HOW PROTECTED LIFETIME INCOME BENEFITS A SMALL BUSINESS OWNER DURING DIFFICULT TIMES
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When discussing the benefits of annuities, Elaine Larsen, a self-described small business owner, remarked that the guarantee of lifetime income enables her to shake off “the things of the day” — even the market’s current volatility — and to focus on running her business.
“Having an annuity changed my focus on my business,” she says. “It was like one of those moments where, all of a sudden, I stopped just living day to day, and I started picking my head up and said to myself: I need to look further out. And I need to plan for my future because I’m a small business owner.”
Focus and vision are important traits for any small business owner, but they are nothing less than essential for Larsen — a two-time International Hot Rod Association world champion who drives a 5,000-horsepower jetcar upward of 336 miles per hour, a personal best. Off the road, Larsen and her husband, Chris, run Larsen Motorsports, a multi-car turbine-powered race team.
“I have so much to prove and so much to do,” Larsen told Autoweek in 2018. “I have the next generation that’s looking up to me.”
Planning for retirement
In a March 2020 interview, Larsen said that she met with a financial planner to assess “the things [she] needed to survive in retirement” — an exercise that led her to include an annuity as part of a diversified investment portfolio. “Everyone else out there is absolutely panicked watching the stock market go up and down, but I’m sitting here saying that I know I’m protected,” she remarked. “That’s one of the main reasons I bought an annuity.”
Larsen underscored the importance of a good financial advisor in planning successfully for retirement: “There are so many things that are confusing out there. The most important thing you need to do is to get educated … and to pick the right financial advisor [who is] going to fit with you.”
After she selected a financial advisor, Larsen made a priority of articulating her retirement goals, including the need for protected lifetime income. “This is what I want to protect,” she told her advisor. “This is the ‘protected money’ that I need. And then I asked how are we going to do this?’”
Essential and discretionary expenses
When consulting with her financial advisor, Larsen discussed both essential and discretionary expenses — both of which have a significant bearing on one’s financial well-being and overall quality of life in retirement, according to a research study released in February 2020 by the Alliance for Lifetime Income. Less than a third (29%) of a cross section of U.S. adults approaching or in retirement (age 40–79) are very confident they can cover their essential expenses throughout the remainder of their retirement, according to the research study, and only a quarter (25%) are very confident they can cover all their expenses.
On average, participants in the Alliance research study consider nearly two-thirds (62%) of their expenses to be “essential” with housing (e.g., mortgage, rent, HOA fees), utilities and groceries being the most common of these must-pay expenses. However, while discretionary expenses like hobbies, travel and entertainment represent a smaller percentage of their monthly expenses, 92% indicate that they are essential to their overall quality of life in retirement.
“[Some] of my other investments are for fun stuff,” said Larsen. “I dabble in a lot of things.”
Ready for retirement, but not ready to retire
Larsen, 52, isn’t thinking about hanging up her racing helmet anytime soon. “I don’t have plans for retirement,” she said. “I think retirement is going to find me. As long as I’m still sharp and have fun doing what I do, I’m going to keep going.
“But I know that I’m set right now,” she continued. “If I chose to retire tomorrow, I could. And I wouldn’t have to worry about the rest of my life and living the way I want to live. So that allows me to live and go 336 miles per hour and not even worry about it.”