Multiple Retirement Income Sources

If you’re concerned that your retirement savings won’t last as long as you do, you’re not alone. According to a 2016 Northwestern Mutual study, two-thirds of Americans believe there is some chance that they, unfortunately, will outlive their savings.

But there’s some new research out there that suggests that by adding a mix of other types of retirement assets to your portfolio, beyond just putting money in your 401(k), you may have a greater level of confidence in the survivability of your portfolio.

The research was conducted by Dr. Michael Finke, dean of American College and Chief Academic Officer. Dr. Finke used statistical analysis to simulate the financial experiences of thousands of hypothetical retirees. Each simulation assumed the persons retired at age 65 with $2 million in taxable and non-taxable retirement assets, and then withdrew 4 percent of those assets. Every year, they increased the withdrawal amount with the rate of inflation.

Here’s what he found:

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  • Retirees with only traditional stock and bond investments in their portfolio had a 29 percent chance of outliving their assets.
  • Having cash value from permanent life insurance, when used to provide tax-efficient income in retirement, could reduce the likelihood of a retirement income shortfall down to 21%.
  • Then he added an income annuity to the mix and that reduced the risk of a shortfall down even further—to 16%.


If this type of strategy or approach is set-up properly, for the right candidate, the cash value of permanent life insurance can grow over time and give the retiree an option to take income from it later on. In addition, a deferred income annuity can help provide a steady paycheck that continues as long as a retiree is alive. Using the income of an annuity as a base, the research shows that a retiree could slow the pace of withdrawals from life insurance cash value of the life insurance policy and from other investments, thus potentially stretching his or her retirement dollars even further.
Not only that, but the research also suggests that the legacy—the amount of money available to beneficiaries—may be significantly higher with a mix of income sources, compared to the traditional investments approach.

I don’t know about you, but when you’ve got a better chance of surviving your portfolio, that’s a good thing. So don’t be afraid to talk with your financial advisor about annuities and cash value life insurance. That’s because putting them together properly in a portfolio could just potentially produce the best results for you and your family.

Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal.

Annuities are long-term investment products designed for retirement purposes. Guarantees are based on the claims-paying ability of the issuer, subject to their terms and conditions and assume compliance with the product’s benefit rules, as applicable. Early withdrawals may be subject to surrender penalties and, if taken prior to age 59½, may be subject to an additional 10% federal tax.

Annuities are not FDIC insured. Certain terms and conditions apply, so please read insurance company materials carefully. For costs and further details of the coverage, including exclusions, any reductions or limitations and terms under which the contract may be continued in force, talk to your agent. Products and features are subject to state variations and availability. Repositioning of assets from an existing product may not be suitable for all clients.

There is no guarantee that you will achieve the results illustrated or that the investment strategy will meet its stated objectives.

Raymond J. Lucia Jr. (CA Insurance Lic. # 0E12175) is chairman of Lucia Capital Group, and CEO of its affiliated broker/dealer, Lucia Securities, LLC, member FINRA/SIPC, which is a subsidiary of Lucia Capital Group, a registered investment advisor. Registration with the SEC does not imply a certain level of skill or training. Advisory services offered through Lucia Capital Group. Securities offered through Lucia Securities, LLC.

No client or prospective client should assume that the information contained herein (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from Lucia Capital Group, its investment adviser representatives, affiliates or any other investment professional.

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