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Retirement is a lot like climbing a mountain. Just as important as it is to get up the mountain, it’s important to safely get down. So, just like packing the right gear to go up as well as come back down a mountain is vital, protected income can be a critical tool in your retirement descent.

 

Protected income can assist with the distribution phase of retirement. Different from passive income, protected income involves passing that burden of income off to another entity, meaning it’s no longer active based on your effort and it’s no longer passive based on what you saved into that stream of income either. Some examples include:

 

  • Social Security where the burden of income is passed to the government
  • A pension where the burden is passed to a company
  • Annuities and life insurance where the burden is on an insurance carrier

 

In all these examples, the commonality is you now have a steady source of income and that risk in providing that income is no longer yours.

 

This can lead to many advantages, one being less portfolio reliance in retirement. If someone gets a good percentage of their income from a protected source, along with passive income, it alleviates that reliance on their portfolio. This can help maintain lifestyle in retirement as well. For example, if a retiree gets 80% of their previous wages through Social Security and pension protection, then they can let the market make up for their cost-of-living adjustments, such as, their bonuses, vacation, etc. However, it’s important to note that not all protected income is guaranteed income. For example, if Social Security runs out like it’s projected to in the 2030s, that’s income you will not see.

 

While that can be a huge problem in your retirement, there are ways protected income like permanent life insurance or annuities can still alleviate potential market drops. When there’s a dip in the market, you could go into your life insurance policy to cover expenses. That way, you’re not withdrawing during a down market, you’re using the cash value of your insurance policy. Annuities are also a key tool as they offer protected income not dependent on market performance.

 

It’s important to know all your options for protected income, as having diverse forms of it will better assist in creating a smooth descent into your retirement. Whether you want to spend most of your wealth traveling, or ensure you leave behind a large portion to your loved ones, utilizing protected income can help you maintain a preferred lifestyle and reach your goals. These sources of income can make the difference in having the retirement you want and creating a retirement that was worth the climb.

 

If you want to delve deeper into protected income, you can listen to the full podcast here: 20 Minutes of Clarity

 

If you’re ready to get started, or if you’re looking for a second opinion on your current strategy, remember, we are here to help with the complexities of retirement planning while keeping your financial goals in focus. Give Jason Noble a call today at (843) 743-2926 or PCIA Wichita (316) 669-9413 to take the first step toward designing a portfolio tailored to your retirement dreams.

 

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Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite 150, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”). Certain services may be provided by affiliates of PCIA.