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4 Ways to Help Prevent Outliving Your Retirement Savings


How do you make sure you don’t outlive your savings in retirement?

That, of course, is the $64,000 question. A report issued last week by the Government Accountability Office doesn’t provide a clear answer, but it does offer a look at what the experts are recommending, and how retirees make do.

The Senate Special Committee on Aging asked the GAO to review three things: Strategies that experts recommend for ensuring income throughout retirement, choices retirees have made for managing their pension and assets to generate income, and policy options available to ensure retirement income.

So what do the experts suggest? They typically recommended that retirees systematically draw down their savings and convert a portion of their savings to an income annuity to cover necessary expenses. If you’re lucky enough to have the option of getting annuity payments from a traditional pension plan, they generally suggest opting for that over a lump-sum withdrawal. The experts also recommended delaying Social Security retirement benefits until reaching at least full-retirement age, and in some cases, continuing to work and save, if possible. (For our take on annuities for retirement, SmartMoney took a look at the top 20 sellers of fixed annuities last year. Our sister publication, Barron’s, rang in just last month.)

The GAO offered this example: For two households with $350,000 to $375,000 in savings, the experts recommended buying annuities with part of the savings, drawing down the rest at an annual rate, such as 4% of the initial balance, using lifetime income from a defined-benefit pension plan, if available, and delaying Social Security. (Try our new retirement calculator to see how much you will need to save for retirement.)

It also points out that there’s no single blueprint that everyone can follow, since everyone’s expenses, income level, health and risk tolerance are different.

So, do people actually follow that advice? For the most part, no. Most retirees rely primarily on Social Security – and many take it before their full retirement age, the report says. And only 6% of those with a defined-contribution plan, such as a 401(k), chose or bought an annuity when they retired. The good news: Most retirees who left jobs with a defined-benefit pension took lifetime benefits.

But with fewer and fewer people having traditional pension benefits available, a bunch of policy proposals point to the need for education about ways to get the most out of retirement savings. Although some groups are pushing to make annuities available in defined-contribution plans, which might make them cheaper than if bought by individuals, some employers who sponsor the plans worry that their choice of annuity provider could make them vulnerable to lawsuits if there are problems.


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    • all major life insurance cmnpaoies sell annuities and any insurance agent will drool over the opportunity to sell you one.why anyone in their right mind would want to buy one is beyond me, but hey! different strokes for different folks.[the rates of return implied are usually poor].

    • There’s a ninety cenpert possibility that the investment will fail and most likely, 0 return. Bureau of the Census. Below are the dimensions and key questions : Folks have you got the right caliber of folks? Have they got the competencies to execute the new technique? Are they galvanized to do so? Biz Case Do folks know why the method is central stage? Do they know what to do differently on the Monday morning? Have they got the proper tools and systems to carry out the method? Communicate Do all of your staff know what the new method is and why it’s been adopted? Is the technique communicated in a fashion that it comes alive? Measure Do you’ve got the right measures for the new plan? Are the measures being leveraged to steer the fulfilment? Culture Has the basic way you are working modified in order to inspire the adoption of the new culture? Are you using the language of the new system? Process Do your processes support the new methodology? Are you fitted out to revamp processes in order that they are far more supportive and effective? Reinforce When members of staff step in to the unknown and demonstrate the new behaviours, are they recognized and rewarded? Does the beefing up give them encouragement to demonstrate the specified new behaviours? Review did you know if the actions being taken are producing the right results? Did you know what’s been learned from the realization in the last ninety days? .

    • Hello DavidWhat-To-Do is missing a use of funds . Corporate Greed ..As we all eneirepxced (401k participants) in 2008-09-10.. Corporate greed and plain dis-honest individuals controlling big business effected and destroyed many individuals planned and diverified Savings proportioned for secodary resource for retirement and education exclusive of the 529 plan Enjoy the dayDistroyed at 66 & 64 by Corporate Greed

    • Annuities are great for someone to insure that they won’t outlive their money. The best kind that I can find are Index Annuities. You are able to link them to the Indexes on wall street but if the market tanks you don’t lose out of your money. You are able to avoid taxes on the gains until they are drawn on, which helps because while you are retired you are going to be in a lower tax bracket than if you had to pay taxes on the gains from a dividend or a gain throughout your entire life at higher tax rates.

    • Move to Mexico. I did at 55. Worked great.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.