Average Retirement Income: How Can Annuities Help?

Hey, I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states, including yours. I'm the author of seven books on annuities, and you can download six for free. Why not seven, Stan? Because I’m rewriting that one. It's called The Annuity Stanifesto. It was the original, but I’m rewriting it. However, the other six owner’s manuals are yours for free if you go to The Annuity Man.

How Can Annuities Help with Average Retirement Income?

Annuities can help because they are the only product type on the planet that can provide a lifetime income stream you can never outlive. But what’s the average retirement income? I read something recently, at the time of this recording (the date is above), stating that the average two-income family earns $55,000 a year. That might seem low, high, or just right, but that’s what I read.

Let’s dig into how annuities can help. Why should they be part of your overall income floor plan? What is an income floor? Let’s explore that and how you can plan for your future as you enter the next chapter of your life—living the dream and having income hit your bank account.

The Importance of Income Flooring

As you probably know, I make annuity videos on the Stan The Annuity Man YouTube channel. I did one titled How Does a Pension Annuity Work? You should check it out. Now, why do I bring that up? Because we're talking about creating a pension. And you might wonder, what is the average retirement income? It's important to know because you might be wondering if you're doing better or worse than the average, or if you’re on track. However, I don’t think it comes down to comparison. In my opinion, it's more about what you need. What are your expenses?

I discussed income flooring earlier in the video. Income flooring means: What is the guaranteed income amount you need to hit your bank account every month to cover your basic expenses? This should be income that’s not affected by the markets, volatility, or geopolitical events. It’s like a pension income stream.

What Does Your Income Floor Include?

What does an income floor include? It covers Social Security, an annuity, because it provides a lifetime income stream. If you're lucky enough to have a pension, that’s another lifetime income stream. It also includes dividends or rental income. And don’t forget about RMDs (Required Minimum Distributions) from your IRA. RMDs should be part of your income stream because they provide money into your account. It’s not pure income, but it’s money coming in.

Filling the Gap in Income

How much do you need? And then, you can calculate the gap if there is one. If you already have enough income and there’s no gap, then you’re set. You already own the best inflation annuity on the planet—Social Security. This annuity adjusts its cost of living based on the whims of our friends in Washington, D.C. However, if Social Security isn’t enough to cover your expenses, you’ll have to go back into the marketplace and shop for an annuity to fill that gap.

Average Retirement Income

So, what is the average retirement income? It depends on who you are, your lifestyle, your bills, and the type of money you want coming in. Everyone’s situation is different. It really doesn’t have to do with net worth. I work with clients with a net worth of $100 million, down to those with little or no net worth. For me, it’s about contractual guarantees and what you're trying to solve for.

Some people might need $100,000 a year of income flooring, while others might need $20,000 a year. The point is annuities can fill that gap, giving you peace of mind knowing that you’ve transferred the risk to the annuity company to pay you for the rest of your life, no matter how long you live.

The Pros and Cons of Annuities for Lifetime Income

The good and the bad about using annuities for lifetime income: Annuities are irrevocable contracts, meaning you can’t get your money back in a lump sum (unless structured properly). However, in exchange for that, you get a lifetime income stream.

There are also annuities like Multi-Year Guarantee Annuities (MYGAs), which are like CDs in the annuity world. For example, you might buy a five-year MYGA that pays 4% interest and take that interest without touching your principal. This gives you income while still retaining control over your money.

Fixed Indexed Annuities and Income Riders

You can also use Fixed Indexed Annuities, another type of annuity that works similarly to a CD. You can take the gain from the index option without touching the principal. Additionally, some Fixed Indexed Annuities allow you to attach an Income Rider, which guarantees a future income stream that you control. The downside is that this reduces your principal, but you can turn the income on and off as needed.

Customizing Your Annuity Strategy

Bottom line: Annuities are customizable. I represent almost every carrier out there and have access to the best annuity calculators to help you shop for the highest contractual guarantees for your situation. I encourage you to visit The Annuity Man to download the six owner’s manuals, listen to podcasts, read articles, and get educated.

If you want to speak to us one-on-one, schedule a call, and we’ll help you put together a customized plan that fits your needs. Thanks for joining me. I’ll see you on the next Stan The Annuity Man blog.