Is Social Security Too Much of Your Retirement Income?

The Annuity Man

Christy Bieber's article at The Motley Fool asks an important question, "How much of your retirement income will come from Social Security?" For many Americans, that answer is unfortunately too much.

In a pension-less world, people planning for retirement have to create their own pension type guarantees instead of relying on their employer to provide that lifetime income stream.  Government workers represent the majority of pension recipients in the United States.  Private sector companies have transitioned to 401k type accumulation plans, sometimes referred to as Defined Contribution Plans.

There's nothing wrong with accumulation type plans, but those retirement structures typically don't offer lifetime income options to the plan participants.  With most plans, the participant has to "roll-over" their retirement plan assets to an IRA to start shopping for annuity type lifetime income streams.

A recent law (i.e. Secure Act) was passed to encourage retirement plans to offer annuity lifetime income strategies to their participants.  This is the second move the government has made to encourage people to take ownership of their retirement income needs.  In 2014, Qualified Longevity Annuity Contracts (QLACs) were introduced for people to use their Traditional IRA assets (and 401k type if offered in the plan) to utilize for future income planning needs.

The bottom line is that our US Government debt is growing and Social Security might be in danger for future retirees.  Our friends in Washington, DC are "encouraging" all of us to plan better for our retirement.  For some, it's a good early wake up call to start planning.  For many, it might be too late.

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