Retirement Calculator: How Long Will 1 Million Dollars Last?

Hi there. Stan The Annuity Man, America's annuity agent licensed in all 50 states, including yours. Today, we will answer the burning question: how long will a million dollars last for retirement? There's no good answer, but I will go into the details. And if you have a million dollars, what does that mean? It might be enough, depending on your lifestyle, but let's dive into it.

Is It Enough?

When it comes to a million dollars, it's not what it used to be. Think about it. I come from rural North Carolina, where if you said a million dollars, you could have said spaceship. It'd have made more sense to me and my family, but it still doesn't make much sense to my relatives and mom. "A million dollars?" But a million dollars, is that enough to live on? I don't know. The easy math is that if you have 20 years of life expectancy, you divide 20 by a million, and that's $50,000. Can you live off $50,000 a year for 20 years with no interest, blah, blah, blah? You could do that statically, but a lot of people want to have their cake and eat it too. Many people buy products under that premise, which is unfortunate, which means that, hey, you can get this income stream, and at the very end, you'll have the same amount of money even though you got the lifetime income stream.

That's called a bad sales pitch. That's called buying the sizzle, not the steak. If it sounds too good to be true, it is every single time, especially in the annuity world. But in the investment world in general, is a million dollars, or half a million dollars, or whatever your amount is, enough? It really comes down to lifestyle. It really comes down to what you want your income floor to be. If you look at your income floor, and the income floor is not some wood floor, even though my wife would like that, the income floor is the guaranteed income stream that comes into your account every single month. Social Security, if you're so fortunate to have a pension, if you have dividend stocks or something like that, rental income, whatever's coming in, then you need to determine what gap is missing. If there's no gap missing, then you can just live off that and live the lifestyle you want, fine. But for most people, and with 10,000 baby boomers hitting retirement age every single day, the biggest question that we're getting is about income, about lifetime income.

Lifetime Income

Annuities are the only product on the planet that can provide a lifetime income that will pay you regardless of how long you live. The fact that you don't know that is one of the biggest marketing blunders of all time that the annuity industry just hadn't pounded into the floor. I mean, you already own the best inflation annuity on the planet. That's Social Security. If you own a pension, that's a great annuity as well. Both of those pay for life. You don't know the ROI until you die, return on investment, and you don't care because all you want is income. When you're looking at the million-dollar lump sum, the half million-dollar lump sum, or the quarter million-dollar lump sum, whatever that lump sum is to you, and you need income, you need to shop specifically. From a calculator standpoint, every single site seems to have one, and some have calculators that are so complex that you can quote so many things. But as I say to people all the time, annuities are kind of like the unknown.

Most people say, "I hate annuities," which is crazy because that means you hate Social Security, but you don't know what you don't know. Do you know the 40 ways to structure a Single Premium Immediate Annuity? I mean, you can structure it in a myriad of ways. Do you know those? Do you understand those? I hope not because I hope you have a life. That's what I'm here for. I'm here to explain those structures, how they work, the good and the bad, and the limitations. That's the reason we need to connect one-on-one; go to The Annuity Man and set a time with us. You need an expert at the finish line. When you're talking about quarter million, half a million dollars, you're just going to talk to the next 20-something year old on the phone and say, "What do you got?"

Life Expectancy

Give me a break. You don't do that when you go to the doctor. You like to go to the doctor. You go to the Mayo or somewhere for a specific situation. That's big time, and I assume a million dollars is big time for you. It should be. We need to have that conversation. Remember, you have two questions to ask. What do you want the money to contractually do, and when do you want those contractual guarantees to happen? From those two answers, we can determine what type of annuity fits best, and then we shop all carriers for the highest contractual guarantee for your specific situation. Just remember, with all lifetime income with annuities, it's all about life expectancy. Life expectancy drives the train. It's the primary pricing mechanism for lifetime income, meaning the older you are, the higher the payment. It's just like Social Security.

People are always trying to time annuities and say, "Is it the right time? Interest rates are low." Interest rates play a secondary role in the annuity pricing process for lifetime income. Now, yes, if Jimmy Carter rates were here and they were sky-high, it would be a higher amount for you, but that's not going to happen, don't look like it's going to happen for a long time. It's all about life expectancy, and you cannot time it. You just can't. Don't try.

Client Example

I got a call the other day. Guy said, "Hey, I want to buy an Immediate Annuity, but I think rates are low so I'm going to wait five years." I said, "That's fine, you can do what you want. But if you wait the five years, you have to factor in the payments you missed during those five years and how long it will take you to make those up after you turn on the income stream in five years."

Cost of Living Adjustment

In other words, it's math, and you're not going to beat the annuity company out of its own game, period. Don't try. I had a question the other day. "What's the average amount that a retiree spends during retirement?" That is a broad answer. If you're living in Manhattan, it's different than if you're living in St. Augustine, Florida. It's completely different because the lifestyle's different, the rent's different, the cost of living's different. It really comes down to your lifestyle and the amount that you feel comfortable spending. Now, one thing that always comes up when I have these conversations about using retirement calculators is how to use them. When we run quotes for you, we'll run quotes showing a Cost-of-Living Adjustment, increases for inflation, etc. The one thing you'll find when we do that is that the annuity company does not give that away.

Any agent or advisor that says that they have the annuity product or product in general that adjusts for inflation perfectly is lying to you, or they just don't know, or they're just trying to sell something. There's no product like that. If there was a product like that, then all of my videos would be on that product. Annuity companies don't give that away. All the annuity companies do is lower the initial payout when you attach a cost-of-living type increase to the income stream. It's common sense.

Now, Social Security, the reason I say that's the best inflation annuity on the planet is because it is. Politicians just vote for that increase, and then they print more money and send it to you. Annuity companies don't do that. They look at your life expectancy, and if you want the increase, they will lower that payment. It doesn't mean you don't buy one, but you have to understand that if it sounds too good to be true, it is. It's the same thing for people pitching Index Annuities that have index increases or increases to your income stream; they do the same thing. They lower the initial payment to make up for that potential increase in your income stream. What does a retiree spend? How do you coordinate the annuity purchase based on the average? You don't because you're not average. It's all about you. Forget everybody else. Forget the stats, forget the articles, forget everything. From the calculator standpoint, I want you to go to our site and use our proprietary calculators, but as an inroad to us having a conversation because our calculator is, in my opinion, the best one out there. It doesn't let you do 100,000 different quotes because you'd be all over the board.

Our Conversation

During our conversation, I need to know what you are trying to achieve. Tell us about the family. Tell us about the spouse and partner. Tell us about the other investments. Tell us about where you live. Tell us about what you're trying to do. Tell us about the lifestyle you want to live. Tell us about the income stream goals. Tell us about that. Everybody's different. No case is the same every time with me, and I've got thousands of clients in all 50 states. I'm America's annuity agent. You've got to break it down confidentially and let us put together a customized plan using our retirement calculators. Retirement calculators, as a whole, they're great. They're on every site. Everybody seems to have one. Everyone has their formula but understand there is no formula when customizing something. There is no formula when trying to achieve a specific goal for you, so just remember that. But understand, at the end of the day, it's a customized quote. Buy the steak, not the steakhouse. Buy the contractual guarantees. Don't buy the sizzle; buy the steak because you will own the contractual realities. Don't buy the dream.

Go to The Annuity Man to use our retirement and annuity calculators for all types. I hope to have you work with us. You can always schedule a call. Also, download my annuity books. I have six owner's manuals on all annuity types. You can download them for free under no obligation. You'll be the talk of the street, but it'll start you in the process of understanding how these products work. Thank you for joining me today, and I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.