According to the Office for National statistics, out of 300,000 adults surveyed across the UK, pensioners aged 65 to 79 were the happiest. In fact, out of all the adults surveyed, the statistics seem to suggest that no matter what your age, if you have a pension or no financial stress, then your happy factor goes up. Wahoo.
The problem is, most Americans retiring today don’t have the kinds of defined benefit plans that give them a pension income. Instead, most people get defined contribution plans that offer some kind of employer matching benefits inside investment vehicles such as a 401(k). This gives you a way to invest and grow your money, but alas, no pension at retirement.
The rate of return
When Americans sit down to talk about retirement planning, the issue that always comes up first is the rate of return. Investors who have worked and saved and invested their money want to know, “How much will I earn? What’s the interest rate? What’s the average rate of return?”
It’s not that these are bad questions; it’s that they might not be the most important question.
The retirement crisis
In a paper written for the Harvard Business Review titled, The Crisis in Retirement Planning, economist Robert C. Merton aptly summed up the stumbling block that seems to get in most people’s way. He writes:
“Investment decisions are now focused on the value of the funds, the returns on investment they deliver, and how volatile those returns are. Yet the primary concern of the saver remains what it always has been: Will I have sufficient income in retirement to live comfortably?”
The key to hapinnes
Because today’s workers are having to save and invest their own money, they enter into retirement still concerned about INVESTING and rate of return, when what they SHOULD be concerned about is INCOME.
In an article for Time magazine titled, Lifetime Income Stream Key to Retirement Happiness, Dan Kadlec writes about how studies in the U.S. find that retirees with a guaranteed income stream are happier. Lawmakers are looking for a way to make it easier for investors to turn that 401(k) into a pension and the fixed annuity option is mentioned as the simplest solution.
Your guaranteed option
A lot of people have a lot of funny ideas about what an annuity is and what it can and cannot do. Some financial advisors hate them, won’t sell them or can’t sell them. Others love them, sell only annuities, and make tempting and sometimes bizarre promises.
You might think of an annuity as the bottom line for anyone who needs a pension-like income during retirement because that’s what they are designed to give you. Period. Like anything else, however, there are good ones and bad ones out there.
If the key to happiness is a guaranteed income stream, then all you have to do is find the right annuity that can unlock the door to your retirement dream enjoy the happily-ever-after you deserve.
Choosing the right annuity may be easier said than done. If you don’t have all the facts or haven’t had your annuity properly tested, you might be making an irreversible decision with your money. If you need some help finding out if an annuity is right for you, feel free to reach out to us, and we’ll use our proprietary annuity testing software to see if there are better options for you. You have nothing to lose and only peace of mind to gain.
 Merton, Robert C, The Crisis in Retirement Planning, Harvard Business Review, June 30, 2014