Planning your finances in retirement.

As retirement approaches, focus naturally shifts from how to save for retirement (accumulation), to how to spend in retirement (decumulation). But, there are questions about how much can be safely spent each year.

The risks and uncertainty of retirement.

For an individual, that's a hard question to answer, because it depends a lot on longevity, and how the market fluctuates in the meantime—these are fundamentally unpredictable factors that are mostly outside of an individual's control.

Spending Risk

To protect against running out of money in retirement, individuals must be careful about how much of your savings are withdrawn to spend each year.

Longevity Risk

Americans are living longer than ever. Living to 105 should be a great thing, but it also means the possibility of running out of money at a time when an individual is least able to afford it.

Market Risk

In retirement, there are arent the wages or the time to make up for losses in a downturn. A recession at the wrong time can seriously limit an individual's spending power.

Uncertainty restricts spending power.

The range of income that can be sustainably withdraw today varies hugely based on these sources of risk (see chart).
Many Americans worry about running out of money in retirement and will have to spend conservatively to prevent this. The well-known "4% withdrawal rule" is based on this conservative math: withdrawing only 4% of your savings gives you a >99% chance that your money will last for more than 30 years. But it also reduces your annual spending power from $15,000 to just $8,000 per year.
Consumption differences

Insurance for retirement.

In reality, a person is unlikely to live to 100, and the market is unlikely to perform as badly as the 4% rule assumes. So, why are people advised to be so conservative? Because the cost of be unprepared is very high: running out of money at an old age.
However, spending conservatively is not the only option. The need to protect against low-likelihood, high-cost outcomes is exactly why insurance exists. And it's why we created our software for walking through the benefits of fixed annuities in creating a Personal Pension.

Individual vs. group risk pooling.

The core function of insurance is to pool risk. If enough individuals combine their assets, the law of averages takes over: on average, the group will live the median life expectancy, and assets will grow at the median rate. Even though any one individual may live to 115, a group of individuals can absorb that cost, and are all able to spend according to the median.

Individual Risk

Without insurance, an individuals has to "self-insure" by spending for the most conservative scenario, significantly reducing your spending power.

Individual risk

Pooled Risk

Pooling risk across thousands of individuals, everyone can consume according the median outcome, resulting in much higher annual income for everyone.

Pooled risk

Our technology.

Our technology exists to help financial professionals and consumers collaborate on outsourcing retirement risk to a top-rated insurance company. We provide educational and workflow tools to help through learning, contracting, and managing fixed annuity contracts that provide lifetime income.

Simpler annuities, for a simpler retirement.

If you've done the research, you'll know that there's a dizzying list of annuity types for those looking to insure their retirement. We focus on stimulating the conversation around fixed annuites -- demonstrating the value of growth over time, minimized downside, and income over a lifetime.

Benefits and trade-offs.

A Personal Pension helps set clients up with income that lasts for life. This improves spending power, and also takes a lot of the guessing and the worry out of retirement planning.
As with anything, there are drawbacks. Most importantly, because of risk-pooling, if you live less than average, you won’t receive as much as someone who lives longer than average, and the money you contribute to an annuity may not pass on to your heirs.

Advantages

  • Hedge market risk.
  • Foundational income that lasts for life.
  • Able to safely spend a higher amount each year.
  • Better income certainty makes it easier to plan.
  • Don't have to manage investments—the insurer handles it.

Trade-offs

  • You may not benefit as much from large market gains.
  • You receive less money if you live less long.
  • Income from an annuity isn't inherited by heirs.
  • There may be withdrawal limitations.