How to Create More Guaranteed Retirement Income

11.3.23: Audio automatically transcribed by Sonix

11.3.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Val Majewski:
But welcome back to another episode of the Federal Retirement Show. I'm your host, Val Majewski with American Benefits Exchange. And as usual, I just want to thank you for taking the time out to learn more about your federal benefits and retirement situation. The purpose of this podcast is radio show is to make sure you have everything you need to be successful now, and as you journey through your career and eventually get to retirement. Today I want to talk about a topic that has been on my mind recently. Recently gave a presentation to a group of government employees on this topic. This is what they requested. This is what this group wanted. Now, if a group of government employees is asking me to speak on this topic, I'm going to assume that there are other federal employees out there that also want to learn this information. So I'm going to be talking to you today. In our discussion, today is going to revolve around making sure you set yourself up with enough guaranteed lifetime income. When you eventually get to retirement. Now, what do I mean by that? Well, there are certain types of income that you can create that you can generate when you do retire, that are guaranteed. And there are certain types of income that are not guaranteed. I'll give you an example. Your pension. Your pension is a type of guaranteed lifetime income stream. As long as you're breathing, that check is going to come every month. If you were to be taking withdrawals from, let's say, a retirement savings account every month and hoping that that would last before the money runs out.

Val Majewski:
That's an example of something that is not guaranteed for life when it comes to retirement income. So the purpose of today's talk is to make sure that you are setting yourself up with enough guaranteed lifetime income when it comes to your retirement. Now, why? Why do we want to talk about guaranteed? I mean, you're going to hear me say that term a lot. Guaranteed lifetime income. Why? Because as a rule, and what research shows, and this is not what I've done, right. There are plenty of people that have researched retirement out there. There are plenty of people that have looked into what makes people happy in retirement. There are plenty of people who looked into the best possible way to retirement. People that are PhDs. People that are doctors and economics. People that are financial institutions, banks, accounting firms. Not myself. And have researched retirement. They have shown through their research, and what math and science prove is that you need to at least cover your basic living expenses in retirement with guaranteed lifetime income if you want to have a successful and happy retirement. I need to say that you can certainly do it without it. Math and science will not show you that you're going to have a perfect retirement if you choose not to have all the guaranteed income you need. But what the research shows is if you want to have a successful and happy retirement, you need to at least cover your basic living expenses, your day to day, your bills.

Val Majewski:
You want to cover the mortgage, car payment, groceries, taxes, all these things you want to make sure are covered with guaranteed lifetime income. Now, again, why is that? Because that relieves worry. It relieves stress. It relieves the things that cause you to be unhappy in retirement, to not have a successful retirement because you don't have enough money to live on. The number one fear amongst retirees. Number one fear, you may have heard this before, is outliving their money. Not having enough money to live on. Or running out of money. Number two, fear is death. So people are typically generally more afraid of running out of money than they are of dying in retirement. Why? Because it's not fun. It's not going to give you a happy retirement if you run out of money in retirement. You run out of money before it's all over. So we want to talk about securing and locking in and making sure you are planning to have enough guaranteed lifetime income when it's all said and done. Now, what are your forms as a federal employee? What are your forms of guaranteed lifetime income? I mentioned the first one pension. Now whether your refers you're entitled to a pension, that pension will come for the rest of your life. Okay, as long as you're still breathing. That check comes every month. That's awesome.

Val Majewski:
It's an awesome feeling. Not everybody out there in the world gets a pension anymore. Government employees. You still get a pension. That's number one. Number two is Social Security. Now, we've talked about Social Security in the past. We can certainly go over Social Security some more. We are not going to go into a complete maximization strategy session here about Social Security. If you need that please go to our website. Go to Federal Retirement Show.com. Figure out. Fill out the form, figure out how we can help you maximize your Social Security. But the two main forms of lifetime income that you're going to get as a federal employee. As a Fers employee. Are your pension and Social Security? Pension and Social Security. Now, let's say you worked 30 years in the government. If you're familiar with the calculation for your federal pension. If you're not, I highly recommend you go back to one of our previous episodes that discusses the Fers retirement or the CSRS retirement calculation, and discover what that looks like. It's actually a very simple math, but the the general rule of thumb is that you will get 1% of your high three for every year of service, that you have, 1% of your high three for every year of service that you have. So that means if you work 30 years from the government, you can expect about 30% of your high three when it comes to retirement. Now, what's your high three? The high three is the average of the highest three consecutive years or 36 month period.

