Shaq on Annuities: When Is Your First Retirement Paycheck?

On Travis Chappell’s Dinner Party, Shaquille O’Neal recalled a conversation that changed how he thought about his endorsement money. A man used a napkin to illustrate how much of each $100 he could set aside. O’Neal said he went on to put money into annuities as a fallback in case other investments didn’t work out. He mentioned ages 55, 60, and 65 and estimated he might receive about $1 million a month at 55. Read the interview coverage from Basketball Network.

What stood out to me was that Shaq was already thinking about when he wanted that money to pay him. You can ask the same question with your own numbers and a calendar.

What happens the month after your last paycheck?

Imagine your last work paycheck arrives in June. By July, the mortgage or rent is due again. So are groceries, utilities, and insurance. Which sources of income will already be paying you that month? And how much of those bills would still need to come out of savings?

Say your essential bills total $4,000 a month and you expect $2,800 from income sources that will already be paying you. In that example, July is the first month you’d need another $1,200. Once you have a date and a dollar amount, you have a more concrete question to work through.

Where might an annuity fit?

An annuity is a contract with an insurance company. Depending on the contract, you can fund it now and arrange for income to begin later. Some contracts offer lifetime income, subject to their terms and the issuing insurer’s ability to pay. If you’re comparing options, ask when payments can begin, what fees or charges apply, and how much access you’d have if you needed extra money for an unexpected expense. Read the NAIC buyer’s guide to fixed deferred annuities.

Explore the Retirement Readiness Calendar™ →

Watch the Free What-If Video

If you put July on your calendar, what would you want the money set aside for that month to do? In What If Part of Your Savings Had a Paycheck Date?, we explore what it means to give a portion of your savings the job of providing income later.

One Better Question
What month would I first need my savings to help cover essential bills, and how much would I need that month?

Explore the Retirement Readiness Calendar for more questions and worksheets to work through at your own pace.