A Better Retirement Spending Plan

• No Wall Street Speculation 

• No watching the markets 

• Just a plan - with a guarantee.

Patrick Hackenberry can help you find the right annuity plan to meet your needs. 

As a licensed expert, I’m here to guide you step-by-step, helping you understand your choices, optimize your savings, and provide you with an income plan during your retirement years.

Onward Shield, LLC, founded in 2024 by Patrick Hackenberry, is located in Thomson, GA and primarily serves the CSRA including Augusta, GA, Evans, GA, and Aiken, SC. Licensed in GA & SC since 2023.  

Smart Retirement Strategies: 

Turning Your 401(k) into a Lifetime Income Stream

Overview of the book’s purpose: to help retirees and near-retirees understand how Fixed Index Annuities (FIAs) with lifetime income riders can transform their 401(k) into a reliable income stream.

Introduction: Securing Your Future with Guaranteed Income

Retirement is often viewed as a season of life to be celebrated, a time to enjoy the fruits of decades of hard work. However, alongside the excitement can come a lingering question that keeps many awake at night: "Will I have enough money to last through retirement?" This uncertainty, rooted in concerns over market volatility, inflation, and longevity, is one that countless people face as they approach their golden years.

You may have a 401(k) or other retirement savings account and feel proud of the nest egg you’ve accumulated. But now, as the transition from saving to spending draws nearer, you wonder: How can I make my savings last? How do I turn what I’ve set aside into a reliable, lifelong income?

This book is designed to help you answer those questions by introducing a powerful retirement tool: the Fixed Index Annuity (FIA) with a lifetime income rider. This unique insurance product not only protects your savings but also transforms them into a guaranteed income stream that lasts as long as you do.

We’ll explore how this "income for life" concept works, walking you step-by-step through the benefits and features of FIAs. More importantly, I’ll show you how to think strategically about your retirement, using a "planning backwards" approach. Instead of simply hoping your savings will last, you can plan with confidence, knowing how much income you’ll need and exactly how to generate it.

In the Bible, we see stories of wise stewards who planned ahead, like Joseph in Egypt. During years of plenty, Joseph prepared for the years of famine, ensuring that the people of Egypt wouldn’t go hungry when difficult times came. Similarly, planning for your retirement is about preparing for the future by making wise decisions now—decisions that ensure you’ll have what you need, no matter how long your retirement lasts.

In the chapters that follow, we’ll cover everything you need to know about Fixed Index Annuities with lifetime income riders: how they work, why they’re important, and how they can fit into your retirement strategy. We’ll also address common misconceptions about annuities and help you determine if they’re the right tool for your financial needs.

Whether you’re nearing retirement or just beginning to think about it, this book will give you the tools to build a future you can count on—one that provides both financial security and peace of mind.

Chapter 1: The Retirement Income Challenge

Imagine standing at the edge of a vast desert. You’re about to embark on a long journey, and you have a reservoir of water to draw from. The journey is your retirement, and the water represents your retirement savings—the very thing that will sustain you through the years ahead. 

As you set out, you dip into your reservoir for the water you need to survive. The challenge, though, is that you don’t know exactly how long your journey will last. Will your reservoir run dry before you reach the other side of the desert? What happens if there’s a stretch of intense heat, and you need more water than you planned for? These are the very same questions that retirees face when they consider how to turn their savings into income.

You’ve worked hard, saved diligently, and likely accumulated a sizable 401(k) or other retirement savings. But when you retire, that savings must shift from a growth mindset to an income mindset. Instead of building your wealth, the challenge now is to make it last. Unfortunately, there’s no way to predict the exact length of your retirement or what unexpected financial challenges might arise along the way.

This is where the retirement income challenge becomes so important. You face several risks:

1. Longevity Risk: People are living longer than ever before, which means your savings may need to last for 30 or even 40 years.

2. Market Volatility: If your savings are invested in the stock market, you face the risk of losing money in a downturn, just when you need it most.

3. Inflation: Over time, the cost of living will rise, and your money will have to stretch further to cover the same expenses.

Given these risks, it’s easy to see why so many people worry about outliving their savings. In fact, studies show that the fear of running out of money is one of the top concerns among retirees. They know they need a reliable source of income, but they’re not sure how to create one that will last.

Now, let’s return to the analogy of the water reservoir. Imagine if, in addition to the reservoir you’ve built up, you also had access to a spring—a source of water that continually refills your reservoir, no matter how much you use. No longer would you have to worry about the reservoir running dry, because the spring ensures that you always have enough. 

A Fixed Index Annuity with a lifetime income rider works much like that spring. While your savings act as the reservoir, the income rider guarantees that you will have a stream of income that lasts as long as you live, even if your savings are exhausted. This "paycheck for life" can offer incredible peace of mind, allowing you to focus on enjoying your retirement without the constant worry of running out of money.

In today’s retirement landscape, FIAs with lifetime income riders have become a popular solution for those seeking both protection and growth. These products allow you to benefit from potential market gains without the risk of losing money in a market downturn. They also provide the added security of knowing that you will receive income for life, no matter how long your retirement lasts.

So, how do you overcome the retirement income challenge? You plan backwards, starting with how much income you will need in retirement and then selecting the right tools—like a Fixed Index Annuity with a lifetime income rider—to make that income a reality. By using this strategy, you can ensure that your retirement journey is secure, no matter how long it lasts.

In the chapters ahead, we’ll dive deeper into the specifics of FIAs and income riders, showing you exactly how these products work and how they can be tailored to meet your unique financial goals. But for now, remember this: Your reservoir of savings doesn’t have to be the only thing you rely on. With the right tools in place, you can tap into a source of guaranteed income that lasts a lifetime, giving you the confidence to retire when you want, without fear of running out of money.

