Income Riders: A Different Retirement Philosophy for Baby Boomers

Posted in: Personal Financial Management

According to the Pew Research Center, just over a quarter of the total U.S. population are “baby boomers,” which refers to the dramatic post–World War II baby boom from 1946 to 1964. And if you are one of this 26% and preparing for your retirement, then you are most likely aware that you are facing very different circumstances than your parents.

Parents of baby boomers and generations prior relied on a three-pronged retirement plan based on their social security, a pension and a savings account. For baby boomers moving into retirement, we do not have the same reliable sources. Many question the future of social security and most companies do not offer pensions but rather a 401k, which can be dramatically impacted by the stock market. If you are like many baby boomers, you may be experiencing fear of outliving your savings.

A few years ago, the insurance industry identified this retirement crisis issue and began developing products that guaranteed growth in assets that can be used for income in retirement, without having to worry about market fluctuations. With these products, known as income riders, guaranteed lifetime withdrawal benefits (GLWB) or guaranteed lifetime income benefits (GLIB), you are protected from investment risk and can now have a set income stream to use in the future when you’re ready for retirement. Income rider, GLWB and GLIB are terms that can be used interchangeably and all operate under the same premise, a retirement account guaranteeing a certain percentage of growth.

In addition to ensuring a set income stream in your retirement, there are several other benefits to be aware of:

  • Funds are paid out at a rate higher than the normal rate that you would take out of an investment account (i.e. 401k accounts, non-qualified retirement accounts, etc.).
  • If you would need to access a lump sum from the account, even if you’ve converted it to an income source for retirement, you would be able to; it would just impact the amount of future distributions.
  • When you pass away, any money left in the account will go to your beneficiary. Similar to other retirement accounts, your family will not lose any of the money.

Planning and preparing for retirement requires a completely different philosophy from years past and with these new options being offered, you will be able to have a guaranteed lifetime income that’s impervious to market fluctuations and can help quell your fears of outliving your money.

These products may not be appropriate for everyone and are best utilized as just one component in your retirement plan. For example, they are not suitable for an individual that intends to take a large lump sum out of the account to purchase a home, vacation, etc. because then it is not being used as an income source, which is the products’ whole purpose.

For more details and questions, please do not hesitate to contact me at:

Annuities are long-term investments and surrender charges can be significant.  Withdrawals of taxable amounts are subject to income tax; early withdrawals may be subject to additional penalties or other charges. Product features will vary. Always consult a qualified advisor prior to purchasing an annuity.  PSA does not provide legal, accounting or tax advice.  All product guarantees are subject to the financial strength and claims paying ability of the issuer.

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