Convert savings into an immediate or longevity annuity
Take a lump sum of money and use it to buy yourself a paycheck. Depending on the circumstances, this paycheck can last the rest of your life and your spouse's life.
Now, annuities don’t have the best reputation. There is a reason for this. Some annuities are so complicated it’s tough for professionals – let alone consumers – to understand them. Some have very high annual fees or surrender charges (a charge for getting your money out ahead of schedule.) Those are not the annuities I’m talking about here. I’m talking about very simple, straightforward ones.
With an "immediate annuity" you take a sum of money at retirement and buy a paycheck. The amount you’ll get for your money depends on your age/life expectancy and interest rates. The older you are when you buy an annuity, the shorter your life expectancy will be – so the greater a monthly paycheck the same sum of money will buy you. When interest rates are higher, the size of the paycheck for the same sum of money will rise also. For that reason, it makes sense to not annuitize all at once, but to annuitize chunks of money over time as your fixed expenses rise. A longevity annuity works the same way: you buy it at say age 50 but don’t start drawing your paycheck until retirement. Because the money has that 15 years (or however many) to grow, your paycheck is much larger.
Source:http://www.today.com/
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Unknown - Monday, March 2, 2015
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