Monthly Income Is the Real Pot of Gold
Annuity providers aren’t the only ones focused on income streams in retirement.
Economist and Nobel Laureate Robert Merton has long argued that defined contribution plans like 401(k)s don’t do enough to convey to employees that they will need to convert their account balances- what may seem like a “pot of gold” at first glance- into sustainable, predictable assets to fund what could well be a lengthy retirement. In fact, Merton argues, the language of investment accounts is dangerously preoccupied with asset values and investment returns.
In actuality, he says that an employee “need to worry about three things only: her retirement income goals, how much she is prepared to contribute from her current income, and how long she plans to work. The only feedback she needs from her plan provider is her probability of achieving her income goals. She should not receive quarterly updates about the returns on her investment (historical, current, or projected) or about the current allocation of her assets. These are important factors in achieving success, but they are not meaningful input for the choices about income that the customer has to make.”
It’s interesting, yes, but more importantly, it’s actionable. If you’re worried about funding your own retirement, stop relying on your 401(k) to tell you where you stand. Take matters into your own hands and determine what your “pot of gold” will realistically look like over 10, 20, 30 or more years of retirement. Consider your expenses and your sources of income and decide what your options are.
We believe that income annuities can be an important element of a healthy financial retirement plan. Schedule a call with us to see if you agree.
Monthly income in retirement matters. You don’t have to take it from us. You can also take it from one of the smartest minds around.