50 KIPLINGER’S PERSONAL FINANCE^ 02/2020you may feel more comfortable with-
drawing money from your savings
for travel and other non-discretionary
items.
Unfortunately, this is not an optimal
time to buy an immediate annuity. Pay-
outs are tied to interest rates for 10-
year Treasuries, which are historically
low. You may want to wait until interest
rates are higher to purchase an imme-
diate annuity, or use a laddering strat-
egy, which involves making smaller
annuity purchases periodically—say,
every three to five years. If interest
rates rise, you’ll capture them. Plus,
the annuities you purchase in your
later years will pay more no matter
what happens because payouts are
higher for older investors. To get an
idea of how much you’ll need to invest
to get a specific monthly payment, go
to http://www.immediateannuities.com.
Paying off your mortgage before you
retire will also provide an extra layer
of security. You won’t have to worry
about selling stocks or mutual funds
during a downturn to make your
monthly mortgage payment.
And don’t forget about Social Secu-
rity, which will provide you with a
monthly check for the rest of your life,to the Employee Benefit Research
Institute. EBRI found that average
annual spending on food for people
age 65 to 74 was $4,400 to $4,900.
Once they reached age 75, it fell to
$3,700 to $4,000.
Unfortunately, that decline in
spending doesn’t last, because during
your last years in retirement—what
Stein sadly refers to as the “no-go”
years—your expenses will likely rise
to cover health care costs. If you need
long-term care, those costs could rise
precipitously.- Create a back-up plan
One way to assuage your fears that
you’ll run out of money is to buy an
immediate annuity. With an immedi-
ate annuity, you give an insurance
company a lump sum of money in
exchange for a paycheck for the rest
of your life, or for a specific period.
Here’s where your expense worksheet
really comes in handy, because you
can use it to estimate your regular
monthly expenses (such as utilities,
groceries and a mortgage, if you still
have one) and buy an annuity to cover
those costs. With those costs covered,
RETIREMENT
adjusted every year for inf lation. You
can claim benefits as early as 62, but
that will reduce your payout by up to
30% compared with waiting until full
retirement age (66 and 8 months for
those turning 62 this year). For every
year past your full retirement age that
you delay claiming, your benefit grows
by 8%. You can get an estimate of your
benefits at http://www.ssa.gov/benefits/
reti rement/estimator.html. But whether
you claim Social Security benefits now
or later, you don’t want them to be
your only source of income.- Once you’ve retired, review
your expenses once a year
That way you can determine whether
you’re spending more or less than you
expected and adjust withdrawals from
your savings accordingly. You can also
adjust your projections to account for
changes in your circumstances—a
paid-off mortgage, for example, or a
child who has moved out. If you spent
less than you estimated, congratulate
yourself and make a gift to charity, or
start planning that cruise. ■
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