A recent article in U.S. News and World Reports talks about 5 ways to avoid running out of money in retirement. This happens to be the number one fear for retirees, the idea that they will run out of money in their retirement. The article highlights the following items as key to avoiding this fear coming to realization.
1) Social Security – delaying social security will increase the amount of the benefit received so by delaying a few years and taking Social Security at age 70 many retirees are able to use this a line of defense against burning through their retirement nest egg.
2) Pensions – For workers fortunate enough to have a traditional pension plan, this can be a great defense against running out of retirement income. However pensions are rare these days and are only becoming more and more sparse in their use.
3) Annuities - For most retirees purchasing an annuity to create an income stream that cannot be outlived is a vital step to prevent from running out of money in retirement.
4) Systematic Withdrawals – This is the idea that you can withdraw 4% or so annually and not run out of money in your portfolio, this was a rule of thumb prior to 2008, but in the current new normal market we have now, this practice is not considered to be an effective strategy.
5) Paying off your house – By eliminating the monthly mortgage expense, you can significantly lower the monthly expenses and therefore can sustain the lifestyle you enjoy at a much lower income level.
For more information on effective retirement planning and to compare annuity rates, visit the Annuity Think Tank.
To read the entire article on avoiding running out of money, click here.