What is the best strategy to meet income needs until full retirement and beyond?

In January 2019, I will reach my full retirement age of 66 years old. I am single, currently work part time and earn $45,000 per year. I need to supplement my income by $1,500 per month. Would it be better to draw down on a $100,000 IRA account that I own until I begin collecting Social Security in January of next year, or should I turn on an annuity I own which has a $406,000 account value and $549,000 lifetime income basis that will pay me $2,200 per month for life? The annuity has a guaranteed interest rate of 6%, compounded daily. Alternatively, should I consider cashing out the annuity (which is out of a penalty period) and investing in another financial instrument that would better serve my income needs now and in the future?

Retirement, Social Security, Investing, Annuities, IRAs, Retirement Plans
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March 2018

There are a lot of moving parts to your question.  It is hard to give advice without more information.  Here are a few things to consider while making your decision (this is by no means an all-encompassing list of what to consider for retirement planning):

  • Make sure you take taxes into consideration.  You want to look at net numbers and make sure you don't get stuck with unexpected taxes later.
  • Is the annuity after tax dollars or was it funded by a retirement account?  The distribution is taxed differently based on the answer to that question.
  • If the annuity will pay you $2,200 and Social Security will cover your income shortfall, what is the purpose of paying M&E and Rider fees in the annuity?  I recommend you research the internal costs of the annuity and find out if it fits your future goals.

Good Luck!

March 2018
March 2018
March 2018
March 2018