Val Majewski:
Highest three year. Consecutive three year period. The average of those three years. That's your high three. Okay. So typically that's giving us a general baseline of your income level prior to retirement. It's not an exact. But let's just say that's your pre-retirement income. Okay. The pre-retirement income level. And most federal employees I talked to want to get to as close to their pre-retirement income level in retirement. Why? Because they want to live the same lifestyle in retirement. They don't want to drastically reduce it or have to live lesser in retirement. So they want to get as close as possible to their pre-retirement income in retirement. So let's again, let's say you work 30 years from the government for the government. Appreciate your service. Thank you for what you've done. You're going to get about 30% of your hi3 in retirement. So that's 30%. Now Social Security we can look at maybe 2,025%. Depending on your Social Security level and when you decide to take your benefits. But that should cover about 20 to 25% of your pre-retirement income. So at best, we're up to 55% of your pre-retirement income. There's a gap there to fill. There's another income stream that you're going to need to have generally in order to live up to or get to that pre-retirement income level. Even if you're saying, well, valve, my net income, the money that I'm taking home in retirement. It's going to be pretty close because when I was working, I had deductions coming out for, you know, the retirement system had deductions coming out for Social Security and Medicare, had deductions coming out for my family or for my TSP.

Val Majewski:
You're correct. Your net income in retirement, or the amount of deductions are coming out of your paycheck in retirement are not going to be as much. So the net numbers will be closer, but they're still going to be a gap if we're only relying on pension and Social Security. Most federal employees I talk to need to fill that gap, and I highly recommend you fill that gap with guaranteed lifetime income. Some people will say, well, I'll just peel money off of my TSP as needed. I'll just take some money out of this account as needed. Now, generally, those accounts are still subject to the risks in the market. Right. Or if you put everything in the fund and start peeling money off, well, you know, the G fund isn't going to pay you much. So your account balance is going to go down and could eventually run out. So it's wise to take at least a portion of your retirement savings, whether that's your TSP or outside IRAs or 401 s that you previously had, and use a portion. If not all, but at least a portion of your retirement savings and turn it into guaranteed lifetime income. Research again shows that those who at least fulfil their basic income needs cover all of their basic income requirements.

Val Majewski:
Right to pay all of their bills. To take care of all their living expenses. Take care of groceries, car payments, mortgages, what have you. Live a longer and happier life. Bulger happier, more successful. Retirement now answered. Said longer in there too. I'll get into that in just a second. But why? Why do we want to do that? Because that that relieves stress. That relieves any of the the issues you might have now what's what's left over. You can still play with you can still keep it in the market. You can still put it somewhere else. You can invest it, invest it in different things. You can let it sit and grow, but you will have all of your basic living expenses, all of your needs, at least covered with all of that guaranteed lifetime income. And here's the good news to that guaranteed lifetime income can also keep growing with you to keep up with inflation, which is awesome. So we've seen inflation recently right. Inflation is at about at the time of this recording about three and one half 4%. In between there somewhere. If inflation continues, the value of your money today in just a few short years is going to be worth significantly less than it is now your purchasing power. Now, hopefully, hopefully inflation gets curbed and it starts to get reduced. But if we're on a steady pace like we're seeing now, we can see the value of our money be decreased. That's why you need to also look at having a lifetime income stream that will steadily grow up over time.

Val Majewski:
It's highly recommended. So where do we do? How do we find these lifetime income streams? Well, there are a couple of different ways you can do this, right. I'm just going to give you the facts. I'm not going to give you my opinion on the matter. I just want to give you the facts so you can make the best choice. When you look at your TSP, okay, there is a way that you can create a lifetime income stream within your. You can turn your or a portion of your TSB into a guaranteed lifetime income stream. They can do that for you. Are you familiar with how that works? Now, we've talked about this before, but I want to reiterate that I'm not a huge fan of it. Again, I said I'm not going to give you my opinion, I just did. But I want to give you the facts of how they work. You can make your own opinion. In my opinion, I'm not a huge fan of it. And here's why. Well, when you do the lifetime income stream with TSB, it's also known as the MetLife annuity. Why is that? Because there's an insurance company, MetLife. It's the same company that administers your program and they're going to purchase for you what's known as a spia a single premium immediate annuity. Now what is an annuity? You hear the word annuity. Annuity is essentially a lifetime paycheck okay, a lifetime check.

