What is the Value of Income Planning?

A process for retirement preparedness

The path to saving for retirement can be likened to scaling a mountain. It takes strategy, time, and patience to reach the peak; to build and accumulate the funds you need to achieve the retirement lifestyle you want. After you’ve summited your accumulation goals, it’s important to be prepared for the subsequent considerations that come with the income phase – such as assets from which you’ll withdraw retirement income. After all, research indicates that coming back down the mountain can be riskier than climbing up.

Certain strategies can help you feel more confident about your approach to retirement income. The Value of Income Planning℠ process is one step-by-step approach to consider. It can help you identify potential retirement income gaps and solutions – such as an annuity – as part of your overall retirement portfolio. By following this process, you can develop realistic expectations for your income, expenses, and lifestyle goals in retirement.

Most of us are familiar with saving for our retirement. We have certain financial strategies to help us attain our long-term goals to live the lifestyle we want.

Once we move into the retirement phase, many of us mistakenly think that retirement is simply the reverse of accumulation and we pay ourselves a certain income from our savings until the money is gone. But how long will we live? How much savings is enough? It is important to realize that creating income for retirement takes a whole new way of thinking and a whole new set of strategies to avoid running out of money or not enjoying the lifestyle that we want.

The Value of Income Planning℠ process is one step-by-step approach to consider. It can help you identify any potential income gaps and develop solutions to help attain lifestyle goals in retirement.


Step one: Know your retirement risks

In the income phase, the amount you’ve saved for retirement is subject to a variety of risk factors as you begin to withdraw funds. By identifying these risks, you can begin the process of developing strategies to help minimize the effects these may have on your retirement savings.

Step two: Review expense categories

In general, your retirement income goes into three categories of retirement expenses. As a general rule, your essential expenses take priority and require stable, dependable, and reliable income. After all, you must cover your essential expenses regardless of market conditions or other factors.


Step three: Identify income sources

While retirement income can come from a variety of sources, most people consider Social Security to be the foundation. For decades, America’s retirees have counted on Social Security for dependable, reliable income, often with a cost of living adjustment.

However, studies indicate that Social Security alone may not provide a sustainable source of retirement income as in the past. That’s why it is important to know your options when filing for Social Security benefits – so you can enhance your benefit as much as possible.


Step four: Uncover potential income gaps

The Value of Income Planning process is designed to help you determine whether your stable and dependable sources of retirement income – like Social Security or a pension – will cover your essential expenses in retirement.

If you discover you do not have sufficient guaranteed income to cover your essential expenses, you will have identified a retirement income gap. Luckily, making this discovery is the first step toward developing a tailored solution toward the retirement lifestyle you hope to experience.


Step five: Develop a tailored solution

Together with your financial professional, you can create a guaranteed income stream to cover your essential expenses for life so your basic needs will always be covered. Examples of guaranteed income include Social Security, pensions, and annuities. You can also develop a financial strategy to help enhance the discretionary income you spend on travel, entertainment, college funding, or a big event such as a wedding. And the process can help you fulfill your legacy wishes such as leaving money behind for your family or donating to a charity you care about.

With an annuity as part of your income strategy, you can work toward your long-term retirement goals by taking advantage of tax-deferred growth potential, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement. Keep in mind, annuity guarantees are backed by the financial strength and claims paying ability of the issuing company.

You should carefully consider the features, benefits, limitations, risks, and fees that may be associated with an annuity, as well as the expenses, investment risk, and objectives of the underlying investment options in a variable annuity.

Variable annuities are subject to investment risk, including possible loss of principal. Investment returns and principal value will fluctuate with market conditions so that units, upon distribution, may be worth more or less than the original cost.

Variable annuities offer optional benefits, or “retirement strategies,” that can help protect you in several ways:

  • Income benefits – which provides the potential to help protect, and potentially grow, your income that’s guaranteed for life
  • Death benefits – which may provide help for loved ones after you’re gone.

Certain annuity features are provided through riders that are optional and available for an additional cost.

As you can see, there are new ways of thinking with new strategies needed to help make your retirement savings last as long as you do. To start the Value of Income Planning process:

  1. Download the Value of Income Planning client brochure
  2. Gather key financial information including your retirement income analysis worksheet
  3. Make an appointment with your financial professional
  4. Collaborate on ways to enhance Social Security benefits
  5. Create an income strategy that can help meet your income needs in retirement

This page is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America, its affiliated companies, and their representatives and employees do not give legal or tax advice. Encourage your clients to consult their tax advisor or attorney.

Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.

Products are issued by Allianz Life Insurance Company of North America. Registered index-linked annuities (RILAs) are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.542.5427 www.allianzlife.com

Product and feature availability may vary by state and broker/dealer.