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January 10, 2022

You’ve been faithfully saving, spending wisely and investing for years in preparation for a comfortable retirement, and you have a lot to be proud of. But making the transition from accumulating money to actually spending it in retirement is a part of financial planning that isn’t always talked about.

Have you thought about how your savings can be used to provide predictable income in your golden years? Or how your investments may need to offset inflation to ensure you don’t run out of money?

It’s important that your savings continues to work for you. Consider these three ways to help further diversify your income in retirement and continue your active lifestyle.

1. Invest for Income

Investing in the market doesn’t necessarily need to stop once you retire, but you’ll likely want to pursue options that come with less risk to protect your wealth and combat potential inflation. Liquidity is also an important consideration, helping to ensure you can access your money quickly should you need it. Mutual funds and managed account portfolios might be a good fit.

  • Mutual Funds. Mutual funds can be structured to match your tolerance for risk and be a part of a diversified portfolio that may provide protection from inflation and market fluctuations, while providing income. the financial professional located at your credit union can help you adjust your plan as you transition into retirement or as your needs change.
  • Managed Account Portfolios. Managed accounts can typically offer more peace of mind because investment professionals oversee your portfolio. Outcome-oriented portfolios are designed to allow you to focus your savings on what is most important to you, with some more focused on generating income and others on capturing excess returns. These portfolios can be used to preserve capital while generating income to pay current and future expenses, and they’re designed to balance down-side risk and total returns.

2. Downside Protection

There was a time when many Americans could rely on a pension to provide guaranteed income in retirement. Increasingly, those days are a thing of the past. However, there may be a way to create your own pension, of sorts.

An annuity is one way that many retirees can secure a steady, predictable income – and it’s one that you can’t outlive. It’s important to educate yourself about the many types of annuities. That’s not always easy, though, because they can vary widely between companies. It’s best to talk with the financial professional located at your credit union who can walk you through the best options to suit your goals and share about the pros and cons.

Here’s a basic breakdown of the types of annuities that might work best for you:

  • Registered Index-Linked Annuities. Provides a measure of downside protection with upside potential that locks in gains and locks out losses
  • Variable Index-Linked Annuities. Diversified investing for higher growth potential and guaranteed limits on loss
  • Income Annuities. Create your own pension with fixed monthly income guaranteed for life
  • Fixed Annuities. Lock in a guaranteed, competitive rate with reliable returns that provide tax-deferred income beyond your qualified retirement plan

3. Guaranteed Income

“But won’t Social Security provide a steady paycheck?” Yes, Social Security provides a consistent, monthly benefit for most retirees. However, Social Security was never meant to replace your regular income, only supplement it.

The average monthly Social Security benefit is only $1,544.1 Chances are, that amount falls far short of the standard of living you’ve come to enjoy. Some people believe that their benefits are already pre-determined and that there’s not much they can do to increase their monthly benefits. Not necessarily.

Waiting to claim Social Security later in life can increase your monthly benefit. For example, your average monthly benefit could increase by as much as 77% if you wait until age 70 rather than claiming at age 62.2

“But I don’t want to work until I’m 70 years old!” You don’t necessarily need to in order to reap these extra benefits, especially when you structure your investments to help bring in other forms of income in those early retirement years until Social Security kicks in. The financial professional located at your credit union can help you strategize ways to postpone claiming benefits while bridging the gap with other diversified income sources.

Talk with a Financial Professional

Planning for retirement is important, but do you have a plan for AFTER the plan? It’s always a good idea to review your strategy, especially as retirement grows closer. The financial professional located at your local credit union is there to help you make sense of it all and provide sound advice. They will talk through your current plan and explore whether any adjustments need to be made to help you reach your goals with confidence. Get in touch with them today.

SOURCES:

1. Social Security Administration, Fact Sheet, 2021
2. Social Security Administration, When to Start Receiving Retirement Benefits, 2021

Withdrawals may be subject to surrender charges. Withdrawals of taxable amounts are subject to ordinary income tax, and if taken before age 59½ may be subject to a 10% federal tax penalty. If you are considering purchasing an annuity as an IRA or other tax-qualified plan, you should consider benefits other than tax deferral since those plans already provide tax-deferred status. The company does not provide tax or legal advice. Contact a licensed professional.

All guarantees are based on the claims-paying ability of the underlying insurance carrier.

Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, which is not an affiliate of the credit union. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. © CUNA Mutual Group

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