Peter Longo, Regional Director for Janney’s Insured Solutions Group, provides some useful tips and insight on how to make smart saving and spending decisions for each phase of life regarding retirement.

Reaching the ultimate date of your personal retirement goal is one of the most rewarding, yet complex events that most people will ever encounter. You spend most of your life working toward reaching your retirement savings goals, but there is an additional — and vital — piece of the retirement planning puzzle: figuring out how you will draw down from your savings to produce an effective retirement income plan that will last through the life of your retirement.

Retirement Income Planning

The exercise in managing a career’s worth of savings, and selecting appropriate benefits, is more complicated than merely attaining a certain age or accumulating a targeted amount of money. Retirement income planning is the process of converting all of a retiree’s financial resources (savings, Social Security, pension, investments, etc.) into a systematic flow of income, which needs to last for their entire lifetime. It is important to carefully plan for retirement by understanding your needs and risks, and also considering the appropriate level of protection for your income.

The different phases of retirement planning

Don’t delay saving for your retirement, no matter how distant retirement may seem. Pre-retirement planning is essential, as pensions are disappearing, life expectancies are rising, and the years spent in retirement are rivaling the number of years people spend working. During the retirement planning process, there are two different phases: the “Accumulation” phase (pre-retirement) and the “Distribution” phase (post-retirement).

Investor GoalAccumulationIncome & Capital Preservation
Investment NeedsGrowthModerate Growth & Income
Portfolio AllocationTraditional Assets (stocks, bonds, cash)Traditional and Guaranteed Income Sources
Risk ToleranceHigherLower

Developing an effective retirement income strategy

Any investment involves some level of risk; however, it is very important to understand the numerous risk factors that can significantly impact your income once retirement finally arrives. On “Official Retirement Day,” you may stop working and no longer receive a steady paycheck from your employer. One of the toughest challenges for a client and their advisor is to “create” (or replace) that previous, steady income stream. This newly constructed stream of income needs to be safe and consistent, have the opportunity to grow over time, and must last through the retiree’s entire lifetime.

In a recently conducted survey from 2018, nearly 2000 adults were asked their “level of fear” for a variety of categories such as crime, government, and economics. Out of 94 categories in this survey, “not having enough money for the future” was the 4th highest fear reported among all respondents1. One of the most difficult challenges is how to invest prudently for growth (during the accumulation phase), but to also provide income for life (during the distribution phase).

As the average life expectancy increases, so does your retirement income need

Life expectancy is the most significant factor in planning for retirement, yet it is an unknown. According to the Social Security Administration, the average 65 year old male has a life expectancy of 84 (19 years), whereas a 65 year old female’s life expectancy is 86 (21 years)2. Living 20+ years in retirement, (without a steady paycheck from your employer) is an intimidating concept, but what is even more alarming is that these figures are just the averages. A significant percentage of retirees will likely live even longer. In fact, a married couple, at age 65 has nearly a 33% probability of one member living to age 92.3

Having confidence in your ability to produce a steady monthly income brings great comfort in retirement, but also takes a great deal of planning. It is important to prepare during both the accumulation phase and distribution phase in order to ensure that your assets are properly allocated to balance out your individual need for growth potential, but for income as well.

Each individual has their own vision of what amount is needed in regular cash-flow to maintain their standard of living. Some of this income will be from guaranteed sources, such as Social Security or pension income, and some other portions of an income plan may not have the same degree of regularity. There are a variety of investment options that can be integrated into a plan, but if there is a gap between your sources of income, and the amount that will make you confident in maintaining your style of living, you may consider utilizing an annuity to create an additional source of guaranteed income.

Using annuities to generate retirement income

An annuity is a contract between a person and an insurance company, in which a client’s money is invested, and in return, the company pays out regular distributions either now, or in the future. Most often, these payments are disbursed during one’s retirement years, and typically are paid out for the life of the recipient (also known as the annuitant). An annuity is the only investment that can provide a guaranteed income for life, similar to that of a pension or Social Security check. The structure of the annuity shifts a portion of the longevity risk to the insurance company, and away from the investor. If the value of the investments within the annuity contract fall to zero, many types of annuities will continue to pay the investor as long as they are alive.

However, annuities are not suitable for everyone. Some investors may have sizable portfolios, or are collecting a monthly check from a Defined Benefit plan, pension, or Social Security. In this case, an annuity may not be a necessary component of your income plan, as this client may have sufficient income sources to feel comfortable about their income in retirement.

Another significant concern facing retirees as they enter into retirement is inflation. As we discussed previously, the average client that retires at age 65 will likely live 20 years or more….without a paycheck! It is very important to discuss with your advisor how inflation will impact your income over 10, 20, or even 30 years while retired. Guaranteed income sources are great, but over time you will lose the ability to maintain your lifestyle as your expenses increase, but your income remains the same.

1. Source:
2. Source: SSALifeExpectancycalculator:
3. Source: Vanguard-

This is for informative purposes only and in no event should be construed as a representation by us or as an offer to sell, or solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within.

Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.


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