
Social Security
History of Social Security and its Evolution
The want for economic security is no new trend. We’ve laid out the evolution of Social Security and how it’s developed into the program it is today.
According to the Social Security Administration, individuals aged 65 and over in the top quartile for income (an average of $78,180) received only 18% of their income from Social Security.
So what makes up the remaining 82%?
The old retirement adage says that we should use the three-legged stool approach to prepare for retirement:
But, we see these figures changing as time progresses, so we want to hone in on other ways to establish a steady income throughout retirement. Here’s a rundown of what they might be:
Managed payout funds are a way of providing a steady monthly income that keeps up with inflation. The allocation of payments may change over time to avoid eating away at the principal investment payment, which brings us to a downside of managed payout funds: they don’t provide a guaranteed lifetime stream of income. They can also expose investors to downside risk due to high allocations toward equities. Nevertheless, this is another tool for generating retirement income.
The 4% Rule was born in the ’90s when financial planner William P. Bengen concluded that someone who started withdrawals between 1926 and 1976 could make the portfolio last for at least 30 years by taking an initial 4% withdrawal and adjusting it for inflation each year. It’s a oversimplified rule for those looking to live off their own investments. However, after the market collapses in 2001 and 2008, researchers fear that 4% may be too generous a rule. Instead, people are opting for dynamic withdrawal strategies that evolve alongside the market.
Your Personal Pension is backed by insurance companies which guarantee that for every dollar you contribute, you will receive a certain amount of income every month starting when you retire. Unlike an income annuity, the Personal Pension allows you to contribute incrementally, in smaller amounts and at a younger age, similar to the way you’d put aside money in your savings account or 401(k). You can use our Diagnostic Tool to project your income needs in retirement based on some basic information.
A Personal Pension is a contract between you and top rated insurance companies. By making contributions to your Personal Pension over time, you develop a portfolio of guaranteed income available in retirement. Blueprint Income offers a Personal Pension account with the lowest minimum, $100. After opening an account, you can make subsequent contributions of $100 or more, each of which will increase your pension check.
Here you can see what contributing to a Personal Pension will guarantee you in retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.
Similar to the Personal Pension, income annuities provide a guaranteed lifetime stream of income during your retirement. However, instead of contributing over time, you pay a lump sum upfront to purchase your annuity from an insurance company. Then, the insurance company sends you a series of payments for the rest of your life.
Income annuities come in two forms: immediate or longevity. With immediate annuities you begin receiving payments within 12 months of your purchase, whereas with a longevity annuity you can choose to begin receiving payments at a date much later on.
A Qualified Longevity Annuity Contract (QLAC) is a type of longevity annuity (a.k.a. deferred income annuity) that comes with tax-deferral benefits. You can transfer the lesser of $135,000 or 25% of your qualified retirement account to a QLAC, which will then generate a future lifetime income stream starting after age 72 and before age 85. During the period in which income is deferred, the money used to purchase the QLAC is excluded from the required minimum distribution (RMD) calculation, a required annual withdrawal retirees must take from retirement accounts once they turn 72 years old.
At Blueprint Income, we offer annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes.
From there, you’ll get access to our annuity guides and team of specialists to help you analyze your retirement finances and walk you through the application process.
The want for economic security is no new trend. We’ve laid out the evolution of Social Security and how it’s developed into the program it is today.
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