I have been a tinkerer and inventor my entire adult life, but instead of building a better mousetrap, I concentrate on financial products.
I started my career as an actuary and graduated to manage divisions of financial service companies. I even ran my own life insurance company. Now I’m an entrepreneur and financial advisor, constantly thinking about how to help people with the most common retirement question:
Will the money I saved for retirement last for the rest of my life?
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
My latest invention is Income Power, which tells investors how much lifetime income they can get from their retirement savings — guaranteed. It also helps analyze what steps to take if these savings won’t provide as much income as investors need.
Helping a friend
My thinking about Income Power started with a conversation with a friend who had accumulated sizeable savings in preparation for retirement. She worked with an advisor to find out how much income she could expect her savings to provide each month. The advisor instead told her, based on her budget, how many years the money would last if the market achieved historically average investment returns.
My friend pointed out that her parents and other relatives had lived many years longer than “average” and asked what would happen if she lived into her 90s as well. The advice she got? “Trim your monthly budget.” I thought, There must be a better way.
Ups and downs
I also used the history of the stock market and similar investments to inform my work on Income Power.
Research shows that individual investors, even those who work with financial advisors, usually under-perform the market by as much as 1% to 3% a year.
For my friend, that meant the estimate of her monthly income was probably drastically overstated.
Understanding the Annuity Business
The pieces of Income Power fell into place as I considered income annuities. I have long been an advocate of income annuities because of their ability to offer dependable, spendable income. They are backed by highly-rated life insurance companies, several of which have been in business more than 100 years. Therefore, there are no worries about the annuity lasting as long as you do.
Around the time my friend was wondering how long her savings would last, new products called “deferred income annuities” and “Qualifying Longevity Annuity Contracts” (or QLACs) were introduced. They both provide guaranteed lifetime income and start at future retirement dates the investor selects.
Because of my previous work as an actuary and having worked on annuities, our researchers were able to reverse-engineer these new products and solve for the internal interest rate they were guaranteeing for a lifetime. We found they offer rates that are quite competitive with other fixed income investments, particularly considering the stability of the payments and credit quality of the insurers.
Find your starting point
Income Power lets people create a baseline for their future retirement income, while we analyze the commercial marketplace for these income annuities. When you use the Income Power calculator, you enter information about how much money you have saved, your age and the like. Within seconds you will know exactly what income you can expect.
Of course, no one will invest all their savings into annuities. The guaranteed income of an income annuity, however, is a way to insure against late-in-retirement expenses and to provide a buffer to the ups-and-downs of the economy.
Income Power can give you a starting point for the income you should expect from all your investments and financial products. And if your Income Power is too low to meet your retirement expectations, you can experiment with the calculator or seek the help of a Go2Specialist to make adjustments. Perhaps, for example, you will decide you need to work for a few more years before you can retire comfortably. Income Power will help you decide.
Watch this video of Tom and Janet to see how one couple used Income Power as a starting point for their retirement decision-making.
Go to Income Power now and enter your retirement numbers into the calculator. It’s a free, no-obligation test run of my invention. Then let me know what you think.
This content was provided by Golden Retirement. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.
-
What Is a Qualified Charitable Distribution (QCD)?Tax Breaks A QCD can lower your tax bill while meeting your charitable giving goals in retirement. Here’s how.
-
Embracing Generative AI for Financial SuccessGenerative AI has the potential to reshape how we approach learning about and managing our personal finances.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025 than in 2024.
-
Medicare Basics: 11 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
The Seven Worst Assets to Leave Your Kids or Grandkidsinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2024 and 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 in 2024 and $70,000 in 2025..
-
Roth IRA Contribution Limits for 2024 and 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2024 and 2025simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
-
Roth 401(k) Contribution Limits for 2025retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
