Almost all retirees receive at least some form of guaranteed lifetime income, most commonly Social Security. For many households, Social Security represents the largest cash flow source in retirement, but there are other options, like annuities, that can offer additional guaranteed income.
The idea of receiving a reliable paycheck in retirement can be appealing, but there are some trade-offs to consider. This article looks at how guaranteed income from immediate annuities can affect a retiree’s first-year safe spending amount, lifetime spending, and their ending balance after 30 years.
Our Research on Retirement Income
In our recent annual study on retirement income, my colleagues Tao Guo, Amy Arnott, Christine Benz, and I explored different ways retirees can turn their savings into dependable cash flow. Along the way, we estimated a sustainable starting withdrawal rate of 3.9% and assessed flexible withdrawal strategies for those hoping to leave a legacy.
