Protect your retirement income.

Retirement is a time to enjoy life with the people who matter most to you. To make sure your savings will always be able to keep up with your lifestyle, here are some key financial risks to consider:

Longevity risk — the risk that you outlive your savings. While the average 65-year-old will live for 20 years, 1-in-10 will live for 30 years or more.

Market risk — the risk that your investments go down in value and don’t recover in time.

Inflation risk — the risk that goods and services (e.g. food and healthcare) get more expensive over time.

When building a retirement portfolio, it’s important to balance across a range of investment types so you can manage all the above risks.

Guaranteed retirement income means a paycheck that will always be there no matter how long you live or what happens in the market.

A source of guaranteed retirement income provides you with protection from longevity risk and market risk. In some cases, guaranteed income can also provide paychecks that increase over time, which provides protection against inflation risk.

Social Security is one type of guaranteed income and employer pensions are another.

Because Social Security and/or employer pension checks may not provide enough guaranteed income in retirement, many people also turn to income annuities.

An annuity is a type of insurance product, just like life insurance and disability insurance. Their main goal is to help you save for retirement and protect from longevity risk (living longer than expected).

We believe most annuity products (such as variable annuities) are too complicated. That’s why we only offer one type of annuity at Saturday — income annuities.

Income annuities are used to convert some of your savings into a monthly paycheck in retirement. You simply make a single payment to an insurer and, in return, receive a monthly paycheck for life. You can select when the paychecks start, and they are guaranteed for life, regardless of how long you live or what happens in the markets. That’s it. No bells and whistles, no complicated formulas, no terms you don’t understand. They are designed to give you a reliable paycheck and peace of mind throughout all your retirement years.

In general, if Social Security and employer pensions checks cover most of your spending needs, you may have very little need for income annuities. On the other hand, if your Social Security and employer pension checks wouldn’t be enough to live on, allocating some of your assets to income annuities could help you sleep better in retirement.

Here are some additional considerations to help you decide:

Income annuities are a lower risk, lower-lower return asset, like bonds. When considering your retirement portfolio’s asset allocation, income annuities should be balanced with stocks and other growth assets.

Most people should not allocate more than 30% of their portfolio to income annuities. This ensures you still have a sizable buffer of assets to support unexpected expenses and generate growth.

Income annuities are best used to fill the “gap” between your pension checks and your critical spending needs in retirement. For example, imagine you have $4,000 in critical monthly expenses, but social security only covers $2,500. You could buy an income annuity that covers the other $1,500, so your key expenses will be covered for as long as you live.

Consider buying income annuities over time, starting 10-15 years before retirement. Like bonds, the cost of income annuities changes as interest rates change. Buying income annuities over time can help you average your costs over interest rate cycles (just like dollar-cost-averaging with mutual funds).

You can have your paychecks start immediately or defer them as long as 30 years. Income annuities with paychecks that start immediately are called single premium immediate annuities (“SPIAs”) and ones with checks that start later are called single premium deferred annuities (“SPDAs”). Here are a few examples:

• A 65-year-old just retired and wants to start getting paychecks immediately, so she buys a SPIA
• A 50-year-old is planning for retirement at age 60. He buys an SPDA with payments that start in 10 years.

At Saturday, we offer both immediate and deferred income annuities, so you can choose the annuity that fits you best.