Do you often feel like you are living from paycheck to paycheck? Do you find yourself wondering how to cover your daily expenses for the coming month? Guaranteed income can help you with this.
Guaranteed income is a form of income that never goes away, no matter what.
What Is Guaranteed Income?
Guaranteed income is a form of permanent monthly cash flow that you can use to cover your daily expenses. It cannot be outlived, carried over into the next month, or diverted for any reason other than purchasing consumer goods and services.
How Does It Work?
Typically, a company distributes guaranteed income in the form of an annuity. The way it works is simple: when your guaranteed income starts at age 65 or later, you will receive guaranteed monthly cash flow for life or until you pass away.
You can use your guaranteed income to cover any expenses that come up throughout the month, including rent payments, utility bills, and groceries. Since this income never expires, it’s often called “License to Spend.”
Many factors determine if someone qualifies for guaranteed income, including the current financial situation and overall long-term goals and savings strategies.
Some basic rules can help determine if guaranteed income is suitable for you. The main requirements are as follows:
- 65 or older
- Single, widowed, or divorced, and an income below $18,984.
- Receiving the Old Age Security (OAS) pension.
- Your income plus the income of your spouse or common-law partner is $25,104 or below, and gets the full pension from OAS.
- Your income plus the income of your spouse or common-law partner is lower than $45,504 and does not receive a pension from OAS.
You can see your income and the income of your spouse in the paystubs generated by your respective HR departments.
The Pros and Cons of Guaranteed Income
Guaranteed income has many pros, including the ability to license to spend on anything you want without fear of running out of money. It is also safe and secure with no risk factors involved.
However, there are some cons, too. The biggest con is that it is also not flexible, meaning that you cannot divert funds elsewhere without incurring penalties or fees.
You also cannot use it towards any expenses other than purchasing consumer goods or services like groceries. For this reason, guaranteed income may not work if you aim to accumulate large sums of wealth through investments like real estate or stocks/bonds.
Your ‘license to spend’ can be a great way to cover day-to-day expenses, but one cannot use it as an income replacement for investing.
Why Get a Guaranteed Income?
There are many reasons why guaranteed income is a good idea. For one, it has tax benefits to help you save money on your taxes each year. When generating your invoice, your taxes are usually included.
It can also eliminate the risk of outliving your savings since it will never expire or become depleted through monthly payments. Its non-expiry makes it great for retirees who want to enjoy their retirement without worrying about how they’ll be able to continue living in the future.
Guaranteed income can give you peace of mind knowing that there will always be enough money coming in to cover expenses even if something happens and you need additional funds for healthcare or other needs down the road.
Who Would Benefit From This Type of System?
Some people who would benefit most from guaranteed income are young adults, older Americans in good health, and those with low income.
Younger individuals may see this sum of money as a way to keep taking on side jobs without having to worry about how they will cover their living expenses when the next paycheck comes around.
Older Americans typically have more financial concerns than younger citizens due to retirement planning or medical bills that arise after a severe accident or illness. The best part for both groups is that guaranteed income can be used immediately towards anything you want.
No waiting is required unless your aim is building up wealth through investments like real estate or stocks/bonds, which then need time until returns start coming back into your bank account. People with low income often struggle with day-to-day expenses, and guaranteed income is a way to cover their basic living needs without worrying about running out of money.
Guaranteed income is an excellent system for anyone looking to cover their day-to-day expenses while still having the ability to spend money on anything they want.
It is also great for those with limited savings strategies and wealth accumulation goals, making it perfect for young adults who are just beginning work, or older Americans who need access to additional funds to pay off medical bills.
It has both pros and cons that should be considered before entering into this agreement. Still, overall, your ‘license to spend’ is a safe solution for individuals struggling with long-term financial planning.