When I talk with clients about retirement planning, one of the most common concerns I hear is: “I’ve been saving diligently, but I’m worried about having enough income in retirement.” If that sounds familiar, you’re not alone. The traditional approach to retirement savings—build up a big account balance and then withdraw 4% per year—was designed decades ago and may not provide the retirement lifestyle you’re hoping for.
For a complete overview, see our complete guide to MPI.
That’s where retirement income solutions come in. These strategies focus on creating reliable, tax-advantaged income streams rather than just accumulating account balances. In my experience helping families plan for their financial future, I’ve seen how the right approach can make the difference between surviving in retirement and truly thriving.
The Problem with Traditional Retirement Planning
Most people follow what I call the “outdated system” of retirement planning. You contribute to a 401(k), maybe a Roth IRA, watch the balance grow over 30-40 years, and then hope it’s enough when you stop working. But here’s what most people don’t realize: retirement isn’t about the size of your account—it’s about how much of it you can actually spend.
Let me give you a real example. Say you’ve done everything right and accumulated $1 million in your 401(k). Using the 4% rule that most financial advisors recommend, that gives you $40,000 per year in retirement income. After federal and state taxes, you’re looking at maybe $32,000 take-home. That’s about $2,700 per month.
After working for 40 years and saving a million dollars, you end up with less than $3,000 a month to live on. That’s the harsh reality of the traditional system.
What Are Retirement Income Solutions?
Retirement income solutions are strategies designed to generate reliable, ongoing income during retirement rather than simply accumulating savings. The key difference is the focus on cash flow rather than account value.
These solutions typically offer several advantages over traditional retirement accounts:
- Higher distribution rates - Often 8-10% versus the 4% rule
- Tax advantages - Reduced or eliminated taxes on retirement income
- Principal protection - Protection from market downturns
- No required minimum distributions - Take income on your timeline
- Flexible access - No age restrictions or penalties
The MPI Strategy: A Modern Approach to Retirement Income
One retirement income solution that caught my attention several years ago is the MPI (Maximum Premium Indexing) strategy. What drew me to it initially was how it addresses the fundamental flaws in traditional retirement planning.
My parents raised five boys in the Chicago suburbs, ran multiple businesses, and worked hard to give us a great life. They made good money, but like many families, they didn’t save early—and when they tried to catch up with real estate rentals and the stock market, 2008 wiped them out. Watching them lose their properties, their savings, and their retirement plans changed the way I looked at the traditional system—but it wasn’t until I learned about the MPI strategy that everything finally clicked.
How MPI Works
The MPI strategy uses a properly designed, max-funded Indexed Universal Life (IUL) policy to create retirement income. Here’s what makes it different:
Principal Protection: Your money is protected with a 0% floor. When the market goes down, you simply earn zero—never negative returns. Think of it this way: when the market crashes and those index options expire worthless, you only lost the gravy, not the steak. Your principal was never at risk.
Index-Linked Growth: Your cash value can grow based on stock market index performance (historically 7-8% average) but without direct market exposure.
Tax-Advantaged Income: In retirement, you access your money through policy loans, which are generally not treated as taxable income when the policy is structured properly.
No Distribution Limits: Unlike 401(k)s with their 4% safe withdrawal rate, a properly designed MPI strategy may support distribution rates of 8-10% or higher.
The Compound Interest Advantage
What really sets MPI apart is how it leverages compound interest through what’s called the participating loan feature. Think of your cash value like a bucket. When you take a policy loan, you’re not taking water out of the bucket—you’re just putting a lien against it. The bucket stays full, and that full amount keeps earning index credits.
This means you can potentially borrow against your cash value to reinvest as additional premium, allowing both your money and the insurance company’s money to compound simultaneously. It’s a way to accelerate the wealth-building equation that most people never learn about.
Comparing MPI to Traditional Retirement Accounts
Let me walk you through a comparison using that same $1 million example:
Traditional 401(k) at $1 Million:
- 4% safe withdrawal rate = $40,000/year
- After taxes = ~$32,000/year
- Monthly income = ~$2,700
MPI Strategy at $1 Million:
- 10% distribution rate = $100,000/year
- Tax-free through policy loans = $100,000/year
- Monthly income = ~$8,300
That’s nearly three times more spendable income from the same amount of money saved.
Key Advantages of MPI
- No contribution limits - Unlike 401(k)s ($23,000 limit) or IRAs ($7,000 limit)
- No age restrictions - Access money at any age without penalties
- No required distributions - Take income when and how you want
- Built-in life insurance - Provides a death benefit for your beneficiaries
- Living benefits - Many policies include riders for chronic or critical illness
Is MPI Right for Everyone?