Chapter 2: What Is a Fixed Index Annuity (FIA)?

When it comes to planning for retirement, many people are familiar with common options like 401(k)s, IRAs, and mutual funds. But there’s another powerful tool that can provide both security and growth potential—something that more and more retirees are discovering as they plan for the future: the Fixed Index Annuity (FIA).

In simple terms, a Fixed Index Annuity is a type of insurance product that helps protect your money while still offering the opportunity to grow your savings based on the performance of a stock market index, like the S&P 500. Unlike investing directly in the stock market, with an FIA, your money is never at risk of losing value due to market downturns. Instead, your annuity contract is tied to the performance of an index, allowing your money to grow when the market performs well while protecting you from losses when it doesn't.

Let’s break that down.

What Makes an FIA Different from Other Annuities?

An annuity is a contract between you and an insurance company designed to help you accumulate funds or generate income for retirement. An FIA stands out because it offers:

1. Market-Linked Growth with Protection: Your interest earnings are based on the performance of an index, but even if the index has a negative year, your annuity won’t lose value.

2. No Direct Investment in the Market: You aren’t actually investing in stocks or other assets. Instead, your annuity gains interest based on how the index performs, without putting your principal at risk.

3. Tax Deferral: Earnings within your FIA grow tax-deferred, meaning you won’t pay taxes on the interest until you start taking withdrawals.

Imagine this: you’ve spent years working hard and saving diligently. You’ve put aside a substantial sum of money for retirement, but now you’re worried about how to protect it. If you leave it in the stock market, you could lose money in a downturn—right when you need that money the most. On the other hand, if you keep it all in a savings account or CD, you’ll likely earn very little, and inflation will erode your purchasing power over time.

A Fixed Index Annuity offers a middle ground. It allows you to protect your principal from loss while still giving you the potential to earn more than traditional fixed-income options.

How Does an FIA Work?

The concept behind a Fixed Index Annuity is relatively straightforward, but understanding how it works will help you see why it’s such a valuable tool for retirement planning. Here’s a quick overview of the mechanics:

1. Protection of Principal: When you purchase an FIA, the money you put in (your premium) is protected. This means that no matter what happens in the stock market, you won’t lose your initial investment.

2. Earnings Linked to an Index: Your FIA is tied to a stock market index, such as the S&P 500. When the index performs well, your annuity earns interest based on that performance. The better the index does, the more interest you earn. However, if the index has a bad year, your principal is protected, and you won’t lose any money—though you may not earn any interest for that period.

3. Interest Crediting Methods: There are different ways that insurance companies calculate the interest you earn. Some common methods include:

   - Annual Point-to-Point: The interest is based on the difference between the index value at the beginning and end of the year.

   - Monthly Average: The average value of the index over the course of the year is used to calculate interest.

   - Monthly Cap: Each month, the index’s performance is measured, and gains are capped at a certain percentage, with losses potentially reducing the overall return.

4. Guaranteed Income Option: Many FIAs offer optional riders that provide guaranteed lifetime income, ensuring you never run out of money, even if you deplete the value of your annuity over time.

Why are FIAs Popular for Retirement Planning?

So, why are FIAs becoming increasingly popular, especially among retirees? The answer lies in the balance they provide between growth and security—two key concerns for anyone nearing or entering retirement. Let’s take a closer look at why FIAs are such a compelling option:

1. Safety from Market Volatility: One of the biggest fears retirees face is the potential for a market downturn to wipe out a significant portion of their savings. This risk is especially concerning in the years right before or after retirement, when your portfolio has less time to recover from losses. With an FIA, you don’t have to worry about market crashes. Your money is shielded from the downside risk.

2. Upside Potential: While FIAs protect your principal, they also offer growth potential linked to the market. You won’t earn as much as you would with direct stock investments during a bull market, but you also won’t experience the losses that come with bear markets. This makes FIAs an attractive option for those who want some exposure to the market without the full risk.

3. Tax-Deferred Growth: Like other annuities, FIAs grow tax-deferred, meaning you won’t pay taxes on your interest earnings until you start withdrawing funds. This allows your money to compound more efficiently over time.

4. Guaranteed Income: Many people choose to add a lifetime income rider to their FIA, turning it into a reliable source of retirement income. This rider guarantees that you will receive regular income payments for life, even if your annuity’s value is depleted. Think of it like a pension that you create for yourself—steady, reliable income for as long as you need it.

The Parable of the Talents: Protecting and Growing What You’ve Been Given

To illustrate the value of a Fixed Index Annuity, let’s turn to a well-known biblical story: the Parable of the Talents (Matthew 25:14-30). In this story, a master entrusts his servants with varying amounts of money, or "talents." Two of the servants wisely invest the talents, doubling their master’s money. But the third servant, out of fear, buries his talent in the ground, earning nothing.

The master praises the servants who invested and grew their talents, but he rebukes the one who hid his money away. The lesson here is clear: wisely managing and growing what you’ve been entrusted with is important.

A Fixed Index Annuity allows you to do exactly that. By protecting your savings from market downturns while still providing the opportunity for growth, an FIA helps you be a wise steward of your financial resources. It ensures that your "talents" are not buried in fear, but instead are used to create steady, reliable income for your future.

How FIAs Fit Into Your Retirement Plan

At its core, an FIA is a tool for helping you manage the balance between growth and protection. It’s not designed to make you rich overnight, but rather to safeguard your retirement savings and ensure that your money lasts as long as you do. For many retirees, this balance is exactly what they need to feel secure.

