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NEWSLETTER
First Quarter 2011 -
Consider buying an immediate fixed annuity as soon as you possibly can. It truly helps insure against disaster with the timing of your retirement. You give money to an insurer and they hand you a check for life. End of discussion.
Today, it may be difficult parting with a chunk of change. If you should have an untimely death, the insurer could continue to pay your family. But on the other hand, you could be unlucky and end up retiring at the start of a bear market, and annuity payments could soften, for as long as you live, any blows to your saving account. So, how do you know whether to buy an annuity or not.
Here are a few suggestions. There are a few things to look for that hinge on the condition of your nest egg after several years into retirement. With some research a first year withdrawal rate of 3.6% or less along with an asset allocation of 40% stocks and 60% bonds, would produce a nest egg of about a 100% success of lasting indefinitely.
With a million dollar nest egg, the annuitant can withdraw $36,000 the first year and with an inflation of 3.5%, approximately $37,260 upon the second year. If you want to withdraw more than 3.6%, how will you know with your withdrawal rate, that your egg will leave you with an empty bank account after 20 years?
On the fourth anniversary of your retirement, take a look into your account to see if you have more or less money than when you first retired….Of course, if you have more, you will be happy! But if you have less, your chances of running out of money within the next 20 years are substantial…..
To learn more about calculating the needed size of an annuity for retirement and how price/earnings ratios can help gauge your retirement portfolio, give me a call at 215-736-0200 and ask for Bill Cervellero. I sell today’s money that you can spend in the future at a discount!
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