As retirement approaches, the focus shifts from creating your nest egg to turning it into actual income. But how can you spend more than your retirement savings? This is an important concern, especially when you’re looking at more than 30 years of retired life.
Withdrawing money from a retirement income fund or generating income through bonds and guaranteed investment certificates are all great ways to convert your savings into income. But they can all run out of money before you die. So how can you generate an income that’s guaranteed for life?
Here are five ways to get guaranteed income for life.
1. Work Toward Getting a Pension
A pension is a great retirement income strategy for people who didn’t save enough for retirement in earlier years. To get a pension, seek employment with an organisation that offers pension benefits then work there long enough to qualify for the benefits. Government jobs both at state and federal level offer pension benefits and some to consider include police, military, and fire departments.
2. Buy an Immediate Annuity
One of the easiest ways to generate guaranteed income in retirement is to buy an immediate annuity. An immediate annuity, also called a single-premium immediate annuity (SPIA), is an annuity contract that is purchased with one lump-sum payment and starts paying out one month after the premium is paid. The payments continue for as long as you are alive.
The nice thing about an immediate annuity is that it provides a reliable and inexhaustible stream of income. Additionally, you can sell the annuity payments for a viatical settlement when the need arises.
3. Get a Reverse Mortgage
Another way to generate guaranteed retirement income is to get a reverse mortgage. The lender makes payments to the homeowner based on the equity of the home. Unlike traditional mortgage, payback is optional. However, you are required to make timely payments of home insurance and property taxes.
While reverse mortgage can generate guaranteed retirement income, it is not popular among retirees as they fear that the lender can take their property. This was true some time back but new regulations have made the product safer, and less risky for homeowners.
4. Claim Social Security
Claiming Social Security is a great way to increase your retirement income. Retirees are qualified to claim Social Security benefits at the age of 62. However, claiming benefits at this age will reduce your monthly payments and overall lifetime earnings. Many financial planners recommend clients delay taking benefits until the age of 70. This is because benefits increase based on the number of months you do not receive benefits between age 62 and 70.
5. Put Money in a Deferred Income Annuity or Qualified Longevity Annuity Contract
A deferred income annuity, sometimes referred to as a longevity annuity, is a form of annuity that guarantees a lifetime income at a future date. A Qualified Longevity Annuity Contract (QLAC) is a special form of deferred annuity that’s funded with an investment from a 401(k) or IRA. These two forms of longevity insurance allow you to enjoy your retirement without having to worry about a future source of income.
These five ways to generate guaranteed income can help create a stream of income that you’ll need for a financially secure retirement.