“Well, today people have to be self-reliant if they want a secure retirement income.”
— Scott Cook
Scott Cook, who is a co-founder of Intuit, maker of the TurboTax software, is more right than ever these days. Just a generation ago, many millions of people had pension incomes to look forward to, but those are increasingly rare in the private sector. Most of us now have to rely largely on ourselves for our retirement income.
Here are five ways you may be able to boost your retirement income:
Work a few more years
The idea of working a few more years and retiring a few years later than we planned isn’t generally appealing, but it’s a powerful strategy.
Doing so will let you save and invest more for retirement, while putting off having to start drawing from your nest egg. Consider this example: If you sock away $10,000 per year for 20 years and it grows by an annual average of 8%, you’ll end up with about $494,000. If you can keep going for another three years, still averaging 8%, you’ll end up with… more than $657,000! That’s more than $160,000 extra just for delaying retiring for a few years.
If you’re collecting matching funds in your 401(k) from your employer, you’ll collect a few more years’ worth of that free money, too — and will remain in any employer-sponsored health insurance plan longer, too, possibly permitting you to save money on health-care spending.
This strategy isn’t a sure thing, though, because many times we end up retiring earlier than we planned, because of an unexpected job loss or health setback. If you can employ it, though, give it some consideration.
Buy a fixed annuity
Many people are rightly skeptical of annuities. After all, some of them — such as variable annuities and indexed annuities — can be quite problematic, often charging steep fees and sporting restrictive terms.
Fixed annuities, though, which can start paying you immediately or on a deferred basis, are much simpler and can be excellent options. Following are examples of the kind of income that various people might be able to secure in the form of an immediate fixed annuity in the current economic environment. (You’ll generally be offered higher payments in times of higher prevailing interest rates.)
Annual Income Equivalent
Annuities can provide much peace of mind, removing stock market moves and the economy’s current condition from your worries. A deferred annuity can also be smart, starting to pay you at a future point, such as when you turn a certain age. A 70-year-old man, for example, might…