GAO Issues Report on How To Ensure Income Throughout Retirement

The U.S. Government Accountability Office (GAO), at the request of Sen. Herb Kohl, the chairman of the Special Senate Committee on Aging, has studied and released a report on how best to ensure income throughout retirement, finding that found that while most retirees rely primarily on Social Security, most Americans fail to maximize their benefits.

The report--"Retirement Income: Ensuring Income throughout Retirement Requires Difficult Choices"--finds, among other things, that around 72.8% took benefits before age 65, and only 14.1% took benefits the month they reached full retirement age, noting that, by taking the benefits on or before their 63rd birthday, 49.5% passed up at least 25% to 335 in additional monthly inflation-adjusted benefits that would have been available had they waited until full retirement age.

“As workers near retirement they not only have to focus on saving money but on closely managing their investment throughout their retirement years,” Kohl said. “This report shows that many Americans will need to save much more or work longer in order to avoid the very real risk of outliving their savings.”

Among the report's recommendations:

• Many retirees should delay taking Social Security to increase payments for life.
• Depending on net worth, households also should consider buying a life annuity, particularly if they don't have a traditional pension that guarantees sufficient income.
• Retirees should make withdrawals from their investment portfolio at a rate of no more than 3% to 6% annually at retirement, with adjustments for inflation, to help ensure they won't run out of money.

Source: U.S. Senate Special Committee on Aging News Release (July 1, 2011)