There are many elderly people going back to work in their 80’s because they need income to supplement their lifetime savings. In the Deposit Accounts article “Options for the Elderly to Live with Today’s Ultra Low Interest Rates,” author Ken says that immediate fixed annuities purchased with some of an elderly person’s savings will finance a lifetime of living expenses with the remaining savings left for heirs. The Fed released a statement this week that it will likely be the middle of 2013 before we see any significant increase in the federal funds rate. Those people hoping to live off the interest from their CDs are finding that these low interest rates are forcing them back to work at an age where they hoped to be relaxed and enjoying life.
An 86 year old woman’s story was highlighted in the article. She had never been married, was a retired teacher, and has $425,000 in CDs. She hoped to live off of the interest, but it is only $1,000 per month and she couldn’t meet her basic living expenses on that dollar amount. The author recommended she put around half of her money into immediate fixed annuities so that she would not have to continue working the fast food job she was using to supplement her income. While the fixed immediate annuity rates are comparable to other lower interest rates, an immediate fixed annuity would give her guaranteed payments lasting her lifetime. If she used $200,000 of her savings, she could receive around $2,600 a month. With $300,000 of her savings, she could get close to $4,000 a month. By investing her money in a few different fixed annuities with different insurers, her money is safe and she still has savings left for her heirs or unforeseen expenses.