generation ago, pension plans were offered to more than 4 out of 5 private-sector workers. Today, it’s fewer than 1 in 3. An employee has mainly replaced pensions paid plans like 401(k)s, 403(b)s, or 457s.

Expenses built into many of these plans make it difficult to earn the needed money to fund basic retirement needs. The shortcomings of this approach are evident in its lack of guarantees – an essential factor when you consider the current historical level of market volatility. Plus, new insight into how fees are charged and the actual cost of owning these plans have come under regulatory scrutiny.

Thankfully, solutions exist that can potentially increase income and generate a lifetime pension payout to both spouses with the benefits of protection and guarantees.

How can this be accomplished?

Naturally, by handing the risk of managing your significant retirement funds to a risk bearer, such as an insurance company.

Since the Presbyterian Church first invented annuities nearly 300 years ago, annuities have been the cornerstone of millions of retirees’ significant retirement income. With the evolution of new and dynamic products, a guaranteed income with annual crediting in the 4-7% range is fully available.

Removing risk from retirement planning by allowing an insurance company to manage your retirement accounts can provide you with a stress-free and secure future.

Copyright © Lyle Boss, all rights reserved.