Let’s talk about retirement.
More specifically, let’s talk about how much money you actually need to retire comfortably without having to eat cat food, sell your golf clubs, or start looking for a part-time job at Walmart because your retirement savings decided to retire before you did.
Sound familiar?
Here’s the thing: Most people spend years worrying about how much money they need to accumulate before they can retire. They watch their 401(k), check their investment accounts, follow the stock market, and occasionally have a minor panic attack when the market drops.
But there’s a question I think is even more important:
How much monthly income will you actually need to live the retirement you’ve been dreaming about?
Because having a million dollars sitting in an account and having a reliable paycheck coming in every month are two very different things.
And when you retire, that monthly paycheck can become pretty important.
Let’s look at how you can create a retirement income strategy that gives you more confidence, more choices, and hopefully fewer sleepless nights.
1. First, Figure Out What Your Retirement Lifestyle Will Actually Cost
Before we start throwing around big retirement numbers, let’s get realistic.
What does a comfortable retirement look like to you?
Is it traveling around the country in an RV? Taking those vacations you’ve been putting off for 30 years? Playing golf three times a week? Spending more time with your grandchildren?
Or maybe your retirement dream is simply waking up on a Tuesday morning and realizing you don’t have to answer to anybody.
Now THAT’S a beautiful thing!
But whatever your retirement dream looks like, it needs to be supported by income.
Start by looking at:
- Your monthly mortgage or rent.
- Utilities, groceries, insurance, and everyday expenses.
- Travel, hobbies, entertainment, and those occasional splurges.
- Healthcare and potential out-of-pocket medical expenses.
- Any outstanding debt.
- Income you’ll receive from Social Security or a pension.
- Additional income you’ll need from your retirement savings.
Some financial experts suggest you might need around 80% of your current income in retirement.
Maybe.
But here’s my question: What if you actually want to enjoy retirement?
What if you want to travel more, visit family, buy a boat, or finally take that trip to Italy?
And what happens when healthcare costs increase?
I wouldn’t automatically assume your expenses are going to magically disappear just because you stop working.
In fact, you may have MORE time to spend money!
My advice: Build your retirement income plan around the life you want to live, not just some percentage of what you’re earning today.
After all, the goal isn’t simply to retire.
The goal is to enjoy being retired.
2. How Can an Annuity Help Create a Retirement Paycheck?
Here’s where things get interesting.
One of the things I like about annuities is their ability to provide a predictable, contractual income stream that can last for the rest of your life when you select an appropriate lifetime income option.
Think about that for a moment.
You spend decades working, saving, investing, and building your retirement nest egg.
Then retirement arrives.
Suddenly, instead of receiving a paycheck from your employer, you’re responsible for creating your own paycheck.
And let’s be honest: Most people didn’t sign up for a second career as their own retirement income manager!
This is one reason I like looking at annuities as part of a retirement income strategy.
You can potentially use a portion of your retirement savings to establish a future income stream while keeping other assets available for growth, emergencies, and additional financial goals.
There are several ways to generate retirement income:
- Rental properties.
- Dividend-paying investments.
- Bonds and other fixed-income investments.
- Annuities with lifetime income options.
Each has advantages, disadvantages, and risks.
But if your primary objective is creating a contractual lifetime income stream, I believe annuities deserve a serious look.
I especially like comparing income riders, single premium immediate annuities (SPIAs), and deferred income annuities (DIAs).
I’ve often found income riders to be competitive when comparing potential income payouts, but you should always compare the actual contracts and alternatives.
Your age, state, income start date, and whether you’re planning individual or joint lifetime income can make a significant difference.
And remember: The goal isn’t simply to find the biggest number on a piece of paper.
The goal is to find an income strategy that makes sense for YOUR retirement.
3. What Could $250,000 Generate in Retirement Income Starting at Age 60?
Let’s put some actual numbers on the table.
In the video above, I walk through an example involving a married couple living in Idaho.
Both spouses are 52 years old, and they would like to retire at age 60.
They have $250,000 in an IRA that came from an old 401(k).
They’re considering using that money to create a joint lifetime income stream beginning in approximately eight years.
They also have concerns about market volatility between now and retirement.
And who can blame them?
When you’re getting closer to retirement, the last thing you want is to watch a major market decline take a bite out of your savings right before you’re ready to start using it.
For this particular illustration, the leading option produced approximately:
$32,000 per year in illustrated lifetime income beginning at age 60.
Midland appeared at the top of that particular comparison.
Now, is $32,000 enough to retire on?
For some people, that could cover a significant portion of their retirement expenses, especially when combined with Social Security, pensions, or other investments.
For others, it’s simply another piece of the retirement income puzzle.
The important thing is understanding how much income you need and how different financial strategies might help you generate it.
And please remember: These are figures from the specific illustration discussed in the video. They are not a guaranteed quote for someone else investing $250,000. Actual results depend on your circumstances and the contract available when you apply.
Here’s a Detail You Don’t Want to Overlook
The exact date your income begins can make a difference.
In this example, the younger spouse’s birthday and the way the illustrated Midland contract determines income eligibility affect the timing and payout.
That’s why I don’t like making retirement income decisions based on rough estimates.
The details matter.
Your birthdays, contract issue date, and intended income start date should all be verified before making a decision.
Sometimes a small detail can make a surprisingly big difference.
