Staying Fit
You don’t have to rely on good investments to improve your retirement security. There are smart ways of securing more guaranteed income that will last for life.
Social Security
Many retirees start Social Security at 62 and try not to touch their IRAs until they have to, at 70½. But that’s getting it backward, says planner Gary Schatsky of ObjectiveAdvice.com in New York City. It’s smarter, he says, to live on your savings for a few years and put off your Social Security claim. Your benefit rises by 8 percentage points a year (plus inflation) between your full retirement age and age 70.
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Pensions
If you’re eligible for a company pension, you’re often given a choice between taking the money in a lump sum or turning it into a monthly income for life — for yourself alone or for you and a spouse. Monthly incomes are usually the right answer for new retirees with modest savings and untested investment skills, Schatsky says. If you’re married, choose a payout that passes 100 percent of your pension to your spouse for life, unless he or she is already well provided for. People with monthly pensions are the least likely to run out of money. If you skip the traditional pension and choose a lump sum, you should be an experienced investor or have a financial adviser whom you’ve worked with and who has already done well for you.
Annuities
Have no pension? You can buy one in the form of a simple fixed annuity. (Very simple, please! No added bells and whistles.) You put up a sum of money; in return, an insurance company sends you a monthly check for life, or for the lifetimes of you and a spouse. Before you buy, Pfau advises estimating how much more guaranteed income you want. Then visit ImmediateAnnuities.com to see how much you need to invest in order to get that amount. Annuitize only part of your money. Keep the rest for emergency spending, splurges and (if you wish) an inheritance.
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Retiree Living on Social Security Benefits
Peter, 72
AARP
