Are Annuities the Best Strategy to Fund One’s Retirement?
April 3, 2019 by Michael Edesess
Suppose you are retired, or soon-to-be retired, and you have no reason to leave a bequest. You have no offspring, or they are financially independent – or you want them to be – and you have no charities to which you wish to leave money. You just want to assure yourself of as much income as possible while you are alive. What is your best course of action? My research shows it’s almost impossible to beat an annuity1.
The comparison
In an August 14, 2012 article in Advisor Perspectives, Joe Tomlinson showed that annuities have been an extremely safe investment, and that there is no reason to believe they will not be in the future. Let us therefore, tentatively, say that they have a 99% chance of delivering their promised income (the only risk being the failure of the insurance company and the lack of adequate government funds to pay annuitants).
In this article I explore comparably safe, “safe withdrawal strategies” from a stock-bond portfolio, in order to compare the lifetime income they provide with the lifetime income from an annuity purchased with the same initial investment.
Click HERE to read the full story via Advisors Perspectives.