Pension, No Problem: How an Annuity Could Help

Labor Day traditionally marks the end of summer. The kids are back in school. Beach season is over. It may be the last weekend to enjoy warm weather before fall arrives. If you’re like many Americans, you might enjoy your Labor Day weekend with family and friends.

Labor Day isn’t just about parties, however. It’s an official national holiday to celebrate the efforts and contributions of the nation’s labor movement. Starting in the 19th century and continuing through the 20th century, labor organizations and workers’ rights groups fought for many of the benefits that are now standard options in many companies. For example, labor unions and workers fought for everything from minimum wage to health insurance to paid time off.

One of the biggest employee benefits in the 20th century was the company defined-benefit pension plan. The first defined benefit pensions in the United States were offered to soldiers, firefighters, and city workers in the mid-1800s.¹

Private companies started to adopt defined benefit pension programs in the late 1800s. American Express created the first private defined benefit pension plan in 1875. By 1926, there were more than 200 private defined benefit pensions. By 1990, over 40% of the private sector workforce was covered by a defined benefit pension. ¹

The Decline of Defined Benefit Pensions

A defined benefit pension is a valuable resource because it provides a steady stream of consistent guaranteed* income through retirement. You don’t have to worry about where your income will come from each month. That means you can enter retirement with a solid foundation of income.

Unfortunately, defined benefit pension plans have been in decline over the past several decades. Many companies have transitioned away from defined benefit pensions in favor of defined contribution plans, like a 401(k) plan. In 1998, 59% of Fortune 500 companies offered a defined benefit pension. That figure dropped to 16% by 2017.²

In a 401(k) plan, the employee contributes to their own retirement. The employer may make matching contributions. However, much of the burden is on the employee. That makes a 401(k) a more appealing option for many companies.

The Defined Benefit Pension Alternative

Are you one of the millions of Americans who don’t have a defined benefit pension? If so, you’ll have to develop a strategy to generate reliable, predictable income from your own retirement savings. Fortunately, you have options available.


One possible option is an annuity with an optional guaranteed* income rider. Annuities are tax-deferred insurance-based vehicles. You deposit a lump sum of money and then potentially grow your assets over time. The type of growth depends on the type of annuity. Some pay interest. Others, such as variable annuities, let you invest in the financial markets. And there are some, called fixed indexed annuities, that pay interest based on the performance of an external market index.

On many of these policies, you can select an optional benefit called a guaranteed* minimum withdrawal benefit. This allows you to withdraw a guaranteed* amount each year. As long as your withdrawal never exceeds the limit, the income is guaranteed* for life. It doesn’t matter how long you live or how the financial markets perform. Your income is guaranteed. *

While an annuity isn’t exactly like a defined benefit pension, it can serve as an alternative for income in retirement. Are you ready to see how an annuity might fit your retirement strategy? Let’s talk about it. Contact us today at Protecting Your Retirement LLC. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. Our Telephone number is 913-648-2700.

1 | https://www.workforce.com/2016/06/21/the-history-of-retirement-benefits/

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

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19146 – 2019/8/19