According to a recent BlackRock survey, 99% of people think that having guaranteed income in retirement would help them financially. And we agree! Knowing that you have a guaranteed income source for life can be a huge benefit to retirees.
But folks should know what they are signing up for. As Casey explains in this week’s video, there’s no “free lunch” on Wall Street. Locking in a guaranteed income usually means you no longer have the ability to grow that income source. The main problem with guaranteed income is that we know things are going to cost more in the future. $100 today isn’t the same as $100 10 years from now. Inflation is a fact.
So how will that fixed income affect your numbers down the road as inflation increases future costs?
Tune in to this week’s video to learn more about guaranteed income in retirement!
Guaranteed Income in Retirement – Links
Blackrock – 2024 Read on Retirement Survey
How to Avoid Overspending in Retirement – Mullooly Asset Show
How to Avoid Underspending in Retirement – Mullooly Asset Show
Guaranteed Income in Retirement – Transcript
99% of people think that this would help them in retirement. 99%.
The last two weeks we’ve talked about not underspending in retirement and not overspending in retirement. At the center of both of those things is the fear of outliving your money in retirement. And BlackRock actually did a survey across all four generations of people getting ready for retirement.
They surveyed Baby Boomers, Millennials, Gen Xers, and even Gen Zers. They asked them a broad array of questions about retirement readiness, and they found that 60% of the people that they surveyed across all four generations do fear outliving their money in retirement.
They also found that 99% of the respondents to the survey across all four generations think that having a guaranteed income in retirement would be financially helpful to them. So it’s pretty much across the board, everyone agrees that having guaranteed income in retirement would help their situation.
And I agree, having guaranteed income in retirement would certainly ease the fears of outliving your money in retirement. But I also think that it’s important to know what you’re getting yourself into when you lock in a guaranteed income source. So here are two things to consider when making this decision.
The first thing is it really goes back to the dynamic or the balance between risk and reward, which is pretty much at the center of all financial decisions. The more risk you take, the more reward you should hypothetically get for taking that risk. If you’re not taking any risk, you hypothetically shouldn’t get any reward.
So taking no risk or guaranteeing something, guaranteeing an income, guaranteeing a return from an investment, that means you’re not taking any risks. So you shouldn’t really get a reward for that. You’re not going to be able to grow that income at all. You’re going to be locked into that amount for the rest of your life. So your upside is going to be capped. That income is going to be the income for the rest of your life.
And this leads us to number two, which is you have to think about inflation. Yes, you’re going to have an income floor in place. You’re going to have a minimum amount coming in each month, but the purchasing power that that amount of income has over 10, 20, or 30 years is going to decrease. Heck, even five years.
We know that things are going to cost more in the future than they do today. So the amount of expenses that that income covers today is not going to be the same down the road, and that is a super important piece of the pie. Inflation is a huge factor when it comes to retirement planning and something that we have to keep in mind and something that we have to plan for and offset.
We think that it’s prudent to keep a piece of the pie growing or invested in the stock market or in bonds at the very minimum. And yes, that money is going to be at risk, but there should hypothetically be a reward for that. And that reward ideally, would be offsetting the inflation that we know is going to occur.
Guaranteed income can be a vital piece of the retirement pie, but we think that it should probably just be a piece and not the whole thing. If you want guaranteed income in retirement, you have to be making these decisions with eyes wide open. You have to know the trade-offs that are being made when you are thinking through these decisions so you can make the right decision for you. That’s going to do it for this week’s episode. Thank you as always for tuning in.
