The final two threats we’re going to discuss might not seem like they go together—but they do. In fact one of them, legacy planning, might not sound like it belongs in this series at all. Sadly, it does and as you read on, you’ll start to understand why.
Let’s talk about inflation first. Inflation is the general rise in prices for products and services. While a gallon of milk might cost around $3 to $4 today, with inflation it could cost much more in the future. So if you plan on taking a postretirement income of, let’s say $20,000 a year from your savings, you have to remember that this $20,000 will buy a lot less in the future, because of inflation. That means you may need to take even more money than you’d planned, thus depleting your savings even quicker. One way to prevent this is to look at products that offer both a guaranteed income and built-in inflation protection, such as certain fixed indexed annuities.
Legacy planning might sound odd as a threat to your postretirement income. After all, you want to leave a legacy for your heirs and/or your favorite charities and nonprofits, so how does that desire threaten your income? Essentially, it limits your income because the more you want to leave behind, the less you’ll want to spend on your self after retirement. After all, if you deplete your savings living a comfortable postretirement life, what will be left for your legacy? This is especially concerning when inflation creeps in and forces you to take a larger annual income than you expected or planned.
For most of us, estate planning is better handled by enlisting the help of a life insurance policy in order to secure our legacy plans. With the protection of a life insurance policy, not only can we avoid the postretirement belt-tightening that often results from legacy planning concerns, but we may also gain an added resource for tax-free loans during our retirement years.
On their own, both legacy planning and inflation can be postretirement income killers—but together, they can devastate your future. Creating a plan that allows you to keep your income separate and secured from both of these influences is vital if you want to ensure a comfortable, healthy retirement.
We hope you’ve enjoyed the series, THREATS TO POSTRETIREMENT INCOME and learned both about potential threats to your income and ways to combat those threats. For more postretirement planning wisdom, check out our other Special Retirement Bulletin Series: