Should I Buy an Immediate Annuity for Retirement Income or Tap Savings?
Editor’s note: This is one of the 20 tough financial questions posed in the “Do This or That?” cover story in the September 2011 issue of Kiplinger’s Personal Finance.
Editor’s note: This is one of the 20 tough financial questions posed in the “Do This or That?” cover story in the September 2011 issue of Kiplinger’s Personal Finance. Use the drop-down menu above to consider other financial conundrums and the right answers for you; share your own experiences and insights in the Discuss field at the bottom of this page.
Choose an immediate annuity if you’re worried about outliving your savings. You’ll be able to generate nearly twice the amount of monthly income you could safely afford to withdraw from a similar amount invested in a balanced portfolio of stocks and bonds. For a 65-year-old man buying an annuity today, that’s about $7,600 per year for every $100,000 invested. But don’t tie up all your cash. Once you buy an annuity, you can’t get your money back, and if the annuity is not adjusted for inflation (most aren’t), you’ll lose buying power over time.
Tap your portfolio for income if you’re confident in your investing abilities or you have a trusted money manager. Try to hold your first-year withdrawals to 4% of your total nest egg. Then, if your investments continue to grow, you should be able to give yourself a raise each year to offset inflation and perhaps have money left over for your heirs.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Medicare Basics: 11 Things You Need to Know
Medicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
By Catherine Siskos Last updated
-
Six of the Worst Assets to Inherit
inheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
By David Rodeck Published
-
403(b) Contribution Limits for 2024
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Published
-
SEP IRA Contribution Limits for 2024
SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 a year.
By Jackie Stewart Last updated
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Last updated
-
SIMPLE IRA Contribution Limits for 2024
simple IRA The SIMPLE IRA contribution limit increased by $500 for 2024 and workers at small businesses can contribute up to $16,000 or $19,500 if 50 or over.
By Jackie Stewart Last updated
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
By Jackie Stewart Published
-
Roth 401(k) Contribution Limits for 2024
retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
By Jackie Stewart Last updated