How to Help Increase Your Confidence through Retirement

We’re here to talk about all things retirement because we want to help you retire confidently. We’re going to break down some things you can do to potentially improve your situation , so that you are one step closer to being ready to retire.


Studies show that your retirement income needs to be at least 70% of what it was pre-retirement to last throughout retirement. You want to be able to make that much money without worrying about how the market is going to affect you. We’re going to look at different forms of payments that won’t fluctuate with the market.


My father retired back in 1999. He worked for State Farm for many years. And he retired with the “three-legged stool,” which was the model for retirement planning back then. Leg one was Social Security. Both my parents have Social Security, which lasts a lifetime, so they have guaranteed income for life through Social Security.


The second leg of that three-legged stool is a pension. My dad had, and still has, a pension from State Farm. Additionally, if he were to die before my mother, 100% of his pension transfers to my mother. Both my parents have guaranteed income for life through my dad’s pension. Between Social Security and the pension, my dad has already reached slightly more than 75% of his pre-retirement earnings, including adjustments for inflation.


Leg number three is personal savings, my dad’s 401K. The idea was that that was the fun money. Want to go on trips? Use that money. Want to buy a car? Use that money. If you want to give money to your children, if you want to protect yourself with healthcare, or set aside something for an inheritance, you would use that extra money. My parents retired with all of that built into their plan.


When I started in the retirement advising industry, somewhere around 2005, 90% of the families that visited me had this kind of retirement plan. They would tell me that between the pension and Social Security, they would be able to live comfortably. Typically, what worried them the most was figuring out what to do with the 401K and IRA. They wanted to ensure it was secure, and they didn’t want to pay major taxes on it. That’s what they were concerned about.


How does that compare to the situation of people retiring today?


Some people argue that Social Security is no longer a stable leg of retirement planning. I think those people are just trying to scare you. If nothing else, we can be confident that our government officials want to get reelected. If anything happened to their voters’ Social Security, they would get booted out of office by angry voters in the next election cycle. They’re not going to let that happen. We can assume that Social Security is still a stable leg of your stool.


The problem is with the second leg, pensions. Pensions have almost vanished. It started back in the mid-2000s, almost overnight. In one year, it went from 90% of people who came to see me having their lifestyle covered by pensions and Social Security to 90% of people coming in with very little pension, or no kind of pension at all. They were in trouble. They needed their IRAs and 401Ks to replace that pension and generate income. It’s a tough situation to be in, and that’s what’s going on today.


ERS or TRS covers people working for the state or public school system. If you’re not in that position, you may find yourself with only your Social Security and whatever you’ve saved or put in your 401K.


A report by Goldman Sachs proposes a way to solve this problem. I was interested to see what they had to say because I also have an answer; I’ve been working to solve this problem. For almost 20 years, I’ve been implementing annuities within retirement plans. I advise most people to take some, not all, but some of their retirement savings, and use it to buy a guaranteed principal annuity to replace the “pension” leg of your three-legged stool.


Goldman Sachs, along with all their brethren—places like Merrill Lynch, Morgan Stanley, UBS Financial Services, Wells Fargo, Fidelity, and Vanguard—do not often utilize annuities. Why? Investing in an annuity means taking money away from the Goldman Sachs of the world, and, in my opinion, they want that money to stay with them so they can keep getting paid their fees.


But, as baby boomers started retiring, firms like Goldman Sachs started to see a groundswell of money leaving their coffers and moving over to insurance companies because people wanted to guarantee they’d have an income. That brings us to this article by Goldman Sachs. They say that one of the things you can do to potentially protect your income in retirement, to enjoy a more stable retirement, to be part of that 25% of people who retire with an income that’s 70% or more of their pre-retirement income, Isn’t that a crazy idea?


It’s becoming a trend for big money management firms to suddenly start recommending annuities. They’re throwing in the towel. Annuities are doing such a good job of providing income that, instead of fighting it, they’ve decided to join in. There’s finally a healthy acknowledgment of annuities. There are huge differences among annuity companies and annuity types, and it’s important to pick the one that’s right for you.


Our office has the freedom to choose a variety of annuities, but there’s only 1-2% of all the possible annuities that we recommend to people. Most annuities will probably get you through retirement fine, but a select few are the cream of the crop and could potentially treat you and your money well. When you’re choosing an annuity, you want to talk to someone with experience who can help you evaluate all your options.


If you walk into a Ford dealer looking for a truck, the Ford dealer is going to tell you to get a Ford truck, even if a Chevy would suit you better. And a Chevy dealer would tell you to buy a Chevy, even if they knew you’d be better off with a Ford. What if there was a car dealer who represented every car and truck type on the market, every brand available? They’re going to pay attention to your needs and point you to the vehicle that’s the perfect fit for you. If you’re heading into retirement, and no one has talked with you about your annuity options, then I feel you are probably at the wrong dealer. If you want to seek for more income and aim to protect it, or if you do not feel good about your retirement, please give us a call because we want that for you, too. Reach out to us at 512-886-5850. We’ll get a personalized Retire RIGHT Report put together for you. It’s free, with no obligation. We want to help guide you through forming your retirement plan.


Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Centennial Advisors, LLC makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third party websites that Centennial Advisors, LLC may link to are not reviewed in their entirety for accuracy and Centennial Advisors, LLC assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Centennial Advisors, LLC. For more information about Centennial Advisors, LLC, including our Form ADV brochures, please visit or contact us at 512.265.5000.

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