Which Is Better in Retirement, Assets or Income?

Norman had $400,000 in his 401(k) retirement plan. He told me he was set for life and then retired.  One year later he had spent $50,000 to cover his living expenses and had $353,000 left.  He called me and asked about his math calculations, that if he continued taking $50,000 a year out of the plan, he would be out of money in seven more years.  He wanted me to confirm his numbers for accuracy, which I did.  He got very concerned.  Norman asked me, “What can I do at this point in my life to lock down income I cannot outlive?”  His life expectancy was 23 years, but his money expectancy was seven.  This was a massive dilemma for Norman!
Here are a couple of observations to help you understand why a 401(k) or other lump sum arrangement isn’t really the only thing you funding your retirement. Don’t misunderstand me, most people do not have saved even as much as Norman at retirement, but even with close to half a million dollars, Norman still needed to lock down an income stream he could not outlive.  With a predictable income he could better make many other decisions affecting his life, knowing he would have needed money to do so.
My point? It is a predictable income stream (cash flow) you want, and cannot outlive, rather than a lump sum asset that looks nice on paper but won’t last long in the real world.  Don’t you agree? Would you rather have $400,000 in cash, or $50,000 a year of guaranteed income for life?  I think we both know the answer.
Money and assets are very important, but if not structured properly, they won’t last your life-TIME.  This is why you can’t just rely on all the retirement planning advice you have heard preached to you over the years about 401(k)s and IRAs. There is more to retirement than just these tax-deferred savings programs that are subject to the ups and downs of the stock market. This is why I suggest using various kinds of annuities to lock down income that you cannot outlive.  And what I am suggesting for you is also the same for your spouse.  You both want income for life, then work on having surplus money to give you the ability to have fun along the way.  If you don’t have income after seven years of retirement, you are not going to have very much fun. Relying solely on a lump sum 401(k) at retirement makes no sense. Start looking at other options, including annuities, life insurance, and real estate for some promising options that can make life a whole lot happier at retirement.