For many retirees, the lack of a steady paycheck can be a source of anxiety, especially given that Social Security will only replace about 40% of pre-retirement income on average. However, there are ways to turn part of your retirement savings into a predictable income stream that, when combined with Social Security, can cover essential expenses in retirement.

Creating Your Own Paycheck

Creating your own paycheck can alleviate the fear of running out of money before passing away. This is because retirees must manage their assets without knowing how long they will be healthy, how long they will live, how markets will perform, and how high inflation will be. The stress of figuring out how much to withdraw can lead many to underspend in retirement, resulting in a lower quality of life than they might have had.

A study cited in Jean Chatzky’s upcoming book, ‘The Forever Paycheck: The New Retirement Strategy to Spend More, Worry Less and Never Run Out of Money,’ found that retirees who hold a greater portion of their wealth in guaranteed income, such as that from a pension or annuity, tend to spend more than those who hold the greatest share of their wealth in investments. This suggests that having a predictable income stream can make retirees more comfortable spending their money.

Setting Up a Paycheck

To set up a paycheck, you need to determine your spending needs and figure out how much income you will need on top of Social Security. There are multiple ways to do this, including setting up part of your nest egg to produce a predictable amount of income every year through interest-bearing bonds and certificates of deposit, or annuitizing a portion of your savings. Annuities can provide predictable income but may also limit your ability to access the remaining money.

It is essential to work with an accredited financial adviser who knows your finances and retirement goals to get the best guidance. They can help you navigate the complexities of annuities and other income-generating options, ensuring that you make an informed decision that aligns with your needs and risk tolerance.

Original reporting: KRDO (Colorado Springs metro) — read the source article.