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Annuities Can Make Your Nest Egg Last


Conventional retirement wisdom has fallen by the wayside since the recent economic crisis so it’s time to rethink our planning, according to the AARP’s new tip sheet “Making Your Nest Egg Last a Lifetime.”  While retirees could previously safely withdraw 4% of their invested nest egg each year and rarely outlive their money, that has proven not to be case anymore as retirees have had to return to the workforce in droves.  The AARP’s tip sheet offers 5 pieces of advice to help you successfully retire and beat the longevity risk.

The AARP’s first tip is to postpone receiving Social Security as long as you can.  Wait past age 62 and at least until full retirement so that you have extra income that will last as long as you or your spouse lives.  Looking into buying an annuity is the second tip.  The AARP suggests that anyone with a retirement nest egg but not enough guaranteed income to cover their living expenses consider shopping around for the best annuities.  These can cover retirement living expenses with a fixed and guaranteed income stream.

Pay down your mortgage or pay it off entirely before retirement.  This third tip can dramatically reduce your fixed living expenses but not enough people take advantage of the opportunity.  The fourth piece of advice is to ensure that your assets are diversified and heavier in bonds as you age.  And the final tip is to be cautious about withdrawing your money.  Be mindful of your needs versus your wants and only withdraw more when you have improved returns.

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