Retirement Income And The Inheritance Puzzle

Society Of ActuariesA new study by the Society of Actuaries offers some dense but useful reading on the topic of planning for retirement. Not surprisingly, it echoes many of the facts you will find on this site.

Planning retirement income while also preserving wealth for future generations is a delicate balance.  Often, staid solutions like life insurance may make the most sense as you can offload longevity risk through annuities, and ensure inheritance through insurance, with the intelligent use of insurance.  The thundering herd pounding balanced withdrawals and systematic portfolio planing misses the boat 9 out of 10 times on this topic.

Here are a few gems from the recent report:

Each retirement income solution has its pros and cons, and the amount of retirement income delivered to retirees depends significantly on their choice of a retirement income generator. Because there’s no “one size fits all” retirement income solution, retirees will need to make calculated tradeoffs when considering the amount of retirement income they need based on their individual goals and circumstances.

A few more points from the report:

  • Given improvements in life expectancies, the money set aside for retirement may need to last a long time — potentially 20 to 30 years or more. But many retirees are not prepared to manage this critical task on their own. Furthermore, there’s much uncertainty around how long an individual retiree will actually live.

  • Market volatility complicates the challenge of managing savings in retirement. Since 1987, there have been four major market meltdowns. With retirements potentially lasting 20 to 30 years or more, it’s prudent for retirees to expect and plan to survive more meltdowns in their future.

  • Many employees don’t know how to calculate the amount of savings that’s needed to generate lifetime retirement income. They often guess at this amount, and usually they guess too low. This results in retirements sooner than financially prudent based on the amount of retirees’ savings.

  • There’s also evidence that retirees are doing a poor job of managing retirement risks; many lack a formal plan to generate retirement income from their savings, and as a result, they’re planning to spend down assets at an unsustainable rate. Others are under-spending in retirement for fear of running out of money. Surveys show that employees and retirees want and need help generating retirement income.


When making your retirement income plans, think of your own needs first- this is not a selfish act, but a compassionate one. If you truly care for your heirs and family, you’ll not become a burden to them and will be able to supply your own needs.

Retirement annuities might not be the ONLY answer, but they are a very useful tool in the toolbox. For a portion of assets, they do handily eliminate the risk of outliving your money, and offload that longevity risk onto an insurance carrier. It’s worth considering. 

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