Retirement with multiple retirement options

Retirement with multiple retirement options

A study published in Scientific American found that blending doesn't only make for a tasty smoothie - it can also lead to a better lifestyle in retirement.

In retirement, some people choose to have a combination of investments like 401s and fixed annuities, which provide a guaranteed income stream in retirement. Investor bank Goldman Sachs' annual retirement report found that retirees who adopted a blend income strategy tended to be more satisfied with their income.

In comparison to those with only an investment or an annuity alone, retirees with this type of mixed income had a higher level of confidence making the transition into retirement.

As employers-sponsored retirement plans and other investments, such as 401s and IRAs, have become increasingly crucial to planning for retirement. Also known as fixed-rate annuities, which are typically funded in a lump sum or multiple payments, are another popular option.

Permanent annuities offer guaranteed income for the rest of the contract holder, whether in a monthly, quarterly, semiannual or annual payment. Annuities are like a regular salary in retirement that you can collect alongside monthly Social Security payments and other income.

A combination of 401 and annuity provides retirees with the advantages of an investment that produces capital gains and produces a steady, fixed income stream - aka 'blended' income.

Having multiple income streams in a retirement portfolio appears to offer retirees more than just peace of mind. The majority of seasoned retirees are enjoying retirement more than those who only have investments or annuity income. The guarantee of lifetime income provided by annuities can help protect retirees from outliving their savings.

But there are drawbacks of annuities, such as steep upfront fees and annual fees that range from 1% to 3% of annuity cost, according to insurance company Nationwide.

If a contract holder tries to withdraw funds in the first few years, it will be subject to a'surrender' fee that reduces the value of their investment. Annuity income must also be paid taxes and fees because it's regarded the same as the earnings you receive while working.

The report shows that many Americans are facing financial difficulties due to a 'financial vortex,' or competing costs like rising debt, higher education, and student loans that make it challenging to save for retirement at all. Of the 3,700surveyed, about 1 in 5 said these competing financial priorities will delay their retirement by at least four years.

Jill Cornfield, 58, has covered retirement for more than 10 years. I agree to Money's Privacy Notice and consent to the processing of my personal information.

Am I too young to get an annuity?

Lawmakers want to Boost Social Security Payments by changing the COLA calculation.

In 2024, Social Security benefits are expected to skyrocket by 3.2%. All information contained on this site is accurate as of the publish date.