Dr. Pfau's Advice on How to Retire in a Low Interest Rate Economy
In many instances, annuities will also allow you to choose an inflation option for your income payout so that the income that you receive will rise over time. This feature can work to help you in combating the inflation risk factor.
One of the biggest issues facing both retirees and financial advisors today is determining how to best convert savings into enough income so that it can fund a comfortable retirement, and also last the remainder of an individual or couple's lives.
In the past, retirement income strategies such as the "4% Rule" - where you would withdraw 4% of your savings and allow the remainder of the funds to continue growing - were often used, based on a portfolio that was adequately balanced between equities and fixed income investments.
Just bought my first SMA and was very happy to have gone through Immediate Annuities.com. I found them in an article in the Wall Street Journal. As a first time buyer, I had a lot of questions. But to their credit, they did a great job answering my questions directly or getting the right answers from the right people when they needed to.
But today, given the historically low interest rate environment, coupled with an unpredictable stock market, Pfau along with many financial planners and experts are rethinking this method, as it could essentially lead you to run out of savings.
How much money should you be saving or investing for retirement?
Certainly, one of the biggest questions on most peoples' minds in any environment is how much should you be saving. Here, there are several parameters that you need to think about, Pfau believes, because there isn't just one, clear-cut answer for everyone across the board.
These criteria include what your retirement spending goals will be - in other words, you need to get an idea of how much you will be spending on housing, food, utilities, etc. after you retire. You will also need to determine at what age you plan on retiring.
Then add up all of your approximate living expenses. At that point, you will know about how much you will need to save.
You can then start to factor in your potential income sources. For example, how much will you have coming in from sources like Social Security, a pension, or other avenues? Pfau said you could also consider putting money into an annuity so that the payouts from that cover your essential spending.
Do you have more questions about annuities and how they could fit into your retirement income strategy? Contact us now at (800) 872-6684. We’re here to help!
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