You are probably going to live longer than you think you will. The recent intel is that people who reach the age of 65 continue to live longer than their parents did. That means having more years to enjoy your home, your family, and all the things you worked for all your life. Which is great unless you outlive your money. You have no way of knowing how long you will live but that doesn’t mean you should assume that your income stream will remain constant and reliable.
Making Your Money Last Longer
Most Americans over the age of 65 only receive income from Social Security. While the Social Security program is expected to continue, predictions are that it will only be able to pay about 79% of the promised benefits, resulting in decreases of 21 percent to 27 percent in payment levels in the future. Unless you win the lottery or inherit some big bucks, it is time to figure out where your money will come from. That’s why adding an annuity to your portfolio can provide a guaranteed source of income.
What an Annuity Can Do
Setting up an annuity with an insurance company guarantees that you will receive periodic payments throughout your lifetime that will sustain you through retirement. You will have longer to pay into the funds if you opt for a deferred annuity, but you will be able to receive payments right away from an immediate annuity.
How to Calculate the Amount of an Annuity
Before you can shop for an annuity, you need an idea of how much money it should provide for you each month. A common way to calculate your needs is to add up all known expenses including food, housing, HOA fees, utilities, insurance premiums (homeowners, vehicles, health), and all out-of-pocket costs for medications and health care. Next, add up all known sources of income such as Social Security and pensions. Subtract your known income from your expenses to find out how much money your annuity will need to supply.
Not Sure Where to Start? No worries. There are places online that have done the groundwork for you so you can compare different types of annuities, the premiums, and the interest rates. Another good place to start is with your financial planner who can evaluate your current situation and make a workable plan for you to add an annuity to your financial forecast.