If you ask 10 people on the street what the most important part of planning for retirement is, it’s a safe bet that most, if not all, would say, “Saving money.” And I suspect most would have a tinge of guilt for not saving enough or not taking enough time to figure out how much income they will actually have in retirement.
As we recognize National Retirement Security Week (the third week of October), there is good news for many Americans who may feel like they are not planning enough for their retirement. First off, don’t beat yourself up – no matter where you are on the planning spectrum, the tools and resources are at your fingertips to help you master this task! Second, you’re right: building savings is essential to planning for retirement, but it’s only part of the puzzle.
You may be thinking, “Isn’t planning for retirement just about building my savings? It’s good news?”
To subscribe to Kiplinger’s personal finances
Be a smarter, more informed investor.
Save up to 74%
Well yes. You already know how important it is to save. It’s table stakes. Now is the time to develop (or refine) a strategy for turning your 401(k) and IRA savings into a protected stream of retirement income. And – more good news – there are many innovative strategies today that can help you achieve this.
What is your “decumulation” strategy?
Wouldn’t it be nice to shift your focus from saving for retirement to how you’ll spend your money during your golden years? After all, once you’ve taken the necessary steps to save, you deserve to think about how you’re going to spend your hard-earned cash! And to do that, you need to know where that predictable revenue stream will come from.
You may have heard the term “decumulation”. It’s the next step in retirement planning – focusing beyond wealth accumulation to most efficiently and responsibly tap into that nest egg at the levels that are most appropriate. you.
There are a host of products and strategies available today to help you work with a financial professional to leverage your savings for a reliable stream of income. An emerging strategy that’s getting more attention lately is investing in products that offer a “protected lifetime income benefit”.
My colleague David Blanchett, who conducts investment strategy research and analysis for PGIM DC Solutions, a unit of Prudential’s global asset management business, notes that products with protected lifetime income offer a room promise to the puzzle over traditional income annuities because they offer both the growth potential of upside investments as well as a measure of downside risk protection against unpredictable external factors like market volatility and longevity, the “age-old” problem that none of us ever know how long we’ll actually live.
An example close to home here at Prudential is our FlexGuard Income product, which includes a protected lifetime income benefit that offers clients and their advisors the ability to select different levels of protection that can be customized to each individual’s unique needs. investor. The product is designed to be flexible, allowing for changes in investment duration, level of protection, growth strategies and income options, as markets change and financial goals change. Several similar solutions are available and your financial professional can help you choose the ones that are best for you.
Maximize Social Security revenue
Regardless of the product or strategy you choose, Social Security benefits should be the foundation for planning your retirement income. No other vehicle can match the combination of inflation-fighting increases, longevity protection, investment risk elimination, and spousal coverage offered by Social Security, making it potentially one of most valuable sources of your retirement income.
Don’t know when to retire? The first step is to log in (or create) your social security account (opens in a new tab) and review your benefits, then talk to your finance professional about your best options. You might find that postponing your retirement – even for just a year or two – could make a huge difference. Not only will you get a few extra years of savings, but you’ll also be postponing your need to start tapping into your savings, and it could help you delay taking Social Security until the optimal age to maximize your earnings.
So, like having a good savings plan, all of this is an important opportunity to take control of your financial life, ensuring that your approach to retirement income fuels the retirement you envision. You have more options than ever to find the right solutions that allow you to grow some of your savings today, add greater security and the confidence that your retirement income will be there for as long as you will need. Your finance professional can explore new types of strategies with you to help prepare you for a reliable “paycheck” throughout your retirement.
Good luck and remember: you have this!
This material is provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or potential client. The information is not intended as investment advice and does not constitute a recommendation on the management or investment of your retirement savings. If you would like information about your particular investment needs, please contact a financial professional.
FlexGuard Income (P-FGI/IND(10/21), issued under ID P-FGI/IND(10/21)-ID) and other annuities are issued by Pruco Life Insurance Company located in Newark, NJ (main office ). Variable annuities are distributed by Prudential Annuities Distributors, Inc., Shelton, CT. Prudential Retirement Strategies is a business of Prudential Financial, Inc.
Annuity contracts contain exclusions, limitations, reductions in benefits and conditions to keep them in force. Your licensed financial professional can provide you with all the details.
Guarantees depend on the issuing company’s claims-paying ability and do not apply to the underlying investment options.
Indexed variable annuity products are complex insurance and investment vehicles and are long-term investments designed for retirement purposes. There is a risk of loss of principal if negative index returns exceed the selected level of protection. Gains or losses are assessed at the end of each term. Early withdrawals may incur a loss in addition to applicable redemption charges. Please see the prospectus for information on the levels of protection available and other important product information.
Investors should carefully consider contract features, index strategies and investment objectives, policies, management, risks, fees and expenses of the underlying portfolios. The initial summary prospectus and the prospectus of the index strategies of the contract, as well as the summary prospectus or the prospectus of the underlying portfolios (collectively, the “prospectuses”) contain this and other important information and can be obtained from your financial professional. Please read them carefully before investing.
This article was written by and presents the views of our contributing advisor, not Kiplinger’s editorial staff. You can check advisor records with the SEC (opens in a new tab) or with FINRA (opens in a new tab).