Understanding Annuities

Will Your Income Last A Lifetime?

Life is constantly changing and your retirement plans need to adjust to these changes. Especially when you consider:

Market volatility

One of the greatest challenges of investing is the unpredictability of the market. This hypothetical chart illustrates how the timing of market volatility can impact a retirement portfolio. Both illustrated scenarios are based on an average 8% return. But notice how a negative market performance in just the first two years causes Bill's money to run out 10 years earlier.

Longevity risk

As you age, the probability that you'll live a longer life increases. As we live longer, we're spending more years in retirement. This chart shows a man who's 65 today has a 25% probability of living to age 92. Married couples currently 65 or older have a 25% chance of at least one spouse living to nearly 100. Bottom line: Today's investors need to plan for a longer retirement.

Inflation risk

Assume you have an annual income need of $60,000 in today's dollars. Even with a modest annual inflation rate of 3%, you'll need significantly more money down the road to maintain your standard of living. Twenty years into retirement, the impact of inflation can nearly double your income needs.