It is fashionable in the community of retirement advice-givers to talk about your “magic number” for retirement. That’s the amount of money you should accumulate by the time you retire so that savings last the rest of your life, or some fixed period like your life expectancy.

The magic number is based on your achieving average results over the long term. And perhaps that will work out. You might not live longer than average. The stock market in which your savings are invested might hit the average return of the past several decades.Plan for averages

Or maybe it won’t work. It is disconcerting to plan for “average” when you realize how average might work to your disadvantage.

Take this example: A small pond could average three feet in depth. You might plan to walk from one side to the other. But start at the sandy beach where you enter the water, where the depth averages just a few inches as you take several steps toward the center of the pond. In fact, you can walk for another several yards without the water level rising to your knees. Then, the bottom starts to drop away. You find that as you approach the center of the pond, it is much deeper than three feet, and as you keep walking you will be in over your head. If you are wearing a flotation device, or you are confident in your swimming skills, you will make it to the other shore. Otherwise, in this pond of three-feet average depth, you could drown.

Add guaranteed lifetime income to your retirement

Your goal, as always, is to develop enough income in retirement so that you don’t outlive your money. It is fine to put some of your savings into the market, with the hope that averages will climb higher than they have been for the past few years. If you develop a plan to create guaranteed lifetime income with a portion of your money, however, you may not have to depend on the market.

Social Security and pensions from work are the sources of guaranteed income for many retirees. The only way to create another source of guaranteed monthly payments is with the purchase of income annuities, which shift the risk of living beyond your average life expectancy, or the risk of below-market returns, to the insurance company backing the annuity.

Income annuities allow you to plan for all the stages of retirement: Early retirement when you are looking to travel, babysit the grandkids and volunteer, followed by later in retirement when you might anticipate increased medical expenses and wish to stay in your home and avoid becoming a burden on your children.

To avoid the equivalent of drowning during retirement, forget the magic number based on averages. Instead, take control of your future by determining what income your savings will produce. That requires creating a guaranteed lifetime income strategy – your flotation device – unique to you.


If you have questions about annuities and how they might help meet your retirement objectives, write to me at Ask Jerry.

Or if you’d prefer to do more research on your own, take a look at the useful tools and information we offer in our Current Income Learning Center at