Delay Social Security, Buy Annuities

Your federal government is giving you retirement planning advice. The General Accountability Office issued a report July 1 titled “Retirement Income: Ensuring Retirement Income Throughout Retirement Requires Difficult Choices.” You might ask why the government is giving you and others retirement advice. The GAO compiles and issues reports after a member of Congress requests one. In this case, Sen. Herb Kohl of Wisconsin and chairman of the Special Committee on Aging asked the GAO to review three issues:

• Strategies that experts recommend retirees employ to ensure income throughout retirement.
• Choices retirees have made for managing their pension and financial assets for generating income.
• Policy options available to ensure income throughout retirement and their advantages and disadvantages.

The GAo asked financial experts it selected what they thought, and compiled the report. The GAO also said it might be good for 401(k) and other retirement plans to have annuity options.

We’ve mentioned for some years that immediate annuities can be an excellent addition to a retirement portfolio, making a portfolio last longer and ensuring you don’t outlive at least some of your income. We’ve also been early to the party in suggesting that it makes a lot of sense to wait to receive Social Security benefits. The difficulty right now is that interest rates are so low that people are understandably reluctant to lock in the rates paid on today’s annuities. But over the long term an immediate annuity, especially an inflation-indexed annuity, is an excellent part of a retirement portfolio.