A key number to know as you prepare for retirement is how much money you need coming in every month to cover your expenses.
The amount of monthly retirement income you require depends on many factors. However, a common rule of thumb shared by experts is the 80% rule, which suggests you need 80% of your pre-retirement income in retirement.1 For example, if you earned $100,000 per year before retirement, you need $80,000 per year, or about $6,600 a month in retirement. Keep in mind your actual needs could be more or less, and fluctuate over time, depending on your circumstances.
As you know, retirement means saying goodbye to regular paychecks and instead living off savings and other sources of income. That is a frightening thought for many! Will your sources of retirement income—such as Social Security, pension, IRAs or savings—be enough to meet your monthly needs? If not, it might be time to get to know the annuity.
An annuity is an insurance product that’s designed to protect and grow your money and turn it into an income stream for retirement.
Typically, a person funds an annuity with a lump sum of money or through regular payments. These contributions earn a tax-deferred rate of return as they accumulate through deposits, a fixed interest rate, or interest linked to a market index, depending on the type of annuity selected.
Then, immediately or after a period of time, the annuity enters its payout phase and starts paying the retiree income. Some annuities even guarantee regular payments for the life of the retiree!
Annuities are generally considered a safe retirement income option because they offer principal protection and guaranteed growth without market risk.
Who Owns Annuities?
As you plan for retirement and weigh your options, gaining insight from current retirees can be helpful. The Gallup Organization partnered with The Committee of Annuity Insurers to release information about current annuity owners. Here are some insightful takeaways for you to consider:
- The average age of owners when they first purchased an annuity is 51. 2
- 51% of annuity owners are female.2
- The median household income of annuity owners is $79,000.2
- The most common reason for purchasing an annuity is because they’re considered safe.3
- 81% of annuity owners say tax-deferred gains are an important reason they use annuities.3
- 85% of annuity owners cite guaranteed payment for life as an important reason for purchasing annuities.3
- 88% of annuity owners say annuities give them peace of mind in retirement.3
Learn more! Annuities are popular among U.S. consumers who own them, yet 56% of consumers are uncertain about the product.
Could an Annuity be Right for Your Retirement?
Will your sources of retirement income be enough to cover your monthly retirement income needs? Could an annuity be the missing piece of your retirement puzzle? Our financial professionals are here to help you answer these questions and build a plan that helps provide security and peace of mind. Visit BankersLife.com to learn more.
1Investopedia, Will Your Retirement Income Be Enough?, https://www.investopedia.com/retirement/retirement-income-planning/, March 2023.
2The Gallup Organization for The Committee of Annuity Insurers, 2022 Survey of Owners of Individual Annuity Contracts, https://www.annuity-insurers.org/wp-content/uploads/2023/07/Gallup-Survey-of-Owners-of-Individual-Annuity-Contracts-2022.pdf, 2022, p. 8.
3Ibid., p.9 .