The 2025 Protected Retirement Income and Planning Study (PRIP)1 revealed that 50% of advisors say they are putting more clients into annuities, which ranks as the most popular change in investment strategy. How are you discussing reliable lifetime income with your clients? 

Your clients’ accumulation years are about building a nest egg to help produce reliable income in retirement. While most retirees receive Social Security retirement benefits, many may need additional lifetime income to ensure their essential expenses are covered. Planning for lifetime income during their saving years may allow for additional choices in lifestyle when retirees start their income streams.

Helping Clients Understand the Value of Lifetime Income Is Critical

A $1,000,000 nest egg seems like a lot of money— enough to make a client feel “rich.” But your client may be surprised by the value of $1,000,000 when it comes to providing retirement income. In his book A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, William Bengen notes that 4.7% may be an acceptable safe withdrawal rate. But will that produce enough? That’s just a $47,000 gross annual distribution. After taxes, that number will be lower. If the account value drops, the distribution amount drops as well.

Be Sure to Review the Lifetime Income Disclosure

Your client’s 401(k) plan offers a great opportunity to add an annual lifetime income discussion to your client review. The Setting Every Community Up for Retirement Enhancement (SECURE) Act 1.0 requires 401(k) plans to provide an annual Lifetime Income Disclosure to each plan participant. The disclosure illustrates what the participant’s current account balance is projected to provide in both single and joint lifetime income streams at age 67. An annual review of this disclosure provides a perfect segue to a productive discussion about the income a client might need. This also is an opportunity to review the gap between likely essential expenses and current lifetime income.

How to Mind the Gap

A client may find a gap between his or her expected lifetime income and likely essential expenses. Using a retirement income gap calculator can help you illustrate to clients whether there are gaps and whether they pose significant risks. For example, a client with essential expenses of $5,000 per month and lifetime income of $4,300 per month may feel the gap can be addressed with invested assets. But a more significant gap— $5,000 of essential expenses and $2,000 of lifetime income, for example—may indicate a need for additional lifetime income.

Why Consider Annuities?

Annuities provide several options for lifetime income for those clients who need to cover a gap:

•  Single-premium immediate annuities (SPIA) can provide immediate guaranteed income, usually in the form of monthly payments. A SPIA income stream can be for a single life, joint life, a period of years, or a combination.
• Deferred income annuities (DIA) can allow retirees to pay a premium today for income they will withdraw at a future point, typically between two and thirty years from the purchase date. A DIA may require less capital than other options, as it benefits from mortality credits.
• Fixed indexed annuities (FIA) with optional income benefits can offer lifetime income (for an additional cost) with flexibility. A FIA income benefit can allow systematic withdrawals up to a cap, often 5% of the initial premium. As a withdrawal benefit, the annual payment could be reduced or stopped depending on the circumstances. This can allow a client to control the timing of income recognition and, thus, when they pay taxes on that money. The remaining lump sum would be available if income is no longer needed.
• Registered index-linked annuities (RILAs) with optional income benefits also can offer lifetime income (for an additional cost) with flexibility. A RILA is a hybrid annuity that ties potential growth to a market index (such as the S&P 500®) while offering a buffer or floor to limit exposure to market downturns. This can offer a client more upside potential than a fixed annuity but with some downside risk.
• Variable annuities (VA) with optional income benefits can offer clients who want both flexibility and access to the markets a potential strategy. The income benefit (available for an additional cost) provides flexibility while the VA allows for growth— with the potential for greater loss—through market performance. While the income stream may be protected, market performance will determine the value of the account.

Have the Conversation Now

Lifetime income is an important part of any client’s income plan. Whether additional lifetime income is needed and what might be a good option for a particular client will depend on that client’s circumstances. An annual review of the SECURE Act’s Lifetime Income Disclosure requirement can be a great opportunity to help a client better understand the income value of their plan account and plan for additional lifetime income as needed. Whatever the case, it’s always a good idea to start this vital conversation early to prepare for any potential gaps or unaddressed future needs.

ACTIONS YOU CAN TAKE RIGHT NOW

• Add the Lifetime Income Disclosure to your annual review process. 
•  Use our Retirement Income Gap Calculator to determine gaps.
• Explore lifetime income options that match clients’ specific circumstances.

Additional Resources and Links

Retirement Income Gap Calculator

How Much Will I need to Save for Retirement

Managing Volatility Before and After Retirement

For more information about retirement planning,

please contact our Retirement Strategies Group at

RSG@PacificLife.com or (800) 722-2333, ext. 3939.

Annuities.PacificLife.com

For financial professional use only. Not for use with the public.