4. What If You Wait Until Age 65 Instead?
Now let’s have a little fun with the numbers.
What happens if the same couple decides to wait until age 65 instead of starting income at age 60?
That’s approximately 13 years of deferral instead of eight.
And in the illustration discussed in the video, the potential annual income increased to approximately:
$43,000 per year!
That’s a meaningful difference.
In this comparison, Clear Spring appeared at the top, with Athene close behind.
The Athene illustration showed an income benefit base of approximately $637,000 at age 65. Applying a 6.8% payout factor produced roughly $43,000 in annual income.
Now, before anyone gets too excited, let’s clarify something important.
The income benefit base is used to calculate contractual income. It isn’t the same as your account’s cash value, and it isn’t money you can simply withdraw.
Also, a roll-up rate isn’t the same thing as an investment return.
The contract’s bonuses, roll-up provisions, fees, withdrawal provisions, and other terms all need to be understood.
But here’s the interesting takeaway:
Waiting longer can potentially produce significantly more annual retirement income.
And something else worth remembering: The company offering the highest illustrated income at age 60 might not be the company offering the highest income at age 65.
That’s why comparing multiple insurance companies and different retirement dates is so important.
Don’t assume the first illustration you see is the best one.
Do your homework. Compare your options. Make the numbers work for your situation.
5. Don’t Put All Your Retirement Eggs in One Basket
Here’s another important point.
I’m not suggesting you take every dollar you have and put it into an annuity.
That’s not the strategy I’m discussing.
In our example, the couple is considering using a portion of their retirement savings to create a specific future income stream.
The rest of their money can remain available for other purposes, depending on their overall financial plan.
You still need money for:
- Unexpected expenses.
- Emergencies.
- Additional investments.
- Travel and lifestyle goals.
- Future financial opportunities.
Annuities can have surrender charges, withdrawal restrictions, and other contractual limitations. You need to understand those before committing your money.
And guarantees are backed by the claims-paying ability of the issuing insurance company.
One strategy worth considering is building retirement income in stages.
For example:
- Establish one source of contractual lifetime income.
- Continue contributing to your 401(k) or other retirement savings when appropriate.
- Consider adding another income contract later if it makes sense.
- Coordinate everything with Social Security and any pension benefits.
Over time, you could potentially have several different sources of retirement income working together.
Think of it as building your own retirement paycheck system.
And wouldn’t it be nice to know where your next paycheck is coming from without having to ask your boss for another 30 years?
6. The Real Question Isn’t How Much Money You Have. It’s How Much Income Your Money Can Create.
Let’s bring this all together.
You can spend your entire working life chasing a bigger retirement account balance.
And there’s nothing wrong with accumulating wealth.
But at some point, you have to transition from building wealth to creating income.
That’s a completely different game.
A $500,000 retirement account doesn’t automatically tell you how much you can comfortably spend every month.
Neither does a million-dollar account.
What matters is how your money is positioned, what income it can generate, what risks you’re taking, and whether that income will support the lifestyle you want.
I want you to think about something:
What would your retirement look like if you knew you had a dependable source of income coming in every month, regardless of what the stock market was doing?
Would you feel more comfortable traveling?
Would you worry less about market downturns?
Would you have more confidence about spending the money you’ve spent decades saving?
That’s the kind of retirement planning conversation I think everyone approaching retirement should be having.
You worked hard for your money.
Now it’s time to make sure your money has a job to do for YOU.
Ready to Find Out What Your Retirement Money Could Generate?
If you’re approaching retirement and wondering how much income your savings could produce, I’d be happy to help you explore your options.
I can help you:
- Determine how much lifetime income different annuities could potentially provide.
- Compare income riders, SPIAs, and DIAs.
- Compare multiple insurance companies.
- Look at different retirement dates and income start options.
- Understand how annuity income could fit alongside your Social Security, pension, and other investments.
And no, you don’t need to have a million dollars to start the conversation.
Sometimes the best retirement strategy starts with simply understanding what you already have.
Let’s stop guessing about retirement income and start looking at the numbers.
Visit my website and schedule a conversation with me.
Let’s see what your retirement money could do!
Frequently Asked Questions
Is $250,000 enough to retire?
It depends on your expenses, retirement age, lifestyle, and other sources of income. In the example above, $250,000 was the amount allocated to an annuity, not the couple’s entire retirement savings.
How much monthly income could a $250,000 annuity generate?
In the illustrations discussed in the video, the potential income was approximately $32,000 annually starting at age 60 and approximately $43,000 annually starting at age 65.
Those figures are specific to the illustrated scenarios. Actual income will depend on your age, state, contract, income start date, and available rates.
Does waiting until age 65 always produce more income?
Waiting longer can increase the illustrated annual income because the contract has a longer deferral period. However, the best insurance company and contract can change depending on when you want your income to begin.
Can I keep other investments while receiving annuity income?
Absolutely. You can structure a retirement strategy that uses a portion of your savings for contractual income while keeping other assets available for investment, liquidity, and additional financial goals.
Should I expect my expenses to decrease when I retire?
Not necessarily!
You might stop contributing to your retirement accounts, but you could spend more on travel, healthcare, hobbies, and enjoying your newfound freedom.
Retirement is supposed to be the reward for all those years of working. Make sure your financial plan gives you room to enjoy it!