In that case, you might want to think about putting a portion of your savings in a longevity annuity. Perhaps you just want a bit of assurance that you'll still be financially secure late in life even if you overspend early in retirement, or maybe you just want to be sure that no matter what you can count on some extra guaranteed income you can use in your dotage for medical expenses or whatever. Today, for example, a 65-year-old man who invests $100,000 in an immediate annuity would receive payments of roughly $555 a month for life, a 65-year-old woman would get about $525 and a 65-year-old man-and-woman couple would collect about $470.īut there's another type of annuity you might want to consider if you don't need extra guaranteed income in the near term, but feel you might be able to use some later on.
The amount of the payment you'll receive depends on, among other things, the amount you invest, your age (and your spouse's or partner's age, if you're taking the joint and survivor option) and the level of interest rates. (If you want a payment that will continue as long as either you or your spouse is alive, you can choose the "joint and survivor" option.) You turn over a lump sum to an insurance company in return for a guaranteed monthly payment for the rest of your life. The premise behind an immediate annuity is pretty straightforward. Related: When an annuity makes sense for you
But you should be able to deal with that volatility by coming up with a mix of stocks and bonds that provides downside protection in line with your tolerance for risk yet also can deliver enough growth to support a reasonable level of withdrawals.īut if your Social Security payments fall well short of providing you with sufficient assured income to cover basic expenses - or, if you just prefer the emotional comfort of having a larger cushion of guaranteed income - then you may want to consider devoting a portion of your savings to an immediate annuity. Of course, your nest egg will still be subject to the ups and downs of the financial markets. (To gauge how long your savings might last at various withdrawal rates, you can check out this retirement income calculator.) Similarly, if your nest egg is large enough relative to your expenses that you're highly unlikely to deplete it even over a very long life, then you probably don't need an annuity. As long as you keep those withdrawals within reason, you should have a good chance that your savings will be able to support you for the rest of your life.
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If your Social Security payments are large enough to cover all or nearly all of your essential retirement expenses - which you can estimate by going to one of the online budget calculators listed in 's Retirement Toolbox - then you may be able to get by quite nicely on Social Security plus periodic withdrawals from your diversified portfolio of stocks, bonds and mutual funds to cover any excess expenses as well as emergencies and occasional splurges. (To see how monthly income Social Security will provide, you can go to Social Security's Retirement Estimator tool.) The main issue, then, for you and any other retiree or near-retiree considering an annuity, is whether you actually need more guaranteed retirement income than the amount you're already scheduled to receive from Social Security.
But there is one thing that annuities can do that no other investment can do - namely, generate retirement income you can count on no matter how long you live and regardless of what's going on in the financial markets.
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Related: How to get guaranteed retirement income for lifeĪnnuities may be touted for a lot of reasons.
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