Funding Your Retirement

Although you can begin receiving Social Security benefits at age 62, it doesn't mean you should. Since full retirement age is between 65 and 67, taking benefits before then reduces the amount you will receive each year.

If you have income in addition to your social security, you may owe tax on the Social Security benefit. If your yearly "combined income" (earnings plus non-taxable interest plus one half of your annual Social Security receipts) exceeds $25,000, you could owe income tax on a portion of your Social Security receipts.

You can increase your future annual Social Security income by opting to receive your benefits past your full retirement age—up to age 70. In fact, the longer you wait, the higher your payments will be. So what’s the best age for you to begin Social Security benefits? Find out the pros and cons of accepting benefits at different ages in just 3 quick steps

If you leave the workplace with a company pension or Defined Benefit plan, it's important to understand the different ways you can receive distributions. You generally have the choice of receiving:

• Payments over your lifetime
• A one-time "lump sum" payment

If you choose to receive payments over your lifetime, you may also request to receive reduced payments in exchange for having the payments cover both your lifetime and the lifetime of your spouse, whoever lives longer.

If you take a lump sum distribution, know that it is 100% taxable and subject to an automatic 20% withholding. A better alternative may be to roll over those assets into an IRA. This will enable you to invest those assets as you see fit while continuing to benefit from tax-deferred growth.

If you've worked for a number of employers, you may have retirement savings in several retirement accounts. Manage your investments more efficiently by:

• Consolidating your retirement savings
• Transferring your qualified retirement savings into a Rollover IRA

By transferring the money into a Rollover IRA, you can avoid current taxation and penalties, your money will continue to grow tax-deferred, and you may also name a beneficiary.

Decisions regarding pension plans are complex; MetLife’s years of benefits expertise can help you understand all of your options. Learn more about Rollover IRAs

What If You Have An Income Gap?

So you have looked at your needs, prioritized your wants, considered guaranteed sources like social security and pension plans, and there is a gap between your income and your expenses. What next? First, consider ways that will increase your income. You could work longer. Whether it’s continuing in a job you enjoy doing, or finding a new job to continue to earn a paycheck. Not only does this avoid dipping into your resources right away, but almost everything gets a chance to grow – your investments, your Social Security benefit if you delay electing it, and your employer's retirement plans. And as long as you have earned income, you can continue to make pre-tax contributions into an employer's retirement plan or your own IRA (up to age 70½).

If full-time work isn't in the cards for you, still consider part-time work. It MAY have all the benefits of full-time work with a little more time to relax and a little less current income. Maybe you’ll have to dip into your retirement accounts a little – but not as much as if you weren’t working at all.

Quite simply, taking systematic withdrawals is withdrawing your accumulated savings and investments with some kind of rhyme or reason such as a certain amount monthly. On the positive side, systematic withdrawals provide a steady stream of income. And, in most retirement plans, taxes are only paid as you take the money out. While you'll pay income tax on money withdrawn each year (with the exception of a Roth IRA if conditions are met, where contributions are made with after-tax dollars and your assets grow tax-free), the money that remains continues to enjoy tax deferral on any growth within the account.

There has been general agreement among financial experts that to protect against running out of money, a 65-year-old should spend no more than 4% of their retirement savings in the first year. Then each year after that, spending can increase, but just enough to keep up with inflation. Follow that schedule and your money is likely to last for 30 years*. Take more than 4% and you run a bigger risk of running out before 30 years.¹ Under this scenario, it is anticipated that you will keep all or some of the money invested in equities, so that it has the potential to grow. However, as we have seen recently, markets can be highly volatile. If the market has a big dip while you are taking income, you will need to cut back the amount of income you take or run a much bigger risk of not having enough for of the length of your retirement. To protect your income while still giving your money a chance to grow, you might want to consider a deferred annuity.

The key to managing your financial well-being is making sure that, once you retire, your savings will be able to generate enough income to last your lifetime. Annuities, purchased from an insurance company, can create additional guaranteed lifetime income. There are many types of annuities; the most common types are deferred and income annuities:

• Deferred annuities. This type of annuity provides you the potential to grow your money during a pay-in phase with the ability to receive income at a later date. Deferred annuities allow your money to potentially grow tax-deferred and are subject to early withdrawal penalties, ordinary income taxes and possible surrender charges. Please note that there is no additional tax-deferral if you fund an IRA with a deferred annuity. Most noteworthy, deferred annuities, through features or riders available at an additional cost, can provide income protection from volatile markets by providing income or withdrawal guarantees regardless of market conditions. .

• Income annuities. An income annuity gives you guaranteed income starting today, a stream of guaranteed income that will last your lifetime. Along with other guaranteed lifetime income such as Social Security and pension plans, converting a portion of your assets into an income annuity can help you effectively cover your essential expenses. Because it is guaranteed and leverages the efficiencies a insurance company can access, an income annuity can maximize and protect your income throughout retirement. Learn More.

Annuities are also flexible, allowing you to customize your payments to meet your needs. The amount you receive will depend on the type of annuity you purchase. A fixed annuity will provide you with the same amount at every payment. The amount you receive from a variable annuityis based on the market performance of the selected funding options. In both cases, you choose a pay-out type that provide death benefits that can be passed to your spouse.

Discuss specifics with a MetLife representative or your advisor to make sure you understand all the options and make the best decisions to meet your financial needs. All product guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.

If you’re a homeowner age 62 or older, a reverse mortgage can help you get more out of life. By using the equity you’ve built up in your home, you can supplement your income without depleting your savings—all while you continue to live in your home.

Reverse mortgages work best as you get older and when your home is mostly or completely paid off. The mortgage amount is based on your age and your home's location and value. The older you are, the more you can borrow. You receive the cash from the mortgage lender for your reverse mortgage through a lump sum, monthly payments, a line of credit, or a combination of the above. No payments are due on the loan to the mortgage lender until the home is sold, the borrower permanently leaves the home, or the homeowner(s) become deceased.

Unlike traditional loans, reverse mortgages don’t have minimum-income requirements. Borrowers don't have to worry about built-up interest that exceeds the property's value. Reverse mortgages also require that you maintain the home and pay property taxes.

Reverse mortgages may involve fees and charges. Interest rates on reverse mortgages may be higher than traditional loan rates. Homeowners should consider all risks and consult with an attorney before taking out a reverse mortgage.
Learn more about reverse mortgages

As you move through your financial lifecycle, it is important to examine your current situation and plan accordingly for future events that could impact your retirement security. Proper planning can put you at an advantage when it comes to enjoying the freedom and opportunities retirement may bring.

Effective retirement plans include ways to protect your retirement income. Take the next step toward building an effective retirement plan.
Learn more about Protecting Your Retirement Income.