“What’s important about money to you?”

I’ve asked this question hundreds of times to prospective clients during our initial conversation to determine how my team and I might be able to help. While the answers vary, the responses from those nearing or in retirement are often very similar:

• “I never want to run out of money and be a burden on my family.”

• “I want to remain financially independent.”

• “I want to be able to spend my time during my retirement years sharing experiences with loved ones and not having to worry about finances.”

• “What’s important about money? Having enough to never have to think about it.”

I’ve heard it said that the biggest fear that many retirees have isn’t declining health or even death itself but running out of money. Whether we like it or not, money provides the ability to maintain a standard of living and quality of life that we wish to achieve, and the prospect of running out of money feels like the ultimate failure for many people who have spent their lives working, saving, and trying to be responsible with their finances.

As a financial advisor, I think about the financial fears of our clients every day. I’ve shared with others that if the Hippocratic Oath for doctors is, “Do no harm,” for financial advisors it should be, “Don’t let your clients go broke.” While I usually say that with a chuckle, I believe it is the fundamental role we play. Without the confidence that our clients will never run out of money, the rest of our ideas are rather insignificant. Because of this, for our clients who are early in their careers, we work with them to establish savings and investment habits to accumulate the assets needed for retirement. In addition, we implement insurance products to protect against premature loss of their income. We focus on savings and investing in tax-preferred accounts to maximize compounded growth over time and diversify in such a way to achieve growth at a level of risk our clients are comfortable with, even during periods of market losses.

When we’ve reached the point where we decide to retire, and shift from accumulating assets to distributing them, the planning changes. We must determine how much we can comfortably spend without running out. This is difficult to do with certainty, given the assumptions we need to make. The planning software and models we run for our clients help give us perspective and a range of spending that is sustainable but need to be updated and reviewed regularly to determine if our initial assumptions were correct.

Fortunately, there are financial tools that can be implemented to take away much of the uncertainty of retirement income planning and provide a more confident retirement experience. In particular, income annuities provide guaranteed payments month after month, year after year, for an entire lifetime. Many income annuities also provide the opportunity for growth of that monthly payment, with the potential to keep up with inflation and the cost of living. But the biggest benefit, in my opinion, is that a recurring payment, guaranteed to keep coming in month after month, gives our clients the freedom and confidence to spend the money they receive, knowing it will be replenished. From my experience, clients are much happier spending from guaranteed income rather than taking distributions from an investment portfolio, slowing watching their balance decline and wondering how long it might last.

Recently, Ernst & Young (EY), published a study about the impact of incorporating income annuities into a retirement plan. They determined that using an income annuity as a portion of the fixed income component of a well-diversified investment portfolio can increase the amount of retirement spending up to 8% per year over an investment only approach (as per the full report page 8). A link to the entire EY Study can be found here.

Many of our clients have strategically integrated income annuities as part of their retirement plans, for both quantitative and qualitative reasons. As the EY study shows, the math works—more income with lower risk throughout retirement. More than that, guaranteed lifetime income provides an additional level of security and confidence, without the risk of outliving the funds. It’s part of the planning we provide as we follow our number one rule: don’t let your clients go broke.

*WITHDRAWALS FROM ANNUITIES MAY BE SUBJECT TO ORDINARY INCOME TAX, A 10% IRS EARLY WITHDRAWAL PENALTY IF TAKEN BEFORE AGE 59½, AND CONTRACTUAL WITHDRAWAL CHARGES.

*ALL GUARANTEES IN ANNUITIES ARE BACKED SOLELY BY THE CLAIMS-PAYING ABILITY OF THE ISSUER.