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Retirement Planning > Retirement Investing

Waiting pays off

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Between steady advancements in medical technology and baby boomers reaching retirement age, it’s important to make sure your annuity offerings remain relevant. Understandably, the expectation of extended longevity may be a source of worry for many retirees and investors. In these cases, some of your clients may be looking for options to improve their income, either to get a higher rate over the course of their annuity or to make sure they have enough left over after the time period on their annuity is up for them to either reinvest or simply use as additional retirement funds.

In a November 2012 study by the Society of Actuaries, titled “The Impact of Running Out of Money in Retirement,” not only are these increasingly likely fears addressed, the SOA provides a compelling solution that may help calm any questions about running out of money in retirement. This study provides a means by which, using annuities, an investor can help guarantee that they will end up with more money to work with over the course of their retirement. The study notes that “working just one more year could increase annual income by 9 percent overall, and by as much as 16 percent for the lowest earners.” Essentially, waiting a bit longer before the annuity begins to pay out provides a significant boost to the payout when it does start.

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With a lot of baby boomers slated to have retirements lasting far longer than anything their parents may have experienced, it’s more than reasonable to suggest waiting that extra year. This isn’t just for the baby boomers, though, and it will be important to discuss with clients of all ages interested in either starting an annuity or looking to cash in on one soon. As our lives get longer, so does the amount of time that we need to spend accruing enough to support our retirements, since our retirements will be lasting longer as well. Illustrating how much one extra year of work can increase a client’s earnings will be a valuable tool to offer your clients for years, if not decades to come.

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