Secure Your Retirement: Blended Income Insights from Goldman Sachs

10/30/2023

Retirement planning has evolved beyond financial security — it's about savoring the sweet taste of a contented post-work life. Goldman Sachs' annual retirement report suggests that retirees who diversify their income sources, combining investments, tend to enjoy a more satisfying retirement.

This article will be your guide to understanding the dynamics of blended income, its perks, and its pitfalls.

The Alchemy of Blended Income

How does this magic potion of retirement income work?

Employer-Sponsored Retirement Plans: The foundation of blended income lies in employer-sponsored retirement plans. These plans allow individuals to sow their savings early and watch them flourish.
Fixed Annuities: Imagine having a source of income that never dries up — fixed annuities offer precisely that. They deliver dependable payments on a schedule you choose, ensuring your financial stability post-retirement.

The beauty of blended income emerges when you combine the dynamism with the constancy of an annuity, creating a diversified income stream that works harmoniously.

How to Secure Richer Retirement

According to a survey that whisked together 1,588 retired respondents aged 50 to 75, a splendid panorama emerges:

Higher Income Satisfaction: Retirees with blended income reported higher levels of income satisfaction. A remarkable 35% of those with combined income expressed being "very satisfied" with their income, compared to 26% with only annuity income and 24% with solely investment income.
Improved Lifestyle: Nearly 60% of blended-income retirees reported a better retirement lifestyle than their pre-retirement years, surpassing those with only investment (49%) or annuity (49%) income.
Increased Confidence: Retirees with blended income exhibited higher confidence levels entering retirement. A significant 79% felt confident about their financial future, compared to 75% of those with only investments and 68% with just an annuity.

Annuities: Benefits and Drawbacks

Like all great recipes, blended income has its secret ingredients and hidden flavors.

The Good:

Guaranteed Lifetime Income: Annuities provide peace of mind by ensuring income for life, helping protect retirees from outliving their savings.
Steady Paycheck: Annuities function like a regular paycheck, providing financial stability during retirement.

The Not-So-Good:

Fees: Annuities come with upfront sales fees and annual fees ranging from 1% to 3% of the annuity's value, potentially eating into your earnings.
Lack of Liquidity: Annuities are not liquid investments. If you need to withdraw money within the first few years, you may incur a "surrender" fee that reduces the value of your investment.
Tax and Fees: Annuity income is subject to taxes and additional fees, similar to income earned while working.

The Goldman Sachs report paints a vibrant canvas where blended income isn't just about financial security but crafting a retirement that delights the senses. Like any recipe, though, consider the ingredients carefully; weigh the pros and cons of annuities in the context of your unique financial goals. In a world of competing financial priorities, a blend of income streams is your ticket to a retirement that's truly worth savoring.