Lifetime Retirement Paycheck Through an IRA

You should look at your retirement savings as retirement income generators that will give you a monthly paycheck for the rest of your life.  Then, spend no more than that amount.  There are basically three ways to accomplish this:

  1. Invest your savings and spend only the earnings from them.  Don’t touch the principle.
  2. Invest your savings and draw down the principle with caution so you don’t outlive your savings.
  3. Buy an annuity from an insurance company and live off that monthly benefit.

This might also protect your from inflation in addition to generating a lifetime of income no matter how long you live.  That’s peace of mind everybody wants.

Here are a few variations of the aforementioned options:

Scenario one you can invest in a variety of mutual funds, individual stocks and bonds, rental real estate, etc.  Under #2, you could invest your money on your own and withdraw what you need, or you could utilize a managed payout fund which does it all for you.  Finally, with the third option, you could choose from several options which include a fixed dollar amount, one that’s adjusted for inflation or a variable option among others.

All options have pros and cons and here is how they typically generate income:

  • RIG #1, interest and dividends, typically pays an annual income ranging from 2 percent to 3.5 percent of your savings, depending on the specific investments you select and the allocation between stocks, bonds, cash and real estate investments.
  • RIG #2, systematic withdrawals, typically pays an annual income from 3.5 percent to 5 percent of your savings, depending on your investments and how worried you are about exhausting your savings before you die.
  • RIG #3, immediate annuities, can range from 4 percent to 6.5 percent of your savings, depending on the type of annuity you buy and your age, sex and whether you continue income to a beneficiary after your death.

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Contact a tax expert at the IRA Financial Group for more info on how to use your IRA for a secure and worry-less future!

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