\n If you\u2019ve spent your career in the private sector, chances are you won\u2019t get a pension in retirement.\n <\/p>\n
\n Not having that steady paycheck can make retirees nervous about spending the money they\u2019ve squirreled away, especially given that Social Security will replace only 40% of pre-retirement income on average.\n <\/p>\n
\n But there are ways to convert part of your nest egg into a predictable income stream that, when coupled with Social Security, can cover your essential expenses in retirement.\n <\/p>\n
\n Creating your own paycheck can spare you from the biggest fear for many retirees: running out of money before they die.\n <\/p>\n
\n That\u2019s because retirees have to manage their assets not knowing how long they\u2019ll be healthy, how long they\u2019ll live, how markets will perform and how high inflation will be.\n <\/p>\n
\n The perennial stress of figuring out how much they can afford to withdraw can lead many to underspend in retirement<\/a>. So, they live less well than they might and some die leaving a nest egg that is almost as large as, if not larger than, when they entered retirement.\n <\/p>\n \n In her upcoming book, \u201cThe Forever Paycheck: The New Retirement Strategy to Spend More, Worry Less and Never Run Out of Money,\u201d Jean Chatzky cites a study<\/a> that found retirees who hold a greater portion of their wealth in guaranteed income \u2013 such as that from a pension or annuity \u2013 spend more than retirees who hold the greatest share of their wealth in investments.\n <\/p>\n \n What\u2019s more, the study\u2019s authors noted: \u201cSurveys reveal a clear preference among retirees to live off income and many don\u2019t feel comfortable spending down assets to fund a lifestyle.\u201d\n <\/p>\n \n Put another way, \u201cif you structure your money so you have a paycheck, you\u2019re going to be a lot more comfortable spending it,\u201d said Chatzky, founder of personal finance site HerMoney.com.\n <\/p>\n \n Once you have a sense of your spending needs and figure out how much income you\u2019ll need on top of Social Security, you can set up a \u201cpaycheck\u201d in multiple ways.\n <\/p>\n \n Chatzky\u2019s book, which highlights the work of researcher Wade Pfau in creating a retirement income plan, lays out four income path strategies. The \u201cright\u201d choice comes down to how much market risk you\u2019re willing to take versus how much income certainty you want.\n <\/p>\n \n For those most interested in income protection, one approach is to set up part of your nest egg to produce a predictable amount of income every year through interest-bearing bonds and certificates of deposit. But that requires you to be somewhat proactive or pay someone else to do it for you.\n <\/p>\n \n Another approach involves annuitizing a portion of your savings, which can ensure predictable income but also place\ufeffs limits on your ability to get any remaining money out.\n <\/p>\n \n Annuities are not for everyone. Many financial experts note they can be complex, expensive and a potential rip-off if you\u2019re directed to a product that is unsuitable for your needs. But for people who know how risk tolerant they are and who do their research, annuities may be helpful.\n <\/p>\n \n Across the three main types of annuities \u2014 fixed, variable and fixed index \u2014 the income from each can be either immediate or deferred. (Annuity.org offers helpful guides about the different types<\/a> and what to consider before buying<\/a> one.)\n <\/p>\n \n There are also a variety of add-on options: Do you want inflation-adjusted payments? Do you want to be paid for life or just over a decade or two? Do you want the annuity to have a survivor benefit? The list goes on.\n <\/p>\n \n The more add-ons you choose, the lower your guaranteed paychecks will be. For example, a $500,000 single premium immediate annuity (SPIA) offering a 6% interest rate would pay you a flat $30,000 annually until you die. But if you opt for inflation adjustments, your interest rate will be lower, thereby lowering your initial payments so they can grow over time with inflation, said Bryan Hodgens, head of research for LIMRA, a trade association for the insurance and related financial services industry.\n <\/p>\n \n None of it is simple. Both Hodgens and Chatzky recommend working with an accredited financial adviser who knows both your finances and your retirement goals to get the best guidance.\n <\/p>\n \n But don\u2019t sign a contract before comparing offers from different insurers, Hodgens said. Also, ask how your adviser is being paid for any product recommended and only buy from reputable insurers that consistently get a top rating (A or higher) from places like A.M. Best, Moody\u2019s or Standard and Poor\u2019s, Hodgens said.\n <\/p>\n \n Chatzky said that because she is not a risk taker, she plans to buy an annuity with part of her nest egg.\n <\/p>\n \n \u201cBut there are some people who are not wired to match with this product,\u201d she said. \u201cThat\u2019s where the financial planner comes in: to help people figure out if this is the right solution. And if not, how can you get as close as possible (to creating a paycheck) without the guarantee?\u201d\n <\/p>\n","protected":false},"excerpt":{"rendered":"If you\u2019ve spent your career in the private sector, chances are you won\u2019t get a pension in retirement.…\n","protected":false},"author":2,"featured_media":563517,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,268,85,46,266,267],"class_list":["post-563516","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-il","tag-israel","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/563516","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=563516"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/563516\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/563517"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=563516"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=563516"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=563516"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}