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Where’s Your Retirement Income Coming From?

You may already know that your cash flow for retirement will probably not come from a single source, but will more likely be a combination of Social Security, workplace retirement accounts, personal savings and other sources.

Understanding and organizing your income sources may seem like a difficult task, but with the help of a financial professional it may be easier than you thought. He or she can help you with retirement planning, find potential sources of income, and help you fill any gaps that may exist. Understanding how much you need to retire and where your future income will come from can help you plan.

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Let's Take a Look at Some Common Sources of Retirement Income

Social Security

Almost all – 91% – of retirees rely on Social Security for at least some of their income1. One of the biggest decisions you'll make about Social Security is when to start taking your benefits. You can begin taking benefits early and receive a reduced amount, wait until you're eligible to receive your full benefits, or postpone your first payment to qualify for a larger amount.

Workplace Retirement Accounts

Many employers offer defined contribution plans, such as 401(k)s, 403(b)s, 457s, SIMPLE IRAs, SIMPLE 401(k)s, and Simplified Employee Pension (SEP) IRAs. These plans can help you save for retirement and come with tax benefits, such as pre-tax contributions and the opportunity for tax-deferred growth. Plus, investing in them is easy because the money is automatically deducted from your paycheck.

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Variable Annuities

A variable annuity is an insurance contract that may provide lifetime income. Today’s variable annuities can offer insurance riders called optional living benefits that, for an additional fee, provide guaranteed retirement income.

You invest your money in the annuity where it has the opportunity for tax-deferred growth over a number of years. When you want to take income from your annuity, the insurance company guarantees you a minimum payment. Variable annuities may also offer death benefits so that any money left in your account at your death will go to your loved ones.

Fixed Annuities

A fixed annuity is a financial planning tool designed for the long term, offered by insurance companies, that enables you to grow your money tax-deferred at a guaranteed rate of interest. After a specified period, you can withdraw your money over a determined length of time, or for the rest of your life. Your initial investment is protected – you cannot lose money.

Fixed annuities are typically selected by people looking for a risk-free guaranteed rate of return and who wish to delay paying taxes on any earnings. When those earnings are withdrawn or later taken as income, they are taxed as ordinary income.

Fixed annuities may also offer death benefits so your loved ones will receive any money that is left in your account when you pass away.

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Stock and Bond Investments

Stocks are an equity investment that represents part ownership in a corporation and entitle you to part of that corporation's earnings and assets. When you invest in stocks, you have to be able to stomach the ups and downs of the market. On the other hand, when you buy a bond, you are lending money to a corporation or government entity. The seller of the bond agrees to repay your principal amount of the loan at a specified time. And interest-bearing bonds pay you interest periodically.

A Pension

The number of traditional employer pension plans has decreased over the years. If you do have a pension, knowing the benefits you may receive at retirement can help you build a plan for the future. A pension benefit is typically calculated based on your years of service, the age you retire, and your ending salary.

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Home Equity

Your home can be a potential source of retirement income if you own it outright or have built up significant home equity. Two of the most common ways to generate income from a house are to sell it, or, if it's right for you, explore the possibility of a reverse mortgage.

Personal Savings

Having your own personal nest egg for retirement is important, especially since pensions are becoming rarer and the future of Social Security is uncertain. In fact, approximately two-thirds of current workers anticipate receiving retirement income from an IRA and/or other personal savings and investments.

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An Inheritance

An inheritance could be a source of income, but it’s probably not wise to base your future on it. In fact, only about one-fifth of American households have actually received an inheritance, and among those who did, the amounts are relatively small compared to the household's total retirement income.2

A Part-Time Job

29% of retirees are currently employed, and almost all say they have a positive reason for working – because they enjoy it, and want to stay active and involved. However, many say that they continue to work for financial reasons, such as wanting money to buy extras (67%), needing money to make ends meet (42%), a decrease in the value of their savings or investments (23%), or keeping health insurance or other benefits (13%).1

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Footnotes

1 Employee Benefit Research Institute, 2017 Retirement Confidence Survey®
2 Center for Retirement Research at Boston College, How Do Inheritances Affect The National Retirement Risk Index?, September 2015

 

 

See our Annuity Solutions

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It’s Time to Plan for the Expected and the Unexpected

When you look at all your sources of retirement income, you might want to organize them by the kind of expenses they will cover. For instance, you might consider using predictable income from Social Security, pensions and variable annuities for your essential living expenses, and then cover your discretionary and unexpected expenses with your savings and investments.

It’s all up to you, and it can start with a plan that you and your financial professional put together.

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Investors should consider the features of the contract and the underlying portfolios’ investment objectives, policies, management, risks, charges and expenses carefully before investing. This and other important information is contained in the prospectus, which can be obtained on the prospectus page or from your financial professional. Please read the prospectus carefully before investing.

Annuities are issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Variable Annuities are distributed by Prudential Annuities Distributors, Inc., Shelton, CT. Both are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations.

Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Your licensed financial professional can provide you with complete details.

Optional living and death benefits may not be available in every state and may not be elected in conjunction with certain optional benefits. Optional benefits have certain investment, holding period, liquidity, and withdrawal limitations and restrictions. The benefit fees are in addition to fees and charges associated with the basic annuity.

All references to guarantees, including optional benefits, are backed by the claims-paying ability of the issuing company and do not apply to the underlying investment options.

For Compliance Use Only: 1000373-00004-00

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