Retirement Savings Management Help

Running out of money in retirement is a fear for many people, not just because they are afraid they might not have saved enough, but also because they are not sure how much they can pull out of their accounts each year once they do start withdrawing. Nearly 80 percent of Americans don’t feel like they have the skills and knowledge to manage their own retirement as good as they’d like to.

Here we will look at some of the best ways people can move their retirement savings into an income stream for themselves without having to worry about going broke at some point. Specifically, let’s look into setting up an automatic income for yourself, and a newly reported idea from Brookings Research Group is suggesting a plan (pending legislative approval) that could permanently take the worry about this kind of retirement income away from participants.

First, you would need a pooled managed payout fund, would function like a 401(k) with the idea being that you invest in it after you retire instead of before. Just like with a 401(k), you work backward from a target retirement date, basing your stock options off of that, with more risky funds taken in your early investment years and less risky investments coming as you near your retirement.

With the pooled managed payout fund, retirees would put their money into a pool with other retirees which will be managed by a professional investment company, with a payout determined by you and your advisor to come to you as often as monthly in the form of fixed income. This isn’t a contract, so it is not guaranteed, but like a 401(k) it is built to be low risk, and see returns, and occasionally growth too.

Not only could the pooled managed payout fund be its own 401(k) type plan for working individuals, it will also accept rollovers from the accounts of retired individuals too. It is, like its name implies, a big pool in which everyone will draw from.

Second, this pooled fund would undoubtedly need a side fund to help an individual in the case of emergencies, so the idea would be the set aside 10 percent of the enrollees’ assets to be used for such an eventuality. This is especially important the older an individual gets, as things like health expenses tend to rise quickly. The main difference here is that most funds that exist don’t put aside emergency money when your annuities are set up for incremental payment. This gives the retiree more space to collect income without the worry of their money running out due to unforeseen reasons.

Then there is what is known as a longevity annuity, or a deferred income annuity, you are really investing in your old age by giving the insurance company some of your money now for what is essentially a contract for regular payments to continue through the entirety of your life, typically beginning 20 years after retirement, when your about 85 years old. This is just like an immediate annuity, except for the delayed payment, the benefit of that being you’ll be making a lot more back each month than you would if you were collecting on an annuity in your younger years. And since 85 isn’t exactly young, longevity annuities usually come with a death benefit for your survivors, so even if you don’t get to see the rewards of this investment yourself, you’ll be setting up your family and loved ones financially in the process. With this kind of annuity, you will never run out of money, even if you live to be 140 years old.

While this three-point approach to savings management seems like a no brainer, it still is a little bit away from becoming a reality here in America. A few things would need to happen for that to be the case, but there are legislators and lawmakers now who are working towards regulations on this end, changing how 401(k) funds can be accessed (as it stands they usually only come as a lump payment now) and finding new options when it comes to investments that employers have an incentive to offer. More and more people are retiring on their 401(k)s every year and its about time we addressed how to manage the future of all Americans, especially since so many are in the dark as to how to do it themselves.