| Don’t outlast your money |
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| Annuities help guarantee that you won’t outlast your money. They keep paying you a benefit until you die — no matter how old you are or how long you live.
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The good news: People are living longer. Americans who were born at the end of the 20th
century are likely to live at least 30 years longer than those born at the beginning. Most
62-year-olds will live at least another 20 years. Many will live another 30 years.
The bad news: You might outlive your retirement savings if you don’t plan carefully. After you
retire, you’ll need to take money out of your savings to live on, so you’ll need a payment plan.
Unless you have a medical condition, after you reach retirement age you might consider using
an annuity to help manage your retirement income. An annuity is an insurance contract that
guarantees regular payments for life or over some set period of time. The FRS Pension Plan also
pays benefits as an annuity.
However, because a financial or medical crisis in your family could cause you to need
some money right away, it’s a good idea to build flexibility into your payment plan.
In retirement, keep some savings in short-term investments, like a money market
fund, that have little risk of going down in value. Financial planners often suggest
keeping an amount equal to six months of normal expenses in these investments.
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