Saturday, November 23

Why Americans Are Not Annuitizing — and Why They Should

Retirement is something that almost every working American looks forward to and depends on, but that future isn’t so secure for many Americans — and they know it. One in four Americans think that they will have to work until the age of 80 — well past the traditional retirement age of 65 — to be able to retire comfortably. Part of the problem, it seems, is that Americans are more attracted to large lump sums than ensuring that they have a steady stream of income in retirement.

According to Time, an academic panel hosted by Defined Contribution Institutional Investment Association (DCIIA), two professors — Michael Finke of Texas Tech and Stephen Zelde of Columbia University — discussed why Americans are not annuitizing and why they should.

Though annuities haven’t been favored in the past, mostly because owners feel like they lose control of their money, having one provides the owner with a stream of income in retirement.

A recent study conducted by the American College of Financial Services found that fewer than half of those polled think that an annuity is a better option than a lump sum payment. The problem is that people who only have a nest egg are going to have a harder time managing their money in retirement than those who have some sort of additional source of income through an investment. According to Time, one option that people should consider is a real estate investment that will generate that steady source of income.

The benefit of investing in real estate — especially if someone uses a self-directed IRA to do it — is that the owner of the IRA can’t benefit from the investment until he or she retires, which creates a pretty good safety net for retirement.

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