Outliving Your Retirement

Almost every working person in America is, in some way, planning for retirement. Most of us are aware that traditional sources of retirement income, such as Social Security or an employer-sponsored pension, probably will not fully fund our retirement as they did for past generations.

More and more it is up to us to prepare financially for our retirement years. As we build our individual retirement accounts, we generally estimate our needs based on the cost of our expected or desired retirement lifestyle, the current outlook for inflation, what we can currently afford to save and our estimated life expectancy.

This seems reasonable, but what if one or more of these factors prove to be other than anticipated and the money doesn't last? People are living longer today, and it's especially necessary to plan for the possibility of a longer life span. What if you run out of retirement savings at age 85 and live 10 or 20 more years?

Annuitization May Help with general retirement planning

Ensuring that retirement savings in your individual retirement accounts last long enough is where annuitization comes in.

What does annuitization do?

Annuitization, available through insurance contracts called annuities, guarantees the annuity owner income payments for a pre-defined period of time, typically ranging from as short as five years to as long as the lifetime of the owner and his or her spouse.

Additionally, many financial advisers consider this an excellent method of building future income because annuities are tax-advantaged investments—that is, their assets grow on a tax-deferred basis during what is called the initial “accumulation phase.”

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