Retirement Income

Understanding the Types of Retirement Projections

Financial Planning has a number of different tools available to provide analysis at different levels. In addition to the assumptions that are used within a plan, the method used to project your retirement income and expenses will heavily influence how outcomes are evaluated.There are three main types of retirement projections out there: Flat Average Projections Flat average projections use fixed assumptions for life expectancy, return rates, and inflation, applying them consistently throughout the retirement period. While this approach is straightforward, it does not account for variability in market returns or life events. For instance, if you assume a flat 5%…

Retirement Income Strategies

When planning for retirement, choosing how to convert savings into income involves balancing certainty with flexibility. Broadly, retirement income strategies can be divided into two categories: Reliable Income Strategies and Variable Income Strategies. Each has its own advantages and considerations depending on personal risk tolerance, financial goals, and the need for predictable income.1. Reliable Income Strategies (Guaranteed)Reliable income strategies focus on creating income streams that are consistent and predictable, providing retirees with a "floor" of guaranteed income that typically lasts for life. These strategies are ideal for covering essential expenses, such as housing, healthcare, and daily living costs, since they…

Understanding Benefit Base vs. Cash Value in an Annuity

Annuities are a staple in retirement planning, offering a mix of benefits that can provide peace of mind in the later stages of life. However, navigating the components of an annuity, particularly the distinction between the benefit base and the cash value, can be confusing. To simplify this, let's explore these concepts using a relatable analogy: a store coupon. The Benefit Base: Your Special Store CouponImagine you receive a coupon from your favorite store. This coupon is not cash; it has no value outside the store. It’s only useful for getting a discount on a future purchase or redeeming a…

The Original 4% Rule Explained

When it comes to planning for retirement income, you do not have to look very far in financial blogs and forums to find the 4% Rule and for good reason. The 4% Rule ushered in a new era of modeling techniques for financial planners to help people navigate what their retirement might look like in the future and how they can safely spend their accumulated resources over a long and uncertain timeframe.The 4% rule was developed by financial planner William Bengen in the early 1990s. Bengen's work, first published in 1994 in the Journal of Financial Planning, was a response…

The Basic Types of Annuities

Annuities are contracts with an insurance company that provide certain benefits. There are many types of annuities out there and the terminology and usage can be confusing. This article provides and overview of the basic types of annuities and their variations. Quick Annuity Primer Base Contract: Every annuity starts with a base contract. The base contract has certain guarantees embedded it such as minimum interest rates, annuitization factors, fees, surrender charges, how the cash value can be invested. Riders: Some annuities have the option to add riders. Riders are additional features that can be added to the base contract to provide additional…