Guaranteed Income For Life Might Not Be As Good As It Sounds

One reasonably popular option is to use the money to purchase an annuity, which means you’ll get a steady stream of revenue for the rest of your life if you pay a lump sum payment now.

The upside is that you’ll have a regular “paycheck” for the rest of your life, and there’s no chance you’ll outlive your money. There are a few options when choosing annuities, including ones that guarantee payments to your spouse if you pass away before a specific time.

But a huge downside to an annuity is inflation. Meaning the payments you get from the annuity will be worth less as time passes.

For instance, if you buy an annuity that pays $2,000 monthly and the inflation rate averages 2%, those checks will only have $1,336 in purchasing power in 20 years.

You can always find annuities that have payments that grow over time, but this will greatly reduce your initial earnings. Another thing to think about is a deferred-income annuity.

If you don’t like the idea of putting all your savings into a pension, by putting a chunk of it into a deferred-income annuity, you’re basically buying “insurance” against outliving your nest egg.

You give a business a certain amount of money now, and they agree to make monthly payments towards you once you reach a certain age, like 80, for example. Because of that delay, it might not cost too much today to guarantee yourself enough money to live on when you get older.