U.S. life expectancy is still rising, and for those who take good care of their health, living well into their late '80s or beyond is becoming the norm. People who retire in their 60s are now planning for a retirement that will last into their 80s or 90s. That’s a comforting feeling – but not if you run out of money in your 70s or 80s!
A lot of workers haven't put away enough in retirement savings to maintain their current lifestyle, forcing them to face a rude awakening after they retire. And unless they'll be receiving significant benefits from a traditional pension plan, which most people don’t have, the management of their retirement savings is crucial to avoid outliving it.
Unfortunately, some people simply act without preparation or guidelines when it comes to retirement planning and drawing down their savings. They simply withdraw what they need for living expenses without a plan and hope the money lasts. Hoping is not an acceptable way to secure your future! If you spend your retirement savings without planning, there's a good chance you'll go broke in your retirement years.
After retirement, many people forget about living off their retirement savings and instead are tempted to spend it too soon. During your working years, you'll have accumulated a nice nest egg that’s intended to last through retirement. It'll look like a lot of money, and you may think you can easily afford to buy a fancy boat or take that expensive cruise you've been anticipating. You might start spending your retirement savings indiscriminately on the things you desire while expending necessary withdrawals to cover daily living expenses.
If you're not careful, you'll exhaust the balance in your retirement accounts way ahead of schedule. You may have plenty of years to live, but you'll be broke and faced with some hard choices, such as returning to work, drastically scaling back your living expenses or moving in with your kids.
There’s a better strategy that enables you to draw from your retirement savings while preserving and growing those assets, whether you’ve accumulated your nest egg in a regular savings account, a 401(k), 403(b), 457, an IRA or a Roth IRA.
Instead of spending haphazardly, what you should do is consider using an annuity with your retirement savings to generate monthly retirement income. Your objective might be guaranteed income, appreciation or diversification and there is a selection of annuities that will fulfill one or more of those objectives to meet your needs.
Insuring your retirement income means having sources of income that:
* last the rest of your life, no matter how long you live
* enable you to survive stock market crashes
* still cover your living expenses even if inflation pushes them higher
* are paid automatically without any effort or actions on your part
Even if you misunderstand, disbelieve, are confused, apprehensive or indecisive about annuities, here’s a clearheaded strategy to make sure that you’ll never have to worry about running out of money: Estimate your bare minimum living expenses for housing, food, health care, insurance, utilities, and any other basics during your retirement years. Then buy enough of a low-cost annuity so that it’s income, along with Social Security, will guarantee to cover all of your basic living expenses. That way, no matter what happens to the rest of your investments – stocks, mutual funds, bonds, and other risky ventures – you’ll never have to be without a roof over your head and food on the table. By insuring your essentials, you’ll have peace of mind in your later years, your retirement savings will last a lifetime and you will have created a financially secure, enjoyable retirement. By planning your spending in retirement with an annuity, you won't have to worry about going broke.