The Finance of Longevity

Behavioral Savings

Best steps to jump-start financial planning for retirement

by Doug Dubitsky

Mr. Dubitsky is Vice President of Product Management & Development for Retirement Solutions at The Guardian Life Insurance Company of America®, New York. Visit

Saving for retirement is one of the biggest challenges Americans will face in their lives. However, with proper retirement planning and saving strategies, they can get the most out of their retirement years.

Developing good savings behavior is important to build personal wealth. Here are some financial strategies that can help make your retirement dreams a reality:

Take a financial “selfie”
Take a financial snapshot to capture the state of your current finances. Do you know how much you earn and spend each month? Do you have enough cash on hand to pay your bills on time? Are you weighed down by excessive debt? List all your assets (what you own) and liabilities (what you owe) and then subtract your liabilities from assets to determine your net worth. How does it balance out?

Be goal-oriented
Think about the ideal financial situation you want to enjoy in the future and go for it by setting achievable goals. For example, you might decide to pay off your credit card debt in one year, or build an emergency cash reserve of $15,000 over the next three years. Monitor your progress and hold yourself accountable.

Pay yourself first
Whether you are saving for your retirement or building an emergency reserve, put aside money every month to reach your goals. Of course this means, you’ll have less cash to spend on discretionary items but you should see your savings accumulate, which was the goal.

Separate needs from wants
Review your spending habits, especially for discretionary items, and ask yourself, item by item, ‘Is this really necessary?’ Could you drive your car another year or two? Dine out less often? Turn the thermostat down a notch? Keep your long-term goals in mind so it seems less of a sacrifice.

Bundle, buy generic, and go green
One way to build savings and retirement funds is to be a smarter consumer. To cut grocery costs, buy certain items in bulk, shop less frequently, clip coupons, look for sales, and buy generic items when feasible. Could you save money by bundling services such as telephone, television and internet access? If you and your spouse both have cell phones, do you need a landline? Look for energy-efficient appliances, consider energy-proofing to cut your heating bill, and look at driving a more fuel-efficient vehicle or car-pooling.

Tap into your biggest asset
Although your home is primarily a shelter, it’s also a financial asset. You build equity as you pay down your principal. Used wisely, a home can be a powerful financial tool. Home equity can help you pay college tuition, consolidate high interest rate debt, or make home improvements. Consider refinancing your mortgage if you can lower monthly payments enough to recoup refinancing costs in three years or so.

Break free of debt
Easy to say. Hard to do sometimes. But the fact is, funding your retirement is more manageable if you’re not carrying a heavy debt load. Today is the day to take a step in that direction. Draw up a budget and stick to it. Buy only what you can afford. Visualize how good it will feel to be debt-free. Consider getting support through reputable credit counseling.

Even with all of the planning that goes into retirement, you’re still going to need money to pay for what you have planned. That’s true not only for necessities such as daily expenses, but also for “splurges” such as eating out and travel. It’s the catch-22 of retirement life: You give up the steady paycheck to pursue your dreams, but the bills keep coming as if nothing changed.

The good news is that, for those who want income with certainty there are income annuities. Here’s how they work:

Immediate Annuities: Income Now

Annuities are insurance products that guarantee income throughout one’s retirement. With an immediate annuity, the buyer purchases an annuity contract with a lump-sum payment they give to their insurer. In return, the insurer provides the annuity purchaser with a steady stream of payments for a set amount of time.

These payments are delivered monthly, quarterly, semi-annually or annually, and can last a minimum of five years or for the rest of your life. This type of an annuity is usually purchased when you are ready to retire and want a guaranteed steady income amount to cover your specific needs.

What are the key things to understand about immediate annuities? First, they generate income for the purchaser right away, so there’s no waiting for years before you get your first payment. And second, no matter what happens to the economy or market, those payments are guaranteed by the issuing insurance company to be paid to you.

Funding your retirement is more manageable if you’re not carrying a heavy debt load.

The only exception: If you buy an immediate annuity with a “cost of living adjustment/inflation option,” the income you receive will increase each year according to a pre-determined interest rate of up to 5 percent. In this case the periodic payments you receive will be less at the start, but over time your payments will increase.

Deferred Income Annuities: Income Later

With deferred income annuities, the buyer pays for their annuity contract now and then chooses a later date to start receiving payments. Similar to immediate annuities, deferred income annuities guarantee the purchaser a fixed payment on a regular basis, but only after a minimum two year waiting period. Many deferred annuities are “lifetime annuities,” meaning they continue to pay out until the purchaser dies.

One advantage of deferred annuities is that they allow you to purchase your retirement income while you’re relatively young and premiums are still low. As you get older, the price you may have to pay for any given annuity could go up. In certain instances, you may potentially be able to continue to purchase additional lifetime income monthly, quarterly or annually up until a set point before your income payments are set to start.  Another potential benefit is that you often can build a customized income stream at different periods of your retirement years.

Don’t waste time, start planning for retirement now. Whether you’re ready to retire now and choose an immediate annuity to receive income right away or want to start an income plan now for your retirement years with a deferred income annuity and get income payments later, you are taking greater control of your future with income you can depend on. A financial professional can help you determine what you need to fund the retirement of your dreams, and the rest is up to you.

Guarantees are backed exclusively by the strength and claims paying ability of the issuing company. This material is intended for general public use. By providing this material, Guardian is not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial professional for guidance and information specific to your individual situation. ◊