Retirement Income & Withdrawals

A contract with an insurance company where you pay a lump sum or series of payments, and in return receive income either immediately or at a future date, often used to create guaranteed income in retirement. It has two phases: an accumulation phase when your money grows tax-deferred, and a payout phase when you receive distributions. Common types include fixed, variable, and indexed, each differing in how returns are calculated and how much risk you take on.

A type of annuity whose growth is tied to the performance of a market index, such as the S&P 500, while protecting your principal from market losses. When the index rises, your gains are subject to limits like a cap, participation rate, or spread, and when it falls, a guaranteed floor (usually 0%) keeps you from losing money. It sits between fixed and variable annuities, offering more growth potential than a fixed annuity with less risk than a variable one.

An employer-sponsored retirement plan, also known as a defined benefit plan, that provides a guaranteed income in retirement based on a formula using your salary and years of service rather than investment performance. The employer funds and manages the plan and bears the investment risk of paying the promised benefit. This differs from a 401(k), where the employee contributes, chooses investments, and carries the risk.

A retirement guideline suggesting you can withdraw 4% of your total portfolio in your first year of retirement, then adjust that amount for inflation each following year, with the aim of not outliving your savings over about 30 years. For example, a $1 million portfolio would allow a $40,000 withdrawal in year one. It is a helpful starting benchmark rather than a strict rule, since market performance, spending changes, and longevity can all affect how well it holds up.