Guaranteed Income for Life

Stretch your retirement savings with an annuity.

Retirees who watched in horror as their account balances plunged along with the stock market now face a new challenge: how to generate enough income to pay their bills.

A widely accepted rule of thumb suggests that if you hold initial withdrawals to 4% of your nest egg during the first year of retirement and increase that dollar amount by 3% in each of the following years to keep up with inflation, you won't run out of money over a 30-year retirement. Now even that strategy may not be cautious enough, and you may have to rethink your plans for retirement income.

Depending on the extent of your losses, you may want to freeze your withdrawals at current levels, skipping the annual inflation adjustment until the market rebounds. Or, if you suffered significant losses of 30% or more, you may want to restart your 4% withdrawal schedule based on the new, lower balance. But that can take a big bite out of your income. Say you started with a $1-million retirement stash and had been withdrawing more than $40,000 a year. If your savings shriveled to $700,000, you'd now have to get by on just $28,000 a year...

Kiplinger: Guaranteed Income for Life