Are You Ready To Take On The Responsibility Of Your Retirement?

Wouldn’t it be nice to have someone else guarantee income in your retirement? Not that long ago, this was the norm. Before we were all using 401(k) accounts, employers were partly responsible for the success of their employees’ retirement years. This employment perk was very simple – work for the same company for 30+ years, receive a gold watch, sign your pension paperwork, and collect a monthly retirement paycheck for life. You were no longer working 40 hours a week, but you were getting a paycheck as though you were still on the job.

Years later, the Timex may have stopped ticking, but your guaranteed income payment continued to appear every month for the rest of your life. This paycheck, combined with your guaranteed Social Security paycheck, enabled you to live happily ever after because you could never run out of income.

Many of the Greatest Generation lived long and happy retirements based on this model of guaranteed, monthly, lifetime pension checks. They most likely spent time traveling, playing with their grandchildren, enjoying stress-free days, and sleeping through the night, some never worrying about their finances. They knew that, as long as they had blood pressure, they had spending money.

My parents are living examples of how effectively this model works. When dairy farming no longer produced the cash flow needed to support our growing family, Dad shifted careers. He joined the fire department to have a steady income to provide for Mom and the six of us. He continued to dabble in farming and other jobs on his off-duty days to earn extra money.

After our baby sister settled into elementary school, Mom entered the workforce and eventually became a cleaning lady in a large corporate assembly facility while in her early 50s. It was her desire to assist Dad in achieving a more stable financial position in their retirement years.

When we were young, our parents worried about finances, but my five siblings and I never wanted for anything. Our parents worked hard and retired several years after all of us were off the family payroll. Dad spent 23 years as a first responder, and Mom cleaned the plant for 12 years.

They retired, and, while neither of them got a Timex, they both received guaranteed pension payments for their joint lifetimes. Their salaries while working were meager, but they were children of the Great Depression who saved when they could.

Each and every month through their retirement years, the pension and Social Security payments were more than sufficient to pay all of their expenses, enabling them to travel, play with their grandchildren, and never worry about outliving their income. They worked for employers who offered one of the best benefits available. Mom has since passed, but Dad continues to receive his Social Security, his pension, and Mom’s pension. At age 92, he continues to enjoy the perks of days gone by.

While some still exist, most employers have eliminated their pension plans and pushed the responsibility of retirement income onto their employees. We have been indoctrinated to believe that a successful retirement outcome is dependent on how well we invest in the market. The financial markets play an integral role in a successful retirement if used properly, but they do not provide any guarantees.

The lack of guarantees is highlighted by events of the dot-com crash of 2001-2002 and the credit crisis of 2007-2009. Unfortunately, many retired during these time periods without any guarantees in their retirement plans. Some of these retirees probably stayed awake at night, worrying about their financial lives and whether they would run out of money, and sadly, some did.

Although pensions are no longer the norm, guaranteed income streams for life are very prevalent in the form of annuities offered by insurance companies. Merriam-Webster defines an annuity as “a sum of money payable yearly or at other regular intervals” and further explains, “A common example is the payment received by retirees from their pension plan.”1

Understanding annuities requires a paradigm shift for consumers because we have been educated to believe that we should use diversified mutual funds or other securities to provide income throughout our retirement lives. This shift in thinking can best be explained by an example I learned from my Dad and his farming background.

Investing in the market exclusively can be compared to a farmer owning only steers in the herd. When you own steers, they grow until butchered. The meat is frozen and provides food for the future in the form of hamburgers, steaks, meatloaf, stew, chili, and pot roasts. When all of the meat is consumed, there are no longer any meals from the herd of steers.

Using an annuity, along with diversified mutual funds or other securities, is synonymous to a farmer owning steers, bulls, and cows in the herd. The steers will undergo the same fate by becoming a finite number of meals, but the cows will provide ongoing nourishment every day in the form of their milk. In addition to the daily milk, they will procreate to keep the herd producing milk and steers for years to come.

In retirement, you may not have a gold watch, but you can still have guaranteed lifetime income provided by someone other than your employer. Evaluating whether an annuity is appropriate depends on your specific situation. Seek the advice of an insurance professional who develops income plans for guidance.

This content was brought to you by Impact PartnersVoice. Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurance company. Insurance and annuities offered through Gerald Ricken. MO Insurance License #0230655. DT005665-1119

Gerry Ricken Gerry Ricken Brand Contributor

Gerry Ricken is the founder of Ricken Financial, a full service retirement planning firm designed to assist families with their retirement lives. With a background in p...