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For smarter retirement planning, opt for lifetime income

DAILY NEWS CONTRIBUTOR

Sunday, March 13, 2016, 9:00 AM

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Three winners will split the recent Powerball lottery that was worth a record $ 1.6 billion, with each winning ticket getting about $ 528 million.

What would you do if you won the lottery? Would you take the lump sum or opt for the income for life?

On the surface it appears you should take the lump sum, have someone manage it for you and live happily ever after. The problem is people tend to squander a lump sum of money faster than they should whether it is lottery winnings, their nest egg or a 401(k).

The average lottery winner that receives a lump sum ends up broke in three to four years. Whereas the ones that choose income have money coming every single year for typically 30 years.

Would you rather have a large nest egg you siphon money from, or a lifetime stream of income you can’t outlive?

I have found that the older a client is, the more they wish they had planned for monthly income. AARP predicts nearly 40% of retired Americans will be forced back to work because of insufficient income. You don’t have to be a part of this group!

In 13 years of financial advising, I’ve yet to meet someone who wants to outlive their money. Yet, according to recent studies, over 50% of Americans will live longer than their money supply.

This is a scary and sobering statistic. A friend of mine had a grandfather that lived to 104. This is an incredible feat, but unfortunately he lived in poverty for the last 24 years of his life. He simply ran out of money and placed a huge financial burden on his family.

Your need for money never stops and neither should your income. However, most people rarely stop to think about how they will replace the income they received during their working years. Have you created a plan that keeps income flowing, or are you just chasing rates of returns like the masses?

Survey after survey of Americans 50 and older reveals their number one fear is running out of money. If this is the greatest fear facing those who plan to retire, why isn’t there greater focus on lifetime income? Why not have your money in programs that can grow and kick off predictable income?

Most retired folks don’t plan further than five years out, and the majority of pre-retirees rarely plan past 10 years. This short-sighted thinking leads to short-lived retirement and tighter monthly budgets.

For too long now Americans have outsourced their retirement to people supposedly smarter than themselves. This outsourcing has made Americans financially illiterate. Only 5% of Americans will be able to retire on their own money. The rest will be dependent upon Social Security.

This isn’t your fault! Wall Street and banks provide few resources and education on how to live 30 years outside of the work force.

In 1945 there were 40-plus workers for every American receiving Social Security. Now in 2016 there are only three workers for every American receiving benefits. It simply isn’t sustainable and leaves most people living on the bare minimum. Poor planning leads to poor living.

When Social Security was established, the average American retired in their sixties and also died in their sixties. The program was a last measure, not a full-blown income replacement program.

Instead of dependence, shouldn’t we be seeking independence? This requires completely different thinking. How would you plan your future if your goal was to create a never-ending stream of income versus growing a large net worth? Shift your focus, shift your future!

A woman from Florida recently reached out to me after reading my book, “A Bridge Over Troubled Wall Street.” She had been investing in the stock market as she attempted to grow her money. Market loss, coupled with taking money to live on, meant her account was shrinking faster than she could grow it.

Once she started thinking income planning versus nest egg growing, she allocated part of her money into a contractual program which earned her $ 30,000 a year in interest. She could now live off the interest, maintain the nest egg and create legacy planning by passing her life’s savings onto her family.

Her fear that came from watching her principal be depleted was now gone and replaced by monthly income.

There are many programs outside of Wall Street designed for income planning and you should become familiar with them. These programs can grow and compound until you are ready to take income or start income immediately — programs such as bridge plans, structured settlements, private loans, real estate, annuities and CDs.

Planning for lifetime income will strengthen your outlook on the future and give you the money you need each month.

Don’t be like the lottery winners that blow through their money quickly or the large percentage of Americans that will be forced back to work. Instead, purposely plan for income and let the checks roll in.

Stephen Gardner is the best-selling author of “A Bridge Over Troubled Wall Street and two other books. He is also a speaker and trainer in the financial industry. He consults clients all over the country.

[The content provided through this article and www.nydailynews.com should be used for informational purposes only and is not intended to be a substitute for professional advice. Always seek the advice of a relevant professional with any questions about any financial decision you are seeking to make.]

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