One of the biggest concerns facing retirees is that their income will not last as long as they live. In “How to Make Your Income Last for Decades During Retirement,” Tom Halloran’s U.S. News article says that you should consider annuities to help face that concern. When it comes time to retire, you probably will have more questions than answers. You don’t know what your financial situation will look like in retirement or whether your savings and retirement planning will last for as long as you need it to. You might be concerned that either you or your spouse will live a very long life and you will need money and resources to pay for some kind of long term care. The article offers tips to help you prepare for retirement and avoid some of the pitfalls that many retirees face.
First of all, you have to make a plan. Determine your personal needs, your wants and even your biggest wishes when it comes to retirement. Decide the age at which you’d like to retire and the lifestyle that you’d like to lead during retirement. Your needs include necessary living expenses like a mortgage or rent, food, utilities, medical costs and transportation. Wants include those things that you don’t actually need to survive. Your list might include vacations, social events, a second home, or a golf cart to drive around your community. After that, you can make a list of things you wish to do like pay for your grandchild’s college education or give a large gift to charity. Once you know exactly what you want out of retirement, you can get a handle of what financial decisions you’ll need to make to get there.
Next you have to figure out how long your savings is going to last. Estimate your life expectancy so that you know approximately what time frame you will need to finance. You can create a timeline of when you will receive different income streams from a pension, Social Security, annuity payments and finally using personal savings. Keep in mind that your wants and wishes might change as you age and spend more time at home relaxing. For every year that you delay taking Social Security payments, up until age 70, your benefit amount increases. Voya Financial found that 65% of people take Social Security at age 62 and that 78% have taken it by age 65. If you are still working or using an immediate annuity to meet your expense needs, delay Social Security as long as you comfortably can. It’s important to know that there are a lot of rules when it comes to Social Security and Medicare, especially if you are married, divorced or widowed. Speak with a financial advisor so that you meet your timelines and don’t miss out.
One of your biggest decisions will be how to withdraw your money during retirement. An annuity is one of the only ways to create a predictable stream of income, especially if you don’t have a pension as is the case with many Americans. In addition to using an annuity to create income, you can invest your money and live off of your dividends or interest income. A third option is to invest your money and focus on growing it. A combination of different strategies is typically the best and most efficient way to finance your retirement. Purchase an annuity to cover your basic living expenses. You can use an annuity ladder and strategically include Social Security payments as an annuity as well. Investing some of your savings allows you to take full advantage of market gains, although you expose yourself to a lot of risk as well. Working with a financial professional allows you to balance your needs, wants and wishes in retirement and make a plan for financing those things.