How to Make Your Retirement Savings Last a Lifetime


No matter your current age, retirement is coming, at some point. For most people, the earlier that time comes the happier they are. In any case, whether you’re looking forward to that day or you want towork as long as you’re physically able, you will have to call it quits eventually. There are all kinds of ways to spend your retirement but the key to any comfortable retirement is having the right plan in pace, which includes having enough money to last as long as you do.

Making the Most of Your Retirement Savings
Therefore, no matter how close you are to actually hanging it up, you should start working on your retirement plan as soon as you can. That plan needs to include measures that will prevent youfrom running out of money too soon. Going broke in retirement is not a good way to spend your golden years. So how do you make sure that your retirement savings are going to last as long as you need them to?

Open a Qualified Longevity Annuity Contract
One way to ensure that your money lasts as long as you do is by opening up a qualified longevity annuity contract, or QLAC. This option allows you to invest as much as 25 percent of the total balance of your 401(k)s and IRAs, up to $125,000, into a QLAC. Sohow does it work? It’s rather simple actually. You start by paying a lump sum amount to an insurance company. At some point in the future the insurance company then starts to pay you a yearly income for the rest of your life. This happens between the agesof 70 1/2 and 85-years-old and the longer you wait to start taking the payoutthe larger your annual payment will be.

Lifetime Annuities Help Reduce Risks
According to a recent study by the Pension Research Council, putting a portion of your retirement savings into a lifetime annuity is an effective way to protect your savings from longevity risks. Lifetime annuities also help provide people with significantly higher consumption possibilities, especially when they get older.

Using Retirement Funds Saveson Taxes
Another advantage of a QLAC is the fact that you can use your IRA moneyto open one of these contracts. Any money you invest from an IRA or 401(k) does not count against your balance when you turn 70 1/2 and you have to start withdrawing minimum distributions from those accounts. On the down side, your QLAC payments will be taxed at regular income rates. Just be sure to shop around before you sign one of these contracts in order to get the best payout possible, as each company’s payout amounts will vary.

The post How to Make Your Retirement Savings Last a Lifetime first appeared on Advisors to the Ultra-Affluent – Groco.