In an article for Kiplinger’s, Jerry Golden discussed how running out of money is an investor and retiree’s worst nightmare, and how annuities can help address these fears. Retirees do face challenges such as uncomfortably high inflation, soaring healthcare costs, and concerns about the viability of social payments.
Therefore, investors need to have a solid plan to ensure that there remains steady and sufficient income on top of Social Security and other potential pension payments. The goal should be to have a growing and guaranteed income that continues throughout all types of economic circumstances.
One suggestion for retirees with these fears is to use a more conservative withdrawal rule rather than the standard 4%. This will give an increased margin of safety and boost your portfolio’s resilience.
This is difficult and not practical often in reality. A better approach is to integrate financial products in the portfolio which reduce risk and dampen portfolio volatility such as income annuities.
Having an income reduces the odds of money ‘running out’ by a significant degree while also allowing retirees to let their portfolios continue to work and grow. Often, fear is an impediment for retirees from achieving their financial goals, because they are unwilling to stick to the plan through difficult conditions.
Finsum: Running out of money is every retiree’s worst fear. Annuities are one way that retirees and advisors can address these fears.