As you begin thinking about how an FIA might fit into your retirement plan, consider your current financial situation, your goals for the future, and your risk tolerance. If you’re looking for a way to protect your nest egg while still giving it the opportunity to grow, an FIA could be the perfect solution.

In the next chapter, we’ll take a closer look at one of the most compelling features of FIAs: lifetime income riders. These riders turn your annuity into a guaranteed income stream for life, helping you answer the all-important question: "How much income will I need in retirement?"

Chapter 3: Guaranteed Income for Life – Understanding the Lifetime Income Rider

As you approach retirement, one of the most pressing concerns you’re likely to face is ensuring your income will last as long as you do. After all, the last thing anyone wants is to outlive their money. This fear is very real, especially considering the uncertainty of how long we might live. Today, people are living longer than ever, with many retirees spending 30 years or more in retirement. That’s a lot of time for your savings to stretch, and it’s why having a reliable, guaranteed income stream is so critical.

This is where the Lifetime Income Rider on a Fixed Index Annuity (FIA) becomes a game-changer. While your FIA protects your savings and allows them to grow, adding an income rider transforms your annuity into a consistent, dependable paycheck for life. It offers peace of mind, knowing that no matter how long you live or how much your expenses might rise, you’ll always have income coming in.

What Is a Lifetime Income Rider?

A Lifetime Income Rider is an optional feature that you can add to your FIA. Think of it as a guarantee that the insurance company gives you, ensuring that once you start drawing income from your annuity, those payments will continue for the rest of your life—even if you deplete the value of your annuity over time. This feature offers retirees the assurance of never running out of income, regardless of how the market performs or how long they live.

Here’s how it works:

1. Income Value Calculation: When you add a lifetime income rider to your annuity, the insurance company establishes a separate "income base" that will be used to calculate your future income. This income base grows at a guaranteed rate, often referred to as a "roll-up rate." Over time, this amount compounds and becomes the foundation for your lifetime income payments.

2. Guaranteed Payments: Once you decide to start drawing income (typically after a waiting period), the insurance company will calculate your annual payments based on a percentage of your income base. This payment is guaranteed for life, regardless of what happens to your actual account value.

3. Flexibility: You can choose when to turn on the income stream, giving you the flexibility to wait if you don’t need income right away. The longer you wait, the higher your income payments will be, as the income base continues to grow.

Imagine it like planting a seed. Over the years, the seed grows into a tree that bears fruit—your income payments. The longer you let the tree grow, the more fruit it produces. But even if the tree eventually withers, the fruit will keep coming, thanks to the lifetime income rider.

Why Do You Need Guaranteed Lifetime Income?

The idea of a paycheck for life sounds appealing, but why is it so important to have guaranteed income in retirement? Let’s explore a few key reasons why a lifetime income rider can be invaluable:

1. Longevity Risk: None of us knows how long we’ll live, and that uncertainty can make retirement planning difficult. While a longer life is a blessing, it also means you need more income to sustain yourself over the years. A lifetime income rider removes the guesswork by ensuring that your income lasts as long as you do.

2. Peace of Mind: The psychological benefits of knowing you have a guaranteed source of income cannot be overstated. With a lifetime income rider, you won’t have to constantly worry about whether your savings are depleting too quickly. You can focus on enjoying your retirement, confident that your income stream will continue.

3. Market Protection: Even if your FIA’s account value drops due to poor market performance, your income payments remain steady. The rider protects you from market volatility, providing a stable, predictable income regardless of how the stock market behaves.

4. Rising Costs in Retirement: As you age, your expenses may increase, particularly when it comes to healthcare. Having a reliable income source can help you manage rising costs without the fear of running out of money. Even if your account value diminishes over time, the rider ensures your income won’t stop.

How Is Lifetime Income Calculated?

One of the key features of a lifetime income rider is the growth of the income base. While your FIA’s account value is linked to market performance, the income base grows at a guaranteed rate. Typically, this rate is around 5% to 7% per year, depending on the terms of your annuity contract.

Once you decide to turn on the income stream, your payments will be based on a percentage of this income base. The percentage you receive depends on several factors, including:

- Your Age: The older you are when you start taking income, the higher your payout rate will be. This is because the insurance company expects to make payments for a shorter period.

- Single vs. Joint Life: If you choose a single life option, the income will be calculated based on your lifespan alone. If you choose a joint life option (which covers both you and your spouse), the payout may be slightly lower, but the income will last as long as either of you is alive.

Let’s break this down with an example.

Example: Turning Savings into a Lifelong Paycheck

Suppose you purchase a Fixed Index Annuity with $200,000 and add a lifetime income rider. The rider guarantees that your income base will grow at 7% annually. After 10 years, your income base would have grown to approximately $393,000. 

At age 65, you decide to start drawing income. The insurance company calculates that, based on your age and the terms of your rider, you’ll receive 5% of your income base annually. This means you would receive $19,650 per year for life, no matter how long you live or how the markets perform.

Even if your FIA’s account value drops to zero over time due to withdrawals or poor market performance, the insurance company continues to pay you $19,650 every year for the rest of your life. That’s the power of a lifetime income rider—your income is protected, no matter what.

Biblical Wisdom: The Manna in the Wilderness

In the Book of Exodus, we read the story of the Israelites wandering in the wilderness after escaping Egypt. Every day, God provided them with manna from heaven—a type of bread that appeared on the ground each morning. The Israelites didn’t have to worry about running out of food, because the manna was always there. 

