Retirement & Financial Planning Report

People are living longer, on average, so providing for income far in the future may be a concern. Possible tactics:

Buy an immediate annuity. You can buy such annuities in several forms. They can cover your life only, the lives of yourself and your spouse, or your life only with guaranteed payments to a beneficiary for a certain period. Depending on the type you choose, you’ll receive more or less each month. However, if you buy when you’re relatively young, the payments will be small. That’s especially true in today’s low-yield environment.

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Buy laddered annuities. Instead of buying a $50,000 annuity at 65, you might buy a $10,000 annuity at 65, another $10,000 annuity at 67, another at 69, until all $50,000 is invested in five different immediate annuities. As you grow older, you’ll buy annuities with larger payouts. In addition, future annuities might pay more, if interest rates rise.

Insure against your own longevity. You buy these annuities now but don’t start to collect for many years. Say you buy a $50,000 annuity now, at age 65, but don’t start receiving income until age 85. You can tap your portfolio with more confidence in your earlier retirement years, knowing these payments will kick in if you live for many years. You can buy a policy guaranteeing a certain payout (for your heirs) if you don’t live to that age.