In the US, Jean Chatzky described strategies for regular retirement income — MarketWatch
In the United States, financial author Jean Chatzky described several ways in her new book to create regular income after retirement without converting all savings into an annuity. As MarketWatch reports, her approach involves allocating about 25% of a retirement portfolio to monthly payments, while the remaining funds can stay invested.
An annuity involves a lump-sum payment to an insurance company in exchange for monthly income for the rest of one’s life. According to the publication, 18% of Americans are currently covered by a pension plan, while fewer than 15% of US residents have purchased annuities. Chatzky does not view an annuity as the only retirement-planning tool.
A portion of savings for payments
MarketWatch gives the example of a $400,000 portfolio: $100,000 could be used to purchase an annuity, while $300,000 could remain invested. For a 61-year-old woman from Pennsylvania, a $100,000 annuity could provide approximately $600 in monthly income. Under this approach, part of the funds can be used for guaranteed payments with both smaller and substantially larger amounts of savings.
Chatzky cited a Corebridge Financial study according to which 60% of retirees had more money than when they stopped working, while another 14% had approximately the same amount. In her view, fear of exhausting savings may prevent people from spending money set aside for life after the end of their careers.
More current news is available on the UA.News Telegram channel Telegram.
Portfolio management strategies
One option is a total-return strategy. An investor allocates assets between stocks and fixed-income instruments, restores the planned portfolio structure each year, and uses proceeds from assets that have increased in value to fund the following year’s expenses. As they age, the share of more conservative instruments can be increased.
Another option is to allocate funds among separate “buckets”: a long-term one with stocks, a medium-term one for five to eight years with bonds, certificates of deposit, and inflation-protected securities, as well as a cash reserve for several years of expenses. According to Chatzky, this model may make it possible to avoid selling stocks during periods of market turmoil.
Target-date funds
Owners of target-date funds now generally need to choose on their own whether to annuitize part of their savings or make regular withdrawals. Chatzky believes that in the future, retirement plan administrators may simplify access to guaranteed-income programs for participants in such funds.
