Why you need 3 sources of retirement income
The Annuity Man
Michael Fischer's article in ThinkAdvisor explains why it's important to have at least three sources of retirement income.
With over 10,000 baby boomers retiring every single day, most are wanting to transition from market growth type investments to contractual guarantees. In other words, they want to stop shouldering all the risk and start transferring risk. Annuities are contracts that allow you to transfer risk to solve for goals like principal protection or lifetime income.
Annuities are the only product on the planet that guarantee a lifetime income stream regardless of how long you live. There's no ROI (Return on Investment) calculation until you die. Annuities aren't investments, they are contracts. When you buy an annuity, you will receive a contract (i.e. policy) that will fully explain the contract between you and the issuing life insurance company.
Part of your overall guaranteed "income floor" should be annuities. Income flooring involves lifetime income. Social Security provides a lifetime income stream. Pensions (if you are so fortunate to have one) provide a lifetime income stream as well. Both of those are annuity structures.
Single Premium Immediate Annuities (SPIAs) are structured for "Income Now" lifetime income guarantees. Deferred Income Annuities (DIAs), Qualified Longevity Annuity Contracts (QLACs), and Income Riders all provide for "Income Later" lifetime income guarantees.
When quoting any annuity type, you need to quote all carriers to make sure you find the highest contractual guarantee for your specific situation. Annuities are commodities, and quotes change every 7 to 10 days...just like a gallon of milk.
So when you are setting up your 3 sources of retirement income, annuities have to be part of that guaranteed equation.