Editor's Note: This is one of 20 tough financial challenges from the "Do This or That?" cover story in the September 2011 issue of Kiplinger's Personal Finance. Use the drop-down menu above to consider other financial challenges; share your own experiences and insights in the Discuss field at the bottom of this page.
Choose an immediate annuity if you’re worried about outliving your savings. You’ll be able to generate nearly twice the amount of monthly income you could safely afford to withdraw from a similar amount invested in a balanced portfolio of stocks and bonds. For a 65-year-old man buying an annuity today, that’s about $7,600 per year for every $100,000 invested. But don’t tie up all your cash. Once you buy an annuity, you can’t get your money back, and if the annuity is not adjusted for inflation (most aren’t), you’ll lose buying power over time.
Tap your portfolio for income if you’re confident in your investing abilities or you have a trusted money manager. Try to hold your first-year withdrawals to 4% of your total nest egg. Then, if your investments continue to grow, you should be able to give yourself a raise each year to offset inflation and perhaps have money left over for your heirs.
Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy