3. Consider locking in additional guaranteed income.
If you’re confident that you can manage withdrawals so that you can cover retirement expenses while simultaneously ensuring you won’t run out of money before you run out of time, great. You can stop at tips 1 and 2 above. But if you like the idea of having more pension-like income than Social Security alone will provide—whether for financial reasons or because assured income can boost retirement happiness—then you may want to consider devoting a portion of your savings to an immediate annuity.
With an immediate annuity, you invest a lump sum with an insurance company in exchange for monthly payments that start immediately and continue to roll in the rest of your life regardless of how the financial markets perform. For example, a 65-year-old man who invests $100,000 in an immediate annuity today might receive roughly $550 a month; a 65-year-old couple (man and woman) would collect about $460 a month as long as either one is alive. To see how much you might receive for different investment amounts and ages, you can go to this annuity calculator.)
Even if you think adding an immediate annuity to your retirement income planmight make sense, make sure you understand an annuity’s drawbacks as well as its advantages. And should you still decide to go ahead, you’ll also want to shop around for quotes from several insurers with high financial strength ratings and, as a further precaution, keep the amount you invest with any single insurer with the coverage limits of your state’s insurance guaranty association.