Start with one number: what it costs to run your household each month once you stop working. Housing, food, utilities, insurance, healthcare premiums. That is your essential floor, and it should not depend on how the market did last quarter.
The floor-and-upside approach
Add up your guaranteed sources (Social Security, any pension) and compare them to your essential floor. The gap is what an income annuity or a fixed indexed annuity with an income rider is designed to close. Everything above the floor stays invested for growth and flexibility.
- Essentials covered by guarantees
- Discretionary spending funded by investments
- A cash reserve so you never sell in a downturn
Guarantee the bills. Invest the rest.
How large the guaranteed slice should be depends on your other assets, your health and how much volatility you can live with. An advisor can model it in an hour.
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