Much like the manna, a lifetime income rider ensures that you always have what you need, no matter the circumstances. Just as the Israelites received daily sustenance throughout their journey, the income rider guarantees you’ll receive a steady flow of income throughout your retirement, providing for your needs no matter how long your journey lasts.

Creating a Retirement You Can Count On

A Fixed Index Annuity with a lifetime income rider offers more than just financial protection—it offers peace of mind. It gives you the confidence to retire when you’re ready, knowing that you’ll have a consistent, reliable income stream for the rest of your life.

This "paycheck for life" approach simplifies the complexity of retirement planning. You no longer have to worry about whether your savings will last, whether the markets will cooperate, or how long you’ll live. The income rider takes care of those uncertainties, allowing you to enjoy your retirement without financial stress.

In the next chapter, we’ll dive into the specifics of how to determine your retirement income needs and how to structure your plan to ensure that your savings, along with your FIA, will provide the lifestyle you desire. But for now, remember this: with a lifetime income rider, you can create a retirement you can count on, no matter how long your journey lasts.

Chapter 4: How Much Income Do You Need in Retirement?

One of the biggest questions you’ll face as you approach retirement is, "How much income will I need?" This question can feel overwhelming because it’s hard to predict exactly what your expenses will be, how long you’ll live, or what kind of lifestyle you’ll want in retirement. 

Fortunately, there are ways to create a thoughtful and comprehensive plan that ensures you’ll have enough income to meet your needs while still allowing you to enjoy your retirement. In this chapter, we’ll walk through how to estimate your retirement income needs and how a Fixed Index Annuity (FIA) can be a key piece of your financial puzzle.

Assessing Your Current and Future Expenses

To determine how much income you’ll need in retirement, it’s important to take a close look at your current expenses, while also considering what might change once you retire. Some costs will decrease when you stop working—such as commuting, work attire, and certain taxes. But others, like healthcare, travel, and leisure activities, may increase. Let’s break down some key categories to consider.

1. Housing: Will your mortgage be paid off by the time you retire, or will you still have monthly payments? If you plan to move or downsize, how will that affect your housing costs? It’s also important to consider maintenance, property taxes, utilities, and insurance.

2. Healthcare: As you age, healthcare becomes a significant expense. Even with Medicare, you may need supplemental insurance to cover things like prescription drugs, dental care, and long-term care. Make sure to budget for these costs, as they can rise over time.

3. Lifestyle and Leisure: Retirement should be about enjoying the fruits of your labor, so it’s essential to think about how you want to spend your time. Whether you’re planning to travel, pursue hobbies, or spend more time with family, make sure your income can support the lifestyle you envision.

4. Inflation: Over the years, the cost of living will rise due to inflation. Even if your expenses stay the same, inflation will gradually erode your purchasing power. That’s why it’s important to plan for income that will grow over time, or at least keep pace with inflation.

Estimating Your Income Needs

A common rule of thumb is that you’ll need about 70-80% of your pre-retirement income to maintain your standard of living in retirement. But this estimate can vary widely depending on your personal situation. Let’s walk through the steps to create a more tailored estimate:

1. Step 1: Calculate Your Current Spending  

   Take a close look at your current budget. Track your expenses over several months to get an accurate picture of where your money is going. Be sure to include:

   - Fixed expenses (e.g., housing, utilities, insurance)

   - Variable expenses (e.g., groceries, dining out, entertainment)

   - Irregular expenses (e.g., home repairs, vacations)

2. Step 2: Project Changes in Retirement  

   Next, estimate how your expenses might change once you retire. For example, you may no longer need to save for retirement, but you’ll likely spend more on healthcare and leisure activities. Create a new budget based on these changes.

3. Step 3: Account for Inflation  

   Once you have a rough estimate of your retirement expenses, it’s important to factor in inflation. Historically, inflation has averaged around 2-3% per year. To be conservative, it’s wise to assume that your costs will increase by at least that amount annually.

4. Step 4: Add a Buffer for the Unexpected  

   Retirement is full of uncertainties, from market volatility to unexpected health issues. It’s a good idea to build in a buffer—either by saving more or planning for a higher income than you think you’ll need.

Where Will Your Income Come From?

Once you’ve estimated how much income you’ll need, the next step is to determine where that income will come from. In retirement, your income will likely come from a combination of sources, such as:

1. Social Security: Most retirees rely on Social Security to provide a portion of their income. However, Social Security alone is unlikely to cover all of your expenses. Be sure to check your benefit estimate and consider strategies for maximizing your benefits, such as delaying your claim until age 70 to receive a higher payout.

2. Retirement Savings: If you’ve been saving in a 401(k), IRA, or other retirement account, these funds will be an important part of your income. But drawing down your savings requires careful planning to ensure you don’t run out of money. This is where an FIA with a lifetime income rider can help by providing a guaranteed income stream.

3. Pension: If you’re fortunate enough to have a pension, this can provide a steady source of income throughout retirement. However, fewer and fewer retirees have access to pensions, making it even more important to find other ways to generate guaranteed income.

4. Annuities: As we discussed in earlier chapters, a Fixed Index Annuity can be a powerful tool for generating lifetime income. With the income rider, you’ll receive regular payments for life, providing you with a reliable paycheck that complements your other income sources.

Creating Your Retirement Paycheck

Now that you have a clearer picture of your income needs and sources, the next step is to create a plan for turning your savings into a reliable, lifelong paycheck. This is where the concept of "income flooring" comes into play.

Income Flooring is a strategy that ensures your essential expenses are covered by guaranteed income sources, such as Social Security, pensions, and annuities. By creating a stable "floor" of income to cover your basic needs, you can reduce the stress and uncertainty of relying solely on market-based investments.

