The 3 Kinds of Guaranteed Retirement Income (And Why You Rarely Get All Three)

A viewer named Tom asked whether he should buy annuities for guaranteed income or build a TIPS ladder. This video zooms out and covers three things.

First, what is actually being guaranteed. I walk through three kinds of guarantee: the payment will arrive, the payment lasts for life, and the payment adjusts for inflation.

Then I use that framework on the four main sources of guaranteed retirement income. Social Security is the one that hits all three. A pension usually covers payment and lifetime income; inflation protection depends on the plan. A SPIA is backed by an insurance company, with state guaranty limits that vary, and it pays for life, but it no longer tracks inflation. A TIPS ladder is backed by the government and adjusts for inflation, but the longest ladder is 30 years, not a lifetime.

I compare a $100,000 SPIA quote from Schwab with a $100,000 TIPS ladder on tipsladder.com, and I explain why I personally prefer the TIPS ladder: inflation protection, enough years for most retirements, control, and money left for heirs.

Finally I talk about how to use this in a plan. Cover essential living expenses. See how much Social Security and a pension already cover. Guaranteed income always has a cost. If the leftover spending is a small slice of your portfolio, you may not need more guarantee at all.

Resources mentioned in the video:

NOLHGA How You’re Protected: https://nolhga.com/policyholders/how-youre-protected/
Schwab income annuity: https://www.schwab.com/annuities/income-annuity
TIPSLadder.com: https://www.tipsladder.com
TreasuryDirect TIPS: https://www.treasurydirect.gov/marketable-securities/tips/
Social Security COLA: https://www.ssa.gov/oact/cola/latestCOLA.html

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0:00 What this video covers
1:08 The 3 kinds of guarantee
2:54 Social Security
4:34 Pensions
6:54 Annuities and state guaranty limits
9:38 TIPS ladders
10:36 $100,000 SPIA vs TIPS ladder
14:54 Why I prefer a TIPS ladder
16:30 How this fits a retirement plan
17:46 Guaranteed income always has a cost
18:47 Do you need guaranteed income at all?
19:48 Covering all your essential expenses

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. I've since sold my websites, bought them back, and started a new website and this YouTube channel.

I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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