retirement

Avoid running out of money in retirement

Annuities help reduce uncertainty
Annuities help reduce uncertainty © Monkey Business Images/Shutterstock.com

One approach that retirement researchers advocate to deal with the uncertainty of how long you will live is to buy a private annuity from an insurance company so that you get a defined income for life after you retire. The drawback: Most annuities do not provide inflation protection unless you specifically get one that does.

Social Security payment is an annuity that most Americans expect to receive, and it generally offers a cost-of-living allowance annually. You can get a benefit as early as age 62, but the longer you wait, the higher the payout. Because you receive "delayed retirement credits" past your full retirement age -- between 66 and 67 for those born after 1943 -- it may make sense to wait until age 70 to collect, when you get the maximum benefit. You could use your own savings for a while instead of opting for Social Security as soon as you are eligible.

Also, think through the retirement decision. Rather than retiring and then trying to get back into the labor force if you decide you need more money -- at which point you will likely only find a lesser job -- you might be better off sticking it out longer in your primary occupation and retiring only when you determine that you are truly ready to do so.

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