According to Tom Hegna’s book, “Don’t Worry, Retire Happy!”, there have been many studies that have looked at what it takes to have a happy fulfilled retirement. They conclude that having a base income that you can’t outlive is the cornerstone to that happening. I have seen and experienced this phenomenon in my practice for years. Clients who have pensions and other guaranteed lifetime income streams are relaxed and happy. In retirement, it isn’t as important how much wealth you have, but how much income you can count on. After all, you no longer have a paycheck from work, so you need a paycheck from somewhere.
When planning for retirement, we have to build in a number of contingencies as to things that can happen to ruin your retirement happiness. We have to plan for market fluctuations, health issues, inflation possibilities, long term care, disability, unexpected repairs, interest rate changes, and a host of other issues that must be addressed. However, they all pale in comparison to the number one issue in retirement; “will my money last as long as I do?” See, if you don’t live very long, the other issues mentioned above won’t be an issue. However, if you live a long and full life, many of these issues will become potential pitfalls. I’m sure you know of someone who is experiencing this right now.
Since a secure retirement is based on income, not total wealth, having enough income that you cannot outlive is the cornerstone of a successful retirement income plan. The main sources for this type of income are pensions, social security, deferred annuities with income riders and immediate annuities.