After all of their research, professors Babbel and Merrill not only quoted the above statistics, but they gave some recommendations for people who are approaching retirement or who are already retired.
First, they suggest that retirees determine the minimal acceptable level of retirement income. This will vary from person to person. Then, they suggest investing as much of your life savings as necessary in an annuity to cover this minimal amount. That way, you won’t have to spend more to cover your needs and you won’t have to depend on government programs that could lessen or disappear.
Next, they suggest annuitizing some of your remaining money, and putting the rest in a combination of money market funds, stocks, and fixed income securities. They caution retirees in this process to make sure that they have provided for any other expenses, like health care or a nursing home. There are types of insurance that will do this, or the retiree can purchase a rider to a lifetime annuity that makes provision for it.
Most retirees want to leave a significant sum to their heirs. However, they need to balance this with having a comfortable retirement of their own and not leaving their heirs with unpaid medical debt. The higher your tolerance for risk, the more of your life savings you can invest in stocks and other high-risk investments in order to try to accumulate wealth for your heirs.
Finally, the authors caution retirees to make sure that they purchase annuities only from insurance companies that are financially sound. This will allow them to relax and not have to worry about their money during retirement.
If any of this information sounds confusing to you, or you’d like help in purchasing the types of investments that Babbel and Merrill suggest, we can help.
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Warmest Personal Regards,