By Margaret Collins
July 1 (Bloomberg) -- Retirees may have to delay Social Security benefits and buy an annuity to have enough money for retirement, said a U.S. government study.
“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today.
Middle- income households, defined in the study as having a net worth of about $350,000 including their homes, that don’t have traditional pensions should consider using a portion of their savings to purchase an inflation-adjusted annuity, the study said..
The study recommended that retirees make withdrawals from their investment portfolios at a rate of 3 percent to 6 percent annually. Many also should wait to take Social Security until at least the full retirement age, or 66
Almost half of those near retirement are predicted to run out of money and won’t be able to cover their basic expenses and uninsured health-care costs,
An immediate annuity can protect retirees from the risk of outliving their savings, according to the study. For example, a contract purchased for $95,500 by a 66-year-old couple in Florida may provide $4,262 a year until the death of the surviving spouse and include increases for inflation, the report said.
Resistance to Annuities
Americans have resisted buying annuities for reasons including concern about fees and the desire for control of assets ... The problem right now is interest rates are so low you’re not getting a great return for that chunk of cash you’re handing the insurance company,” said Liz Weston, author of “The 10 Commandments of Money.” That’s why retirees may want to purchase a contract with some of their money now and buy another in the future when rates may be higher, said Weston, who’s based in Los Angeles.
(Emphasis above by me not the author)
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