I’ll be honest with you—MPI isn’t a get-rich-quick scheme or a magic solution for everyone. It requires:
- Long-term commitment - This is typically a 20-40 year strategy
- Consistent funding - Regular premium payments are essential
- Education and understanding - You need to trust the math to stick with it
- Adequate cash flow - Generally works best for people who can contribute at least their age times $10 per month (a 40-year-old contributing $400+ monthly)
The sweet spot I see most often is a 40-year-old couple who has maybe $100,000 available as a lump sum (from an inheritance, bonus, or savings) and can contribute $2,000 per month ongoing. They’ve been contributing to their 401(k) for years but are starting to realize it alone won’t be enough for the retirement they want.
Other Retirement Income Solutions to Consider
While I focus heavily on MPI because of the results I’ve seen, it’s not the only retirement income solution available:
Annuities
Fixed or variable annuities can provide guaranteed income streams, though they often come with limitations on growth potential and liquidity.
Dividend-Paying Whole Life
Traditional whole life insurance with dividends can provide steady, tax-advantaged growth, though typically at lower rates than index-linked strategies.
Real Estate Investment
Rental properties can generate ongoing income, but they require active management and carry market risks.
Business Ownership
Building a business that generates passive income can be highly effective, though it requires significant time and expertise.
The Importance of Starting Now
One thing I always emphasize to clients is the cost of waiting. Due to how compound interest works, every year you delay implementing a retirement income strategy costs you significantly in future income potential.
Here’s an example: A 31-year-old saving $1,000 per month might project $111,240 per year in retirement income. If they wait just one year and start at 32, that drops to $100,920 per year. That one year of delay costs $10,320 per year for 35+ years of retirement—over $360,000 in lost income.
The beautiful thing about starting with a lump sum, if you have one available, is it gives you a head start on compound cycles. That money starts working immediately, then your monthly contributions keep building on top of it. You’re accelerating the wealth equation from day one.
Questions to Ask Yourself
As you consider your retirement income strategy, here are some important questions:
- What monthly income do I need in retirement to maintain my lifestyle?
- How much will taxes reduce my retirement distributions?
- What happens to my income if the market crashes right when I retire?
- How will I handle healthcare costs and potential long-term care needs?
- What legacy do I want to leave for my family?
If your current retirement plan doesn’t have good answers to these questions, it might be time to explore alternatives.
The Generational Wealth Component
One of the most powerful, yet rarely discussed benefits of retirement income solutions like MPI is their ability to help create family wealth that can last for generations. Unlike traditional retirement accounts that typically get depleted during your lifetime, a properly structured life insurance-based strategy can provide income during your life while still maintaining a death benefit for your beneficiaries.
This means your children and grandchildren could inherit both the remaining cash value and the life insurance benefit, potentially creating a foundation for generational wealth building.
Getting Started with Retirement Income Planning
If you’re realizing that your current retirement plan might not provide the income you need, you’re not alone. The good news is that it’s never too late to explore alternatives, though starting sooner is always better due to the power of compound interest.
The first step is education. You need to understand how different strategies work, what the requirements are, and which approach makes sense for your specific situation. This isn’t about following a one-size-fits-all formula—it’s about finding the strategy that aligns with your goals, timeline, and risk tolerance.
Remember, most retirement strategies people follow today were built decades ago in a completely different world, and they’re quietly failing millions of people. That outdated system may no longer be enough to create the retirement lifestyle you hope for and deserve.
The real question isn’t whether you can afford to explore retirement income solutions—it’s whether you can afford not to. What good is saving your whole life to build a retirement account if it wasn’t designed to produce good income and could leave you living month to month in retirement?
Every family’s situation is different, which is why I don’t believe in one-size-fits-all solutions. As an independent financial professional, I take the time to understand your needs and explore multiple strategies to find an approach that works for you.
Let’s find your best option together. Schedule a free consultation and get personalized recommendations for your retirement income strategy.
- Focus on creating reliable cash flow streams rather than just accumulating large account balances when planning for retirement income.
- Consider retirement income solutions that offer higher distribution rates and tax advantages compared to traditional withdrawal strategies.
- Protect your retirement savings from market downturns by exploring strategies that include principal protection features.
- Evaluate flexible income options that don’t have age restrictions, penalties, or required minimum distributions tied to your timeline.
- Shift your retirement planning mindset from measuring success by account size to measuring by actual spendable income after taxes.
