Iím retired, 71, and living on my Social Security and
a pension totaling $3,200 monthly. I have an IRA worth
$412,000 sitting out of the stock market and another
$38,000 in a savings account. I donít trust the stock
market and believe it to be overvalued. Iím panicked
and frozen. I want to generate cash flow but also
protect the principal. Iím thinking of a fixed
annuity. Iíve been stuck like this for three years.
Any ideas you can share would be wonderful.
Rather than lurching toward a specific product, why not
consider first how much risk you need to take?
real question is, how much does it cost to live your
current lifestyle and are you doing that without tapping
into the liquid resources?" said Joshua Kadish, a
financial adviser and partner with RPG-Life Transition
lot of people come to us and say they want stocks, or a
certain bond or an annuity," he said. "We know
they need cash flow, but they donít understand the
differences among their options. Cash is inefficient,
but if it works for someone, why put them in a situation
where theyíre not comfortable?"
typically avoids fixed annuities, because of the low
interest-rate environment, and equity-indexed annuities,
because of their costs, but he has been using
FDIC-insured bank products such as principally protected
CDs for clients with very little risk tolerance.
youíre healthy and expect to live another 20 or more
years ó and are withdrawing more than about $20,000
from the portfolio annually ó then sitting on your
hands isnít a good option much longer. Even if
withdrawals are modest, the effects of inflation could
ravage your nest egg over time.
CDs offered by online banks were paying about 2.3
percent annually for five-year terms recently. Thatís
certainly better than many local bank savings accounts.
In a recent article, it is mentioned that Social
Securityís maximum individual benefit for workers
retiring at full retirement age is $2,663 per month. I
have inquired about my own in the past and although Iím
not near the full retirement age, have found that my
benefit was somewhat short of this amount.
does a person increase their benefit based on full
retirement age? Is it based on your total earnings and
amount contributed? And will my benefit increase each
year up until retirement? Is there a formula that we
could use to assist us on calculating our benefit? These
questions would be without adjusting for early
retirement or waiting until 70 to start withdrawals, as
I know this would adjust our benefit accordingly.
Social Security benefits are based on your payroll taxes
paid, but not necessarily your total earnings. For 2015,
earnings up to $118,500 are subject to Social Security
taxes. Benefit estimates from the Social Security
Administration assume you will continue to work at your
current salary until retirement age. You can try out
different scenarios at the SSA website, ssa.gov/retire2/estimator.htm.
for you for taking an interest in learning how these
benefits are calculated, because there is a lot of
confusion around it, Kadish said.
sitting with thousands of people over 20 years, I will
tell you that assuming (clients) know nothing about this
has been a good strategy," the adviser said.
"Iíve worked with a lot of intelligent,
successful people, but this is not their thing."
youíre up to speed on your own benefit, youíll then
need to figure out your best claiming strategy, which
could be different depending on whether you are or were
married or whether youíll be working after you begin