When talking about retirement funds, the metaphor that often comes to my mind is the dried persimmon jar.

The assets accumulated diligently in youth are like dried persimmons stacked neatly in a jar, but the problem arises when one starts to take them out without any plan after retirement, leading to the jar's bottom being visible at some point. Withdrawing a fixed amount for living expenses each month may seem convenient at first.

Since it's my own money that I'm spending, it feels controlled, and the calculations seem simple. However, this method is much riskier than it appears. No one knows how long they will live, and market conditions can change unpredictably, so the very structure of continuously withdrawing from fixed assets will inevitably lead to depletion at some point. In fact, many retirees fear the thought of "Will I outlive my money?"

Therefore, the first thing to consider when planning for retirement is not the total amount of assets but the structure. The question is how my money moves and how long it can sustain me. More important than simply accumulating a lot is to create safeguards to ensure that at least the basic living expenses for a lifetime are covered. This is where the concept of income annuity comes into play. An income annuity involves putting in a certain amount at once and receiving living expenses annually or monthly for life starting from a specified point. In simple terms, it means converting part of my assets into a lifelong pension. Regardless of how long I live, the promised amount continues to come in, which is the key point.

Recently, income annuities have gained attention again due to the interest rate environment. There was a time when low interest rates diminished the appeal of annuities, but recently, as interest rates have risen, a structure has been created where one can receive much more living expenses for the same amount invested. For example, let's assume a 60-year-old puts $200,000 into an income annuity and starts receiving payments at 65. In this case, they would receive about $24,545 annually for life. This number might not seem significant at first glance, but when viewed over time, the story changes. If one lives to 75, they would spend roughly $250,000, and if they reach 90, the total amount received would exceed $600,000. This means receiving nearly three times the initial principal as living expenses.

Conversely, consider keeping the same $200,000 in an account and withdrawing $24,545 each year. The math is straightforward. The assets would be depleted in about 8 years. Regardless of whether the market is good or bad, or whether I am sick or healthy, the money runs out at that point. After that, one may have to rely on other assets, drastically lower their standard of living, or seek help from someone. This difference ultimately arises from "where I allocated my assets." Even with the same amount of money, the lifespan can vary completely depending on the structure.

Of course, income annuities are not a one-size-fits-all solution that requires putting all assets into them. Liquidity is also necessary, and there should be cash or investment assets to prepare for unexpected expenses. However, I believe the core of retirement planning is to create a structure that guarantees at least the basic living expenses that cover food, shelter, utilities, and some medical costs for life. By doing so, even if the market fluctuates or the news is noisy, the foundation of my life will not collapse.

This kind of planning is better checked with a professional rather than calculated alone in one's head. The appropriate pension structure can vary depending on age, health status, and other asset compositions. The important thing is to establish a structure that allows the jar itself to continue producing dried persimmons rather than just opening it and taking them out one by one after retirement.

When well-designed, an income annuity can provide a stable retirement without the worry of "Where will this month's living expenses come from?" allowing one to enjoy a steady supply of dried persimmons for life.