Val Majewski:
Your pension is a type of annuity. Your Social Security benefits are a type of annuity. Okay. Annuities have been around for centuries. Okay. Thousands of years, the Roman Empire used to hand out annuities. They called them an annuity and annui. Sorry. It's gotta get my pronunciation down. It was a lifetime payment. Now, what they do with that single premium immediate annuity is whatever portion you're going to be using to get the life annuity. They are going to take your balance or take your bag of money, whatever you're giving them. And in return they're going to give you a check for life. Sounds like a great deal. And that check will continue for the rest of your life. The only problem is this is an irrevocable choice. You can't back out of it once you make the choice. And set number two is that you had no longer have any access, ownership or control of that bag of money that you gave up to purchase that met life annuity. It's gone. So in the event that you said, oh, I need to get some more of that money back, I gave up a good amount of money. They've given me a little of it back. I need to dive in and get some more of that. I need to reach in, grab a few dollars out of the bag. You can't. You no longer own that money. You don't have any ownership, access or control of that money. However, that check will come for the rest of your life.

Val Majewski:
Now, there are other type of annuities outside of that. Metlife single premium immediate annuity that you can look into that will give you more flexibility, ownership and control of your money. Okay. These are available outside of TSP. And there's so many different types of plans, not just the only one that's with TSP, but there are other plans outside that can be customized for you. What does that mean? Some of them you can get lifetime income without having to cash in your balance. So you can have the best of both worlds. You can get that lifetime check using a portion or all of your funds, and if you did need money, at some point you can reach in and grab money out the bag. Understand it will probably affect the income stream that you're getting, but you have that option. Other plans might be able to provide for long term care needs, or might have enhanced benefits. If you get into a long term care type situation. There are different types of plans out there, and not one is meant for every single person. That's why it's important that you take a look at your situation to see what other types of plans are out there that can provide you this lifetime income that is needed to fill the gap, and make sure you've got all of your living expenses covered again with guaranteed guaranteed for life income. So what is my point here? And why are we talking about this? Well, studies show again the studies do show and the research does show that adding a lifetime income annuity on top of your furs and a top of your Social Security lifetime benefits.

Val Majewski:
To fill the gap will not only lead to a happier retirement, as said, a more successful retirement. But use the word longer. Longer. There was a study done. And it showed that a 65 year old male in the US that purchased a lifetime annuity and had all of their basic living expenses covered, lived 20% longer than a 65 year old male that did not have all that covered. Now, why is that? Why would somebody live longer and happier and have a more successful retirement if all of their living expenses, and then some were covered by guaranteed lifetime payments? Well, they wouldn't be stress it. They wouldn't be worried. It would know 100% that that check is going to keep coming. That check is going to keep coming over and over and over. And since they're being paid to live, they're going to live a little differently. They're being paid to live every day, every month that they're breathing. That check is still going to come. The market goes down, what are they going to do? Let's say the market went down 20% tomorrow. Your retirement accounts, your TSB is is drastically affected. You are pulling money out. You weren't getting a lifetime income. What about the person who's getting guaranteed lifetime income? What do they do? They have zero worry.

Val Majewski:
They're going to go out and play another golf. A round of golf with their buddies. They're going to go to the beach. They're going to go on vacation. They're going to enjoy the things that they're loving to enjoy because because they know their money's guaranteed. It's not affected by market conditions. It's not affected by outside influences. That check will continue to come. This is not a new concept. This has been around said for centuries, and if people are owed money, if you're owed money, you know you're going to get more money every month that you're alive. Chances are you're going to stay alive longer and you're going to be happier for. So the whole point of today, the whole point of our discussion, is not only do I want you to have enough lifetime income to live on, to make sure that when it's all said and done, that your retirement is taken care of, it's guaranteed it's set. You know, without a shadow of a doubt how much you're going to get. We can help you set that up. We can look at your situation. We do an entire benefit situation. But if you want to specifically look at lifetime income, your income in retirement, what that level is going to look like and how I can guarantee it's going to be at a certain level when I do retire. We can lock that in for you. We can show you how to do that, how to set yourself up with either a portion or all of your TSP funds.

Val Majewski:
And make sure make sure that you're going to be at the level of income that is going to sustain you throughout the rest of your retirement, is going to keep up with inflation if that's a concern for you. So you got to make sure all of your needs are taken care of. It's going to remove any stress, worry or doubt from your retirement, which is going to make you happier. It's going to make your retirement very successful. And statistics show that you're actually going to live longer as a result of it. So reach out to us. Go to Federal retirement Show.com. Fill out the form. Request some information. Heck, at the end of the review that we give, we'll send you a copy of the book that I wrote called There's No Excuse Your Guide to Maximizing Your Federal Benefits. And we'll make sure that you're set up properly and you have that peace of mind knowing that your retirement is going to be when you want it, how you want it, with the income level that you desire and need to be at. So I hope you enjoyed today's discussion about lifetime income and lifetime income need in retirement planning. Reach out to us again. Federal retirement Show.com. Fill out the form and we'll be in touch. Really appreciate you taking the time to visit with me today, and I look forward to seeing you on a future episode.

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