Part of the WSJ is free on Sunday and is linked from many newspapers' websites:
"Well-Respected Advice To Stay Away From"
"That brings me to some advice I have often doled out in this column: When you retire, consider sinking 25% to 50% of your nest egg into an immediate fixed annuity that pays lifetime income. To give yourself some inflation protection, buy an annuity with payments that are linked to inflation or that are stepped up by, say, 3% a year.
The fact is, in retirement, your spending will likely exceed your portfolio's after-inflation investment return. In the early years of retirement, this will mean a slow shrinking of your portfolio's "real" value.
But as the years go by, this shrinking will pick up speed, as your need for income climbs along with inflation and as your dwindling portfolio kicks off less investment gains. By your 80s, you may be on the verge of exhausting your savings.
You are less likely to face this sort of financial Armageddon if you purchase an annuity. Not only will your annuity kick off income for life, but also that income means you won't have to draw so heavily on your remaining portfolio. Result: There's a good chance you will die with a decent chunk of your portfolio still intact.
Yes, you wouldn't want to purchase a tax-deferred fixed or variable annuity inside an IRA. The IRA is already giving you tax deferral, so there's not much point in using this money to buy investments that also give tax-deferred growth.
But purchasing an immediate annuity with IRA money can be a smart move. For starters, there won't be any immediate tax bill. By contrast, if you buy an immediate annuity with taxable-account money, you may have to sell stocks to fund the purchase, triggering a capital-gains tax bill.
Moreover, annuity income is taxed as ordinary income, just like your IRA withdrawals. Thus, you won't be generating unnecessarily large ongoing tax bills by purchasing an immediate annuity with IRA money."
I don't think Jon Clements goes bungee jumping or skydiving, either. His "fact" about early retirement spending exceeding after-inflation returns probably implies a portfolio that's heavy in bonds & fixed income. At least he plugs stocks at the end of the article by claiming that retirees are less likely to freak out when the end of the world is at hand...