KIPLINGER PERSONAL FINANCE

If you’re feeling left out because you don’t have a pension, you’re far from alone. Only 22% of workers are covered by a pension these days, according to the Federal Reserve. But if you want to have an additional stream of steady income in retirement to supplement your Social Security benefits, you could create one using an insurance contract known as an annuity.

“An annuity is like a personal pension,” says David Blanchett, head of retirement research for PGIM DC Solutions, the investment management division of Prudential. You transfer part of your savings to an insurance company, which then turns that money into future income payments. You can set up an annuity that provides guaranteed income for the rest of your life, like a pension. “No matter how long you live or what happens in the market, you’ll get some benefit.”  

Having a paycheck you cannot outlive makes retirement a lot less stressful. Studies show that retirees with at least some annuitized income are happier, more satisfied and less likely to be depressed than those without. Creating this extra paycheck for life also takes out some of the work of budgeting and investing your money, especially later in retirement, when you may begin to experience cognitive decline. “It’s like an easy button for turning wealth into income,” says Blanchett...

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