Here’s how to build your income floor:

1. Step 1: Determine Your Essential Expenses  

   Start by identifying your must-have expenses—things like housing, food, healthcare, and insurance. These are the non-negotiable costs you’ll need to cover no matter what happens in the market.

2. Step 2: Match Guaranteed Income to Essential Expenses  

   Next, make sure your essential expenses are covered by guaranteed income sources. For example:

   - Social Security may cover a portion of your housing and food costs.

   - A pension (if you have one) could cover healthcare expenses.

   - A Fixed Index Annuity with a lifetime income rider can be used to fill any gaps, ensuring that your essential expenses are fully covered.

3. Step 3: Use Savings for Discretionary Spending  

   Once your essential expenses are covered by guaranteed income, you can use your remaining savings for discretionary spending—things like travel, hobbies, and entertainment. Since these expenses are more flexible, you can adjust your spending based on how your investments perform over time.

The Importance of Flexibility in Retirement Planning

While guaranteed income provides a solid foundation, it’s also important to maintain flexibility in your retirement plan. Life is full of surprises, and your financial needs may change over time due to health issues, family dynamics, or economic shifts. That’s why it’s crucial to:

- Revisit your retirement plan regularly and adjust as needed.

- Have a mix of guaranteed income and growth-oriented investments.

- Keep an emergency fund for unexpected expenses.

In the Bible, Proverbs 21:5 reminds us, "The plans of the diligent lead to profit as surely as haste leads to poverty." Just as the Bible encourages careful planning and diligence, your retirement plan should be thoughtful and adaptable, allowing you to navigate the unexpected while still enjoying the fruits of your labor.

A FIA as Part of Your Retirement Income Strategy

A Fixed Index Annuity with a lifetime income rider can play a crucial role in your retirement income strategy by providing you with guaranteed, dependable income that lasts for life. Whether you’re concerned about market volatility, outliving your savings, or covering essential expenses, an FIA can offer the stability and security you need.

As you consider your retirement income plan, think about how much of your income you want to come from guaranteed sources. An FIA can help fill in any gaps, ensuring that your essential expenses are covered, and giving you the freedom to enjoy your retirement with confidence.

In the next chapter, we’ll explore how to balance the need for growth with the desire for safety in your retirement portfolio—and how an FIA fits into that balance. But for now, take comfort in knowing that with careful planning, you can create a retirement income stream that lasts as long as you do, no matter what life throws your way.

Chapter 5: Securing Your Income with a Fixed Index Annuity – A Deeper Dive

As we move further along in your retirement planning journey, it’s time to delve deeper into how a Fixed Index Annuity (FIA) can be tailored to meet your specific financial needs. By now, you understand the basics: FIAs protect your principal, offer growth potential, and can provide guaranteed lifetime income with an income rider. But how exactly does this fit into your retirement strategy? Let’s explore some real-world examples, examine the mechanics behind FIAs in more detail, and reflect on the principles that guide wise financial stewardship.

The Bucket Analogy: Breaking Down Your Retirement Strategy

Think of your retirement savings as a collection of buckets, each with its own specific purpose. These buckets help you organize your resources in a way that secures your income while still allowing for growth and flexibility.

- Bucket 1: Short-Term Spending  

  This bucket is for your immediate expenses—covering your first few years of retirement. Typically, this would include a cash reserve or easily accessible savings that allow you to weather any short-term market volatility or unexpected expenses without having to sell investments at a bad time.

- Bucket 2: Guaranteed Income  

  The second bucket is for your guaranteed income. This is where a Fixed Index Annuity with a lifetime income rider comes in. This bucket provides you with a steady paycheck for life, ensuring that your essential expenses are covered no matter how long you live or what happens in the market.

- Bucket 3: Growth Potential  

  The third bucket is designed for longer-term growth. Here, you might have a mix of stocks, bonds, or other investments that offer the potential for higher returns but also come with more risk. Since this bucket is designed for future spending, it has more time to recover from any market downturns.

This three-bucket strategy can help you balance the need for liquidity, guaranteed income, and growth in a way that fits your retirement lifestyle.

Case Study: Susan’s Retirement Journey

Let’s take a look at an example of how a Fixed Index Annuity might fit into someone’s real-life retirement plan.

Meet Susan. She’s 62 years old and is planning to retire in three years. She’s saved $600,000 in her 401(k), but like many retirees, she’s concerned about the possibility of outliving her savings. Susan wants to ensure she has a reliable income stream that will cover her essential expenses, no matter how long she lives.

Step 1: Assessing Susan’s Needs  

Susan has calculated that she’ll need about $50,000 per year to cover her essential expenses in retirement. She expects to receive $20,000 annually from Social Security, leaving a gap of $30,000 that she’ll need to cover with other income sources.

Step 2: The Fixed Index Annuity Solution  

To fill this income gap, Susan purchases a Fixed Index Annuity with a lifetime income rider. She decides to allocate $300,000 of her 401(k) savings to the annuity. Her income rider guarantees that her income base will grow by 7% per year until she starts taking withdrawals.

At the end of the three-year deferral period, Susan’s income base has grown to $367,000. Based on the terms of her rider, she’ll receive 5% of this income base each year for the rest of her life, which amounts to an annual income of $18,350.

Step 3: Bridging the Gap  

With the annuity providing $18,350 annually and Social Security providing $20,000, Susan is still short by about $11,650 to meet her $50,000 income goal. She decides to withdraw the remaining amount from her other retirement savings, which are invested in a diversified portfolio for growth.

