Retirement Income GAP Analysis
History of Guaranteed Retirement Income
Our parents, and their parents worked their entire lives, typically with one company with the hope that when they had worked long enough the company they worked for would allow them to retire and pay them a guaranteed income for the rest of their live and their spouses lives. In the 1980’s the world changed when Wall Street and its “Corporate Raiders” found ways to use the assets accumulated in company pension plans to leverage buyouts at prices shareholders could not refuse.
This began the process for change and has led us to where we are today. The defined benefit process has changed and the defined contribution process has taken over. We know this as the 401K plans and 403B plans our employers allowed us to participate in. This is not a bad situation; however, most people do not understand that the funds that have gathers in these plans was designed to be used for retirement income. Most people also neglect to accept that they have a partner with these accounts, the federal government.
The challenge most people face when they plan for retirement is how do I manage the risk of my retirement funds once I have retired. The guarantee of the old pension does not apply to the 401K and 403B funds, unless you set up guaranteed retirement income stream with your proceeds.
Planning for retirement begins by recognizing your core retirement needs. These are basic needs, food, water, housing, transportation, and medical care. The cost of these basic needs will go up during your retirement years because of inflation.
Now you need to ask yourself a hard question. How am I going to pay for these guaranteed expenses? Typically, the only guaranteed income you have set up for your retirement years is your social security. If you are lucky you may have a guaranteed pension. The risk with these pensions is most are underfunded, and many are on the verge of insolvency. However, your guaranteed retirement income GAP is the difference between the guaranteed expanses you defined and the guaranteed income you defined.
This is where many that do retirement planning make a fatal miscalculation. Many people when planning for their retirement belief that there 401K and 403B will always be there to pay their retirement bills. It may, but it may not. Why take the chance, find a way to guarantee some of these assets to offset your guaranteed expenses with guaranteed income. There is only one way, pensionize some of you assets in your 401K and 403B and give the risk of guaranteeing retirement income for you to the insurance companies. They have the ability to structure you a guaranteed retirement income.