4. I wish I had a pension. Should retirees be considering annuities?
Maybe. If it’s pension-like income you’re craving, then something called a single-premium immediate annuity may help. You pay an insurance company a pile of cash, and in return, they send you a guaranteed monthly paycheck for the rest of your life (or some other period). Experts suggest figuring out what your basic fixed costs are — housing, food, taxes — and then buying enough of an income stream to cover the portion of expenses that Social Security does not.
But the income received is tied to long-term interest rates, which have fallen to new lows. As a result, so-called payout rates have also fallen sharply. One workaround is to spread your purchase out — for example, by using a portion of your money to buy one annuity annually over five years.
Another negative: Once you give that cash to the insurance company, you can’t access it. (You can buy a death benefit for your heirs, but that will reduce your income stream.)
5. I need to sell my home, but I’m worried about timing. I need to live on the income from the sale. Now what?
The supply of houses in most markets is tight and mortgage rates are low, which bodes well for sellers. That could shift, though, as the coronavirus spreads.
Redfin, a brokerage, said home-buying demand has dropped in Seattle, which has been hard hit by COVID-19, but it hasn’t seen a falloff yet in the rest of the country. The National Association of Realtors put out a “flash survey” of its members March 9; 11 percent reported lower home buyer traffic and 7 percent reported lower home seller traffic.
But the virus’s impact is changing so rapidly that we simply don’t know what’s coming next.
6. I’m closing on a house and need cash from my stock and bond portfolio. Where should I pull it from?
First, a wag of the finger. Cash needed for a down payment or other near-term expenses, like college tuition, should not be in risky securities like stocks. Generally, investments should be used for long-term goals like retirement, because you have time to ride out market dips. Money needed in less than 10 years should be somewhere safer. “It should not have been there in the first place,” said Elissa Buie, a financial planner in San Francisco.
But since it’s too late for that, she said — and assuming there’s no other source for the cash — it likely makes most sense to draw from the bonds. Stocks have obviously plummeted in recent weeks, so you can give them some time to recover. Pull from bonds. Their prices, which move in the opposite direction of interest rates, have lately been rising.