This strategy gives Susan peace of mind, knowing that her essential expenses are largely covered by guaranteed income sources. Even if her other investments fluctuate, she has a stable foundation to rely on throughout her retirement.

Going Deeper: The Mechanics of a Lifetime Income Rider

Now that we’ve seen how an FIA can work in practice, let’s take a closer look at the details behind a lifetime income rider. Understanding these mechanics will help you see why it’s such a powerful tool for ensuring a secure retirement.

1. The Roll-Up Rate  

   The roll-up rate is the guaranteed growth rate of your income base during the deferral period—the time before you start taking income. In Susan’s case, her income base grew by 7% per year, regardless of how the market performed. This is key because it allows you to lock in future income growth even during years when the stock market is flat or declining.

2. The Payout Rate  

   The payout rate is the percentage of your income base that the insurance company will pay you annually once you start taking withdrawals. This rate is typically higher the older you are when you begin income payments. In Susan’s example, her payout rate was 5%, but if she had waited until she was 70, that rate might have been higher.

3. Income for Life  

   The most compelling feature of a lifetime income rider is that once you turn on the income stream, it lasts for life—even if your annuity’s account value drops to zero. In effect, the insurance company is taking on the risk that you’ll outlive your money, giving you peace of mind.

Example: The Impact of Waiting

Let’s examine another example that illustrates the power of waiting to start your annuity income.

Meet James. He’s 55 years old and thinking about retiring in 10 years. He’s concerned about having enough income later in life, especially if he lives into his 90s. James decides to invest $250,000 in a Fixed Index Annuity with a 6% roll-up rate and plans to start income payments at age 65.

At age 65, James’s income base has grown to $448,000 thanks to the roll-up rate. His payout rate is 4.5%, so his guaranteed income will be $20,160 per year for the rest of his life. However, James considers waiting a little longer. By delaying income until age 70, his income base will have grown even more, and his payout rate will increase to 5.5%. Now, his guaranteed income will be $29,295 per year—a significant increase for waiting just five more years.

This example shows the flexibility and potential benefit of delaying your annuity income. While James could retire comfortably at 65, he knows that waiting a few more years will provide him with even more income security later in life.

Understanding the Cost of Delay

While waiting can increase your income, it’s also important to consider your personal needs and circumstances. Delaying income can be a powerful strategy, but only if you don’t need the money right away. It’s a balance between receiving income now and securing a higher amount later.

In Proverbs 6:6-8, we’re told to "Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest." This verse reminds us of the importance of planning ahead, just like the ant that prepares for the future. But preparation also involves timing—knowing when to gather and when to harvest.

Building a Resilient Retirement Plan

As we’ve seen throughout this chapter, a Fixed Index Annuity with a lifetime income rider offers more than just protection—it offers a strategy for long-term security. By carefully assessing your income needs, understanding how FIAs work, and making informed decisions about when to start income, you can build a retirement plan that lasts.

In the next chapter, we’ll explore how to integrate a Fixed Index Annuity into your broader retirement strategy, considering other investments, taxes, and withdrawal strategies. But for now, remember this: with a well-structured annuity, you can create an income that sustains you not just today, but for as long as you need.

Chapter 6: Diversifying Your Retirement Portfolio – The 60% Rule

In the journey of building a secure and reliable retirement income plan, we’ve spent a lot of time focusing on the benefits of a Fixed Index Annuity (FIA) with a lifetime income rider. It’s clear that these products offer significant advantages—guaranteed income, protection from market downturns, and peace of mind. But as powerful as an annuity can be, it’s not wise to place all of your eggs in one basket. 

That’s where the principle of diversification comes into play. One of the fundamental rules of sound financial planning is to spread your savings across different types of assets, ensuring that your nest egg is protected from unexpected changes in the market or in your personal circumstances. In this chapter, we’ll explore why it’s generally recommended to limit your annuity allocation to no more than 60% of your retirement savings and how you can build a balanced portfolio that works for you.

The House on a Strong Foundation

Think of your retirement plan like a house. A solid foundation is essential, but you can’t live comfortably in a house that’s just a foundation—you need walls, a roof, and all the other elements that make a house livable.

- The Foundation (Annuity): The annuity is your financial foundation, providing the stability and certainty of a guaranteed income stream. This foundation ensures that no matter what happens, you’ll have the basics of your retirement covered, like your essential living expenses. 

- The Walls (Investments): The walls of your retirement house are your investments in the stock market, bonds, real estate, or other growth-focused assets. These investments provide the potential for long-term growth, helping you combat inflation and ensure your lifestyle is protected over time.

- The Roof (Cash and Emergency Savings): Lastly, every house needs a roof to protect it from storms. Your emergency fund and cash savings act as this roof, providing you with liquid resources to handle unexpected expenses or market downturns.

Just as you wouldn’t want to build a house with only a foundation and no walls, you don’t want to allocate too much of your savings into an annuity at the expense of other important elements like growth and liquidity.

Why Limit Your Annuity Allocation to 60%?

Let’s break down the reasons why financial experts recommend limiting your annuity allocation to about 60% of your total retirement savings:

1. Liquidity  

   While a Fixed Index Annuity with a lifetime income rider provides a guaranteed stream of income, it’s not very liquid. Once your money is in the annuity, access to those funds is typically restricted without penalties during the surrender period. If you need to cover unexpected expenses or opportunities, you’ll want to have access to other assets—like savings accounts, investments, or liquid retirement funds.

2. Growth Potential  

   FIAs are designed for stability and income, not for significant growth. While the index-linked growth can provide decent returns in good market years, it’s not designed to match the long-term growth potential of a diversified portfolio of stocks or other investments. Limiting your annuity allocation allows you to keep part of your portfolio focused on growth, helping you to stay ahead of inflation and protect your purchasing power over time.

