Even ‘people with a net worth of $10 million’ fear making this retirement mistake: 3 ways to avoid it (via CNBCMakeIt)
To avoid this fate, Hessel suggests retirees use a "bucket" approach, assigning different uses for baskets of their savings. Under one strategy, you'll have to calculate your essential living expenses, such as food, housing. "Tie these expenses to guaranteed income sources, such as Social Security, pensions, and annuities," he says.
For some retirees, part of the solution to that problem is buying an annuity, a contract issued by an insurance company that guarantees the person who buys it a steady stream of payments for the rest of their life. You can purchase an annuity either via a lump sum payment or by paying monthly premiums.
Generating income without taking on all the risk you get from equities is a big problem for retirees.Many retirees replace about half of what would be their bond portfolio with an annuity, with the goal of covering essential expenses with guaranteed income, Lau says. Whether this is a viable strategy for you depends on the size of your portfolio. You can useto determine how much a certain amount of guaranteed income will cost.
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