My first company had created inventory control software for small local businesses — a safe bet that made
me enough immediate income to pay for college and an apartment, but little more.
Not exact matches
Similarly, if your nest egg is large
enough so that your chances of running through it in your lifetime are very low or negligible, then you also may not need any type of guaranteed
income beyond Social Security, in which case you simply may not have to devote any of your assets to a longevity annuity or an
immediate annuity.
If the amount of guaranteed
income you'll receive from Social Security and any pensions is
enough to cover all or most of your basic living expenses in retirement, then you may not need an
immediate annuity.
But if you really want to turn a portion of your nest egg into something that approximates a pension — a specific amount of money you can count on month in and month out for the rest of your life — then I suggest you suspend your wariness about annuities long
enough to at least consider a type of annuity that's easier to understand, less prone to the abuses that are too often associated with annuities and is very efficient at turning savings into assured lifetime
income — namely, an
immediate annuity.
The upshot, though, is Warshawsky concluded that while an annuity didn't always outperform systematic withdrawal, an annuity provided more inflation - adjusted
income throughout retirement often
enough (with little risk of ever running out) so that «it is hard to argue against a significant and widespread role for
immediate life annuities in the production of retirement
income.»
An
immediate annuity's ability to transfer money from people who die early to those who die late is largely the reason that a recent study by former U.S. Treasury official Mark Warshawsky concluded that while an annuity didn't always provide more retirement
income than using the 4 % rule or other type of systematic withdrawal, it did so often
enough that «it is hard to argue against a significant and widespread role for
immediate life annuities in the production of retirement
income.»
If, on the other hand, there's a gap between the
income required to cover basic living costs and what Social Security will provide, then you may want to consider devoting
enough of your savings to an
immediate annuity to fill all or most of that gap.
You would need to wait long
enough so that your average
income over the past six months makes you eligible, but you might want to file on the very day you are eligible if you need
immediate bankruptcy relief.