3. Flexibility  

   Annuities are long-term contracts. Once you’ve made your decision to purchase one, you’re generally locked into that decision for the long haul. By keeping some of your assets outside of an annuity, you maintain flexibility to adapt to changing circumstances—whether that means adjusting your spending, shifting investments, or taking advantage of new financial opportunities that arise.

4. Tax Considerations  

   While the tax-deferred growth of an FIA is an advantage, having too much of your portfolio in tax-deferred accounts (like annuities or traditional IRAs) could create tax issues down the road. At retirement, you’ll need to start withdrawing money, and those withdrawals are typically taxed as ordinary income. Maintaining a mix of taxable, tax-deferred, and tax-free (Roth) assets can provide more control over your tax situation in retirement.

Example: The Balance of Retirement Planning

Let’s consider an example to illustrate why diversification and the 60% rule are so important.

Meet Mark and Sarah. They’re both 65 and ready to retire. Between their 401(k)s, IRAs, and personal savings, they’ve accumulated $1,000,000 for retirement. After assessing their essential expenses and guaranteed income needs, they decide to allocate $600,000 (60%) to a Fixed Index Annuity with a lifetime income rider.

This annuity will provide them with a guaranteed income of $30,000 per year for the rest of their lives. Combined with Social Security, which will pay them $40,000 annually, they have $70,000 of guaranteed income, more than enough to cover their basic living expenses.

With the remaining $400,000 (40%), they decide to keep $100,000 in a cash reserve to handle emergencies and unexpected expenses. The other $300,000 is invested in a balanced portfolio of stocks, bonds, and mutual funds, providing them with the potential for growth, liquidity, and flexibility.

Why did Mark and Sarah follow the 60% rule? Because they understood that while the annuity would provide them with peace of mind and security, they needed to keep the rest of their portfolio diversified and flexible. If they had allocated 80% or more of their savings into the annuity, they might have run into problems down the road—whether that was needing more liquid assets to pay for healthcare costs or losing out on growth opportunities.

Biblical Wisdom: Joseph’s Plan for Egypt

The Bible offers a powerful example of the importance of planning for the future and maintaining a diversified strategy. In Genesis 41, Joseph interprets Pharaoh’s dream of seven years of plenty followed by seven years of famine. Joseph’s wisdom shines through as he advises Pharaoh to save during the years of abundance so that Egypt would have enough grain during the famine.

Joseph didn’t rely on just one approach. He didn’t tell Pharaoh to store all of the grain in one place or to make only short-term plans. Instead, he created a well-rounded strategy that accounted for both the good and the bad times, ensuring that Egypt would have what it needed no matter what.

In the same way, we must take a balanced approach to retirement planning. It’s important to prepare for both the good and the bad years—ensuring you have enough guaranteed income to cover your needs during downturns, but also keeping your portfolio diversified so it can grow and sustain you over the long term.

Avoiding Common Pitfalls

Here are a few common mistakes that retirees sometimes make when it comes to annuity allocation:

1. Putting Too Much into Annuities  

   As we’ve already discussed, putting too much of your retirement savings into an annuity can limit your flexibility and growth potential. Be mindful not to overcommit.

2. Ignoring the Need for Growth  

   Retirement is not the time to abandon growth entirely. Even though you’ll likely be withdrawing money from your portfolio, you’ll still need growth to keep up with inflation and preserve your purchasing power.

3. Failing to Plan for Emergencies  

   Having a solid emergency fund is essential. If all your savings are tied up in long-term investments or annuities, you might struggle to handle unexpected expenses like medical bills, home repairs, or family emergencies.

The 60/40 Portfolio in Action

To sum up, the 60% rule offers a balanced approach to annuity allocation. It ensures that you have a strong financial foundation with guaranteed income while leaving enough of your savings in more liquid, growth-oriented assets to maintain flexibility and opportunity.

As Proverbs 21:5 says, “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.” Taking a thoughtful and measured approach to your retirement planning—not rushing into any one product or strategy—ensures that you will have abundance not just today, but for the rest of your life.

In the next chapter, we’ll explore how to integrate other insurance products, such as life insurance and supplemental policies, into your retirement plan. These tools can complement your annuity, providing additional protection and flexibility as you navigate the uncertainties of retirement.

Chapter 7: Planning Together – Working with Your Spouse on Retirement Income

Retirement is not just a personal journey—it’s a shared experience, especially for couples. It’s crucial to make decisions together, ensuring that both spouses are aligned in their financial goals and retirement plans. 

Too often, couples focus on their own individual accounts—maybe one has a 401(k) and the other a pension—but neglect to see the bigger picture. When it comes to annuities, the benefits can stretch across both spouses, offering protection not only during your lifetime but ensuring your spouse is also cared for after you’re gone. This chapter dives into the importance of working with your spouse on a comprehensive retirement plan, and how annuities can provide security for both partners, even into old age or in the face of unexpected long-term care needs.

The Importance of Planning as a Couple

Imagine a retired couple, John and Margaret, who have been married for over 40 years. John worked for a corporation and has a 401(k) worth $800,000. Margaret was a homemaker for many years and later worked part-time, contributing modestly to her IRA. Now, both are 65, and they’re planning their retirement.

Initially, John considered purchasing an annuity with only his 401(k) savings. But after speaking with their financial advisor, they realized that planning together was essential. Margaret may outlive John by several years—something that is statistically likely as women tend to live longer than men. They decided to opt for a joint lifetime annuity, which guarantees income for both of them for as long as either is alive.

