Is Social Security The Only Possible Source of Guaranteed Income for Retirement?

There’s a reason older Americans are advised to think carefully before signing up for Social Security. For many people, those benefits are their only source of retirement income. For others, they’re the primary source. So it’s important to file at the right time, since the age you pick to sign up for benefits has an impact on the amount of money you receive each month.

But even if you have a nice amount of money saved for retirement, it’s important to choose your Social Security filing age strategically to maximize those benefits. That’s because unlike your nest egg, Social Security is guaranteed to never run out.

Once you file for benefits, you’re guaranteed to get that money every month for as long as you live. It doesn’t matter if you live until your mid-80s, late 90s, or beyond. As long as you’re alive, you’ll get your monthly check.

Your savings, on the other hand, could run out — even if you have a lot of money.

But you may be surprised to learn that Social Security isn’t necessarily your only option for guaranteed income in retirement. There’s another option that could pay you money for the rest of your life.

It pays to consider an annuity for your retirement

Running out of savings is a huge fear among retirees today. Social Security helps protect against that to some degree by paying you benefits each month for life. But there’s another financial product that could do the same — an annuity.

An annuity is a contract between you and an insurance company. You pay that company, and in exchange, you’re guaranteed income for life — no matter how many years that amounts to.

There are different types of annuities you can choose from. Some annuities pay you the same amount of money each month. Others pay some amount of money each month that can vary based on market conditions.

You can choose the type of annuity that’s right for you based on your income needs and risk tolerance. For example, you may want the stability of predictable monthly payments, in which case a fixed annuity could be best for you. If you have more of an appetite for risk, you could purchase a variable annuity whose returns and payments can fluctuate based on market conditions.

Is an annuity right for you?

The primary benefit of an annuity is the guaranteed income it provides. But you should be aware that annuities have some drawbacks. They can be costly to set up and tricky to understand.

Also, you may do better financially by putting money into strategic investments instead of an annuity. Although those investment may not guarantee you income for life, they may end up producing larger returns — and payments to you — than an annuity can. And remember, when your portfolio is generating more income, it might end up making you more money than you need to spend each year. There’s some protection in that. 

But if you like the idea of having guaranteed income on top of Social Security, then it certainly makes sense to at least learn more about annuities and figure out if purchasing one is a good choice. You may find that an annuity gives you the peace of mind you need to enjoy your retirement without worrying about money all the time.