A lump sum in lieu of a pension, withdrawal strategies, annuities and other mundane decisions – good luck.

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I recently viewed an interview by Christine Benz on YouTube with the finance writer for the Washington Post.

The topic was the difficulty transitioning from saving to using money for retirement income, a topic frequently discussed on HD. The writer said she was getting ready to retire and her husband was already retired. She went on about her own thinking regarding the difficulty of transitioning from saving to spending. 

After a few minutes of the discussion about withdrawal strategies, she revealed that in addition to what she and her husband had saved, they both had pensions and, of course, social security. Her husbands pension provided her with a survivor annuity. 

She then said she was taking her pension in a lump sum because she wanted total control over her money. Giving up a life annuity income when you have additional resources doesn’t sound like good move to me, especially after saying how difficult the withdrawal strategy would be, what do I know, I’m not a financial columnist. However, I do live on a pension and Social Security and I know the feeling that steady income provides. 

Maybe she has enough investing skills to pull it off, but I bet most of the YouTube viewers would be making a mistake. To me the key to a secure, stress-less retirement is a steady income stream that does not require annual withdrawal calculations or decisions or fluctuating income. 

The writer gave up the second best source, a pension, not available to many Americans these days. Most people must construct their own income stream. 

If I was in that position I would use a portion of my investments to purchase an immediate annuity and I would assure an added income stream with dividends and interest. I see that as simple with few additional decisions needed on an ongoing basis. No guardrails, no ladders, no (significant) worries about the stock market. And it preserves at least a portion of investments. 

In fact, to cope with my non-COLA pension, over many years I have built a supplement income stream from bond interest and dividends and because it has been reinvested for over twenty years, the monthly proceeds could now boost our pension income by nearly 20%. 

No doubt there are other ways to construct a retirement income stream, better than mine very likely, but I like simplicity even at a cost. 

How do people do it, that is, construct their retirement income stream from accumulated savings with minimum effort, maximum stability and minimum stress?