Americans Fear Running Out of Money More Than Death. Could This Be a Solution?

If you’re someone who believes in saving for retirement, you may have contributed to an IRA or 401(k) plan steadily throughout your career. And hopefully, if you’re now nearing retirement, you’re happy with the balance you’ve accumulated through all of that hard work and investing.

The problem with your retirement nest egg, though, is that it’s not guaranteed to last. And that’s a scary thought.

A recent Allianz survey found that 64% of Americans worry more about running out of savings than actually dying. And it’s easy to see why.

Even if you apply a smart withdrawal strategy to your savings, there’s no guarantee that your money will last as long as you need it to. You could end up living longer than expected, or the stock market could go through an extended rough patch that forces you to lock in portfolio losses.

You don’t want to enter your golden years worried about outliving your savings. So it’s important to take steps to prevent that from happening. To that end, there’s one key financial product you may want to look at.

Could an annuity be a good solution for you?

Many retirees do have access to a guaranteed income source — Social Security. But the average retiree benefit today is only a bit over $2,000 per month. That may not give you all that much reassurance if you expect your monthly expenses to be a lot higher.

If you’re worried about running out of money as a retiree, it could pay to look into buying an annuity. An annuity is a financial product that guarantees you lifetime income. And there are a number of benefits to having one.

First, you don’t have to stress about outliving an annuity. Second, fixed annuities protect you against market volatility. A stock market downturn could wreak havoc on your savings, but with a fixed annuity, that’s not something to worry about.

Also, some annuities can be customized to address specific financial concerns you might have. For example, there are annuities that, like Social Security, are set up to adjust for inflation.

Of course, annuities do have some drawbacks you need to know about. They can be expensive to set up and they tend to have long surrender periods. This means that if you change your mind about wanting an annuity, you could face costly fees.

Also, annuities can be difficult to understand. And it’s generally not a good idea to put your money into something that confuses you.

Finally, while fixed annuities guarantee you a certain amount of ongoing income, they’re often not set up to adjust for inflation unless you specifically add that feature on — and pay for it. Your savings, on the other hand, could beat inflation from year to year if you invest in the right assets.

Think through your options carefully

If running out of money is a big concern of yours, then an annuity is definitely worth looking into. Whether it’s worth it is a different story.

To make that decision, you’ll have to weigh the opportunity cost of an annuity over putting your money into other assets that can generate ongoing retirement income for you, even if it’s not guaranteed. You may also want to consult a financial advisor who can tell you if an annuity is a good solution based on your personal situation.