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By Rick J. — Published May 21, 2018
The rising costs of living and healthcare mean that retirement income needs to be planned meticulously. While not every person is in a job that ensures pension, augmenting social security benefits is critical to continue with the desired lifestyle. Here are some ways to obtain guaranteed income post retirement.
Invest in immediate annuity: Investing in immediate annuity can be a smart way to augment income from Social Security. The amount you would earn depends on your age, and the older you are, the more the earnings, comparatively. Immediate annuity is all about making a one-time lump sum payment to the provider and getting back a defined amount each year for as long as you live. The term immediate is used because the income starts immediately following the one-time payment. For instance, if you make a one-time payment of $100,000 and you are a 65-year-old male, you would earn $545 every month for as long as you live. Women of the same age will earn $520 given the statistical fact that women tend to live longer than men.
Go in for deferred annuity: Buying a deferred annuity product is another way to plan for retirement in the future, particularly for those who have ten or more years for retirement. In this, the earnings start at a defined point in the future and are not immediate. It is advisable to look for annuity plans that offer lifetime withdrawal benefit or those that have guaranteed minimum withdrawal benefit (GMWB). When you invest in this type of account, the value of money continues to grow and the increased amount is used to calculate your annuity amount at the end of deposit duration. You can withdraw a particular amount from the total amount while the rest of the amount is converted to annuity payments.
Look up government jobs: If it is feasible, join a government organization that ensures pension post-retirement. Many people change their jobs ten years prior to retirement to reap the pension benefits. If you take benefits from the age of 65 or more, you can maximize the amount insured in your pension.
Think about reverse mortgage: For people above 62 years of age, a reverse mortgage can be a great way of securing a regular income. It involves mortgaging your home or property to the bank which, in turn, pays a regular, guaranteed income. While losing the home was a common concern, the regulations have now changed to make this option safe and secure. Besides, the government cap on fee charges also ensures you do not end up paying any excess fee.
Defer social security benefits: Close to 40% of people claim Social Security benefits at age 62. Illness, not having a job or one spouse earning more than the other could be some of the instances where early claims for benefits are justified. But if you do not fall into any of such categories, claiming the benefits at 62 will mean you get 25% lesser income than what is available at full retirement. Claiming the benefits early will also reduce the survivor benefits that your spouse or family receives.
Think securities: Treasury securities, bonds, and CD ladder are other strategies to ensure income after retirement. Certificate of Deposits are insured by the Federal Deposit Insurance Corporation for a maximum of $250,000 and have fixed deposit duration such as three to six months, one or five years. The longer the term of deposit, the more you earn in terms of interest. Treasury securities are issued by the government and are one of the safest saving instruments. Treasury strips which are the interest portions of the securities can be bought from banks and laddered to create a steady income stream.