Why More Americans Would Choose $60K a Year Over a $1M Lump Sum
When planning for retirement, the biggest decision may not be how much you save, but how you turn that savings into income.
A recent Corebridge Financial report found that 47% of Americans would choose $60,000 a year for life over a $1 million lump sum at age 65. Just 41% prefer the lump sum.
So which option actually makes more financial sense? Here's what Americans need to know about planning for income in retirement.
Read Next: How One Retiree Lives on a Monthly $1,728 Social Security Check
Be Aware: 9 Subtly Genius Things All Wealthy People Do With Their Money — That You Should Do, Too
Lump Sum vs. Guaranteed Income: Which Is Better in Retirement?
So what’s the better option, and when does one make more sense than the other?
"There's no one-size-fits-all answer because it depends on someone's overall financial situation, health, goals and comfort with risk," said Bryan Pinsky, president of individual retirement and life insurance at Corebridge Financial.
However, the fact that more Americans would opt for $60,000 per year shows they place a high value on certainty in retirement.
"With a lump sum, you're responsible for managing investments, navigating market ups and downs, and making sure your money lasts as long as you do," Pinsky said. "A guaranteed income stream provides a source you can count on for life, removing some of that uncertainty."
How To Create Steady Income in Retirement
Social Security benefits are most retirees' primary source of predictable income in retirement, but it's typically not enough to cover all living costs.
"Social Security remains an important part of people’s planned retirement strategies today, and that will likely remain for the foreseeable future," Pinksy said. "But Social Security was never designed to replace a full paycheck in retirement. Most retirees rely on a mix of savings, investments, pensions and other strategies to support their lifestyle."
Historically, pensions have provided a reliable paycheck replacement, but today, fewer workers have access to traditional pensions than previous generations.
"This puts added pressure on retirees to determine how they generate reliable income they can count on throughout retirement," Pinsky said.
For retirees who want more predictable income, annuities are one option. They allow you to convert part of your savings into a steady stream of payments that can last for life, helping cover essential expenses.
There are different types of annuities designed for different needs, so it's important to understand what each offers and where they might fit within an overall retirement plan. A financial professional can help you model different scenarios and align Social Security with your overall retirement income approach to avoid gaps.
Why Guaranteed Income Can Make Retirees Feel More Secure
Both pre-retirees (85%) and retirees (82%) value always feeling financially secure in retirement. Having access to steady cash flow can provide that security.
"Knowing you have access to a [guaranteed] source of income can help build a foundation that supports both financial security and enjoyment in retirement," said Jean Chatzky, bestselling author and founder of HerMoney.
"Our research found that many Americans envision retirement as a time for freedom and enjoyment, but far fewer are comfortable actually spending the savings they've accumulated," she continued. "That's a challenge because retirement isn't just about building assets — it's also about feeling confident enough to use them."
When people know they have a reliable stream of income coming in every month, they're often more comfortable spending on both needs and some wants. Ultimately, the right choice comes down to how much flexibility you want — and how much risk you’re willing to manage in retirement.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: