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AARP talks up annuities

Retirees should consider annuitizing enough of their savings to cover such recurring expenses as rent or mortgage payments, utilities, food and medicine, AARP recommended in a recent report.

The 40-million-member association for people 50 and up released a “Money Matters” tip sheet offering general financial guidance that challenges some conventional wisdom. Issues addressed in the report include when to claim Social Security benefits, whether to buy an annuity and what to do with homes or mortgages.

“Rules of thumb no longer apply,” AARP said in a statement.

Annuities provide regular payments for life, but relatively few people use them out of fear that they are risky or inappropriate, AARP said in its report.

But annuities aren’t appropriate for those who have little in savings or already are replacing a large share of pre-retirement income with Social Security, the report cautioned.

For many people, retirement should be delayed until they can claim full Social Security benefits, the report recommended. Although it is possible to begin receiving Social Security as early as age 62, monthly payments can be reduced substantially for workers and spouses.

Benefits increase through the delaying of claims up to age 70. The Social Security Administration provides an online calculator to estimate monthly benefits.

“When most individuals think of retirement they think about how to save enough money,” Jean Setzfand, AARP director of financial security, said in the statement.

“We have not spent nearly enough time discussing the best ways to take that money and turn it into an income stream that lasts throughout retirement.”

AARP also released “Making Your Nest Egg Last a Lifetime,” a report written by Anthony Webb, a research economist at the Center for Retirement Research at Boston College, which looks at common financial decisions in retirement planning.