By planning together, they ensured that even if John passes away, Margaret will continue receiving income to support her needs. This gave both peace of mind, knowing they were truly prepared for the future.

Annuities and Long-Term Care

One of the most significant uncertainties in retirement is the potential for long-term care expenses. According to the U.S. Department of Health and Human Services, nearly 70% of people turning 65 will need some form of long-term care in their lifetimes. Whether it’s home care, assisted living, or a nursing home, these costs can drain retirement savings quickly. 

Some annuities come with long-term care riders, which allow for additional withdrawals if long-term care is needed. For example, in John and Margaret’s case, their joint annuity could increase payouts if either of them were to require extended care, providing extra income to cover those costs.

Working as a Team

Planning for retirement income as a couple involves regular communication. Here are a few key considerations:

1. Align on Goals: Have open discussions about your retirement dreams—whether that means travel, downsizing your home, or supporting your children and grandchildren. Align your financial plans with those goals.

2. Account for Health Differences: One spouse might be healthier than the other. If one spouse has higher medical costs or is expected to live longer, that needs to be factored into your annuity choices.

3. Beneficiaries and Continuation of Payments: Ensure that any annuity includes a spousal continuation or death benefit option, so that if one spouse passes away, the surviving spouse continues to receive income without disruption.

Biblical Reference: Ruth’s Dedication

In the Book of Ruth, we see a profound example of loyalty and dedication. After the deaths of their husbands, Ruth clings to her mother-in-law Naomi, saying, "Where you go, I will go, and where you stay, I will stay." Ruth was determined to stand by Naomi, ensuring they would face the future together, no matter the uncertainties.

Like Ruth and Naomi, spouses must also face retirement planning as a united front—ensuring that they are not only prepared for their own future but also looking out for the one they love.

Chapter 8: The Annuity’s Role in Legacy and Long-Term Planning

For many retirees, it’s important not only to provide for their needs during their lifetime but to leave something for their loved ones after they’re gone. While life insurance is the traditional tool for legacy planning, annuities can also play an important role in ensuring your financial legacy, especially when combined with other strategies.

In this chapter, we’ll explore how annuities can help you plan for more than just income—they can be structured to leave a financial gift to heirs, cover long-term care expenses, and even help protect your estate from unexpected costs.

Annuities as a Legacy Tool

Traditionally, life insurance has been the go-to product for leaving an inheritance to family members. But did you know that some annuities have features that can also provide for your loved ones? 

David’s Story: David, a retiree, was single and wanted to ensure that his niece would receive an inheritance after his passing. Rather than relying solely on life insurance, he opted for an annuity with a death benefit rider. This rider guaranteed that any remaining balance in the annuity after his death would be passed on to his niece, providing her with financial security.

Annuities and Long-Term Care (Expanded)

We touched on long-term care in the previous chapter, but it’s important to go deeper into how annuities can help with these costs. In many cases, long-term care insurance can be expensive, and the premiums are often subject to increases as you age. 

With long-term care annuities, you can solve two problems at once: you create a stream of income for retirement and ensure you have funds available if long-term care becomes necessary. The hybrid annuity combines an income stream with a long-term care rider, allowing for a much larger payout if the care is needed. This means that, in the event of long-term illness, you won’t have to spend down your retirement assets as quickly.

For example, Susan, age 70, purchased an annuity with a long-term care rider. She was healthy at the time, but by age 85, she required assistance with daily living activities. Because she had planned ahead with her long-term care annuity, her payout was increased to help cover the cost of in-home care, and she didn’t have to sell her home or dip into other savings.

Conclusion: Planning Backwards – Securing Your Future One Step at a Time

As we come to the end of this book, I hope you’ve gained a clearer understanding of how a Fixed Index Annuity with a lifetime income rider can be a critical tool in your retirement strategy. More importantly, I hope you’ve seen that planning backwards—starting with your future goals and working your way back to the present—gives you the clarity and confidence to make wise financial decisions.

Recap: The Journey So Far

We began this journey by discussing the basic concepts of a Fixed Index Annuity, using the analogy of a reservoir. We explored how this product provides guaranteed income, shields your savings from market losses, and allows you to enjoy a worry-free retirement. We dove into key strategies like balancing your portfolio (the 60% rule), planning with your spouse, and considering long-term care options.

Along the way, we’ve seen how the wisdom of Scripture, like the story of Joseph’s careful planning for Egypt’s famine and Ruth’s loyalty to Naomi, can offer insights into our own retirement preparation. These biblical examples teach us that careful stewardship, planning ahead, and making decisions with our loved ones in mind are key to living a life of security and purpose.

A Final Thought: Stewardship and Security

Proverbs 27:12 reminds us, “The prudent see danger and take refuge, but the simple keep going and pay the penalty.” This wisdom is essential for those planning retirement. Taking time to reflect on your future income needs, safeguarding against market volatility, and ensuring that you have both flexibility and security will allow you to navigate retirement with peace of mind.

As you move forward with your own retirement planning, remember that financial decisions are not made in isolation—they’re part of a broader plan to care for yourself, your family, and even your community. Fixed Index Annuities are just one of the many tools at your disposal to ensure a fulfilling and secure retirement.

Looking Ahead

Whether you're preparing for retirement, seeking peace of mind in the face of an uncertain future, or ensuring that your spouse and loved ones are cared for, you’re making important decisions today that will shape the rest of your life. Keep this book as a guide and reminder that with the right planning, you can secure the financial future you envision—one that provides for your needs and leaves a lasting legacy for those you care about.