Investment Income without Mortality Credits

There seems to be a relatively new approach to retirement portfolio management. The basic methodology separates the portfolio into two financial goals: growth and income. For most Americans, the need for growth often times is a strategy to combat inflation to maintain the purchasing power of the retirement dollar. Not many retirees have discretionary monies for growth. But if they do those investments should be viewed as inflation and growth positions and not income plays to pay essential budgetary items that are fixed. So holding large portions of a portfolio hostage to generate 4% income may not be the best positioning of money during retirement. It maybe better to use a portion of your portfolio to purchase guaranteed lifetime annuity for guaranteed domestic expenses.

ETFs, mutual funds and individual stock and bonds were not designed to address guaranteed income for paying obligations and longevity during retirement. The market fluctuations can’t generate predictable income to pay monthly bills unless the portfolio is sizable. Most of the senior market has less than a million dollars, so it’s important to consider using lifetime income annuities that are subsidized by longevity credits. Lifetime income annuities with a cost of living adjustment can generate predictable income for the life of a married couple or single senior for the rest of their lives. That annuity income coupled with Social Security benefits should be able to pay essential and perhaps some discretionary spending throughout retirement.

Every financial product has its economic function. And every portfolio has a dual money purpose that addresses income and growth. Based on where human longevity is going, it may be necessary for every senior to consider financial mortality products that address the very real possibility of extended life to age 100 and beyond. Investments that have no longevity component may not be able to fund the requirements of retirement.