Holding on to the hoarding mentality
Once you have amassed a handsome sum, it may be difficult to relinquish a portion of it to create a stream of income. Experts often recommend getting a life annuity. Very basically, immediate annuities are insurance against outliving your money. You give the insurance company a lump sum, and they agree to give you a certain amount at regular intervals until you die.
“The problem is that people don’t like traditional single premium annuities, and they don’t buy them,” Munnell says. The alternatives to annuities – living off of interest and dividends or using the 4 percent rule for withdrawals – can leave retirees subject to market whims or pursuing investment strategies based on their need for income instead of a prudent approach that optimally balances risk and reward.
