Ready To Retire

In the last 50 years, retirement has become less of a date certain event and more of an extended period that may last for 20–30 years. So, careful planning and decision making are necessary. You may need to consider working longer than you initially intended to if your retirement savings aren’t what you expected. Extending your working life just a few more years may enable you to achieve your goals and retire comfortably.

Things to consider:

• People are living longer — Your retirement could easily last for 20 years, 30 years, or longer. Good thing your annuity can provide income for the rest of your life, no matter how long you live.
• Healthcare can be a big expense — People are living longer today, in part, because of incredible healthcare advances. However, the cost of healthcare — rising health insurance premiums, doctor visits, co-pays, and prescription drugs — can add up quickly.
• Social Security won’t cover everything — The average monthly Social Security retirement benefit for a retired worker is only $1,827. * That’s probably not enough to cover basic living expenses — like monthly rent or mortgage payments, food, utility bills, and cable — let alone healthcare and other expenses.

*Social Security Administration: Frequently Asked Questions: What is the average monthly benefit for a retired worker? January 2023. https://faq.ssa.gov/en-us/Topic/article/KA-01903

Waiting a few years to claim Social Security can increase your monthly benefit. Calculate a rough estimate and the advantages of delaying your Social Security benefit. This tool shows how your monthly benefit changes depending on the age at which you claim. 

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Annuitization converts the accumulated value of your annuity into a regular, steady of income payments you can receive for the rest of your life. These payments can help toward covering everyday retirement needs like medical and living expenses. Now may be a good time to learn more about the options regarding your annuity. There are several payment options available including lifetime payments for you — or for you and another person — or payments that last for a guaranteed number of years.

The decision to annuitize is a personal one and should always be discussed with your financial professional.

Important considerations before you annuitize:

• Permanent decision — Once you decide to annuitize and start taking payments, your annuity is no longer considered a liquid asset. You lock in the annuity’s value and the method for taking income. No changes are possible after this, including taking a lump sum withdrawal.
• Consistent payments — While this can certainly help with your budgeting, it’s possible that over time, your payments will not keep up with inflation.
• Tax consequences* — When you annuitize, your contract is converted into a series of periodic income payments and will no longer have a cash value that will accumulate tax-deferred earnings. Payments may be fully or partially subject to ordinary income tax.

*Before taking money from your annuity, you should speak to an independent tax advisor regarding your particular set of facts and circumstances. MetLife and its representatives cannot provide tax or legal advice.

When you start taking distributions, you’ll begin turning the money in your employer-sponsored retirement savings plan into income. When to take distributions from your plan is up to you, but required minimum distributions (RMDs) must be taken each year generally beginning with the year you reach your required beginning age, currently 73.

Learn the steps you need to take to create an income strategy that can last. 

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You may be offered a choice between a lump sum payment, installment distributions or systematic withdrawals, and a guaranteed stream of income — sometimes known as annuitization. For individuals participating in a workplace retirement plan, the decision of your method of distribution is typically — but not always — made at the point of retirement.

If presented with a choice between a lump sum payment, installment distributions, annuitization, or some combination of the three, you have a number of important considerations. How will you utilize any retirement savings you have amassed in an employer-sponsored retirement plan, and/or how will you manage your accrued defined benefit pension benefits, if you participate in this type of pension plan? Determining how your retirement savings or pension benefits should best be distributed can be one of the most important and impactful decisions you can make regarding your retirement income security.

Taxes don’t go away with retirement. Income taxes assessed on retirement plan distributions are generally taxed as ordinary income. Ordinary federal income taxes generally apply to taxable distributions. State income taxes may also apply. Always consult your tax advisor or investment professional about the income tax consequences of any withdrawals.

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With life full of uncertainties and our needs, circumstances, and personal priorities changing, ongoing decision making, assessment, and updating plans are essential throughout retirement. It’s a good idea to revisit the tasks and activities involved in preparing for retirement to determine if anything needs to be changed, updated, or revised in order to ensure you’re making the best decisions for you.

Find out how working after receiving retirement benefits can lead to increases or decreases in benefits. 

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To help you make a more informed decision about when to start taking payments, here are some points to think about:

• Guaranteed income for life — You have the ability to immediately start receiving a steady stream of income for the rest of your life.
• Financial confidence — By annuitizing and using your annuity as an additional source of income earlier in retirement, you can help preserve your other savings.
• Tax-efficient income — If you purchased your non-qualified annuity contract or Traditional IRA contract with after-tax money and you annuitize your contract, each payment is generally treated as if it were made up of two components: nontaxable return of premium and gain taxable as ordinary income. This is different than the tax treatment for withdrawals, where — because earnings are taxed first — distributions are fully taxable until all accumulated earnings have been distributed then you will begin to recover your premium income tax free.

*If you purchased your Traditional IRA with deductible contributions (i.e., pre-tax), the entire distribution is taxable whether you annuitize or withdraw proceeds.