Why Don't Retirees Buy Annuities? They Get Something Most Economists Don't

[Kimo]

I said in my post that some people feel comfortable with them. That is a personal issue.

You had a long example during the worst increase in inflation our country has faced since the late-1800s. I wonder what the answer would be if a ladder of 10 yr treasury bonds were used instead of a one time purchase of the annuity. After all, the $250,000 had to come from somewhere. I also have no clue whether the annuity rate you used was correct (up or down) at the beginning of your term. My recollection of interest rates in the late 60's has the 10 yr treasury above 6%. Mortgages were definitely above 6%.

I laddered my annuities....

 

[Running_Man]

As an interesting note I decided to look at what would have happened to a Y2K retiree who used this plan on 1/1/2000. Now for sure the annuity would have been paying more than 6.2% for the 65 year old as 10 year treasuries were paying a creepy 6.66% then. However starting instead with a million dollars getting an annuity for 62,000 per year and then taking $31,000 in 2000 and increasing by CPI the retiree would be spending $42,703 this year and have a 10 year treasury ladder with $472,000 in invested 10 year treasuries and as the spend has not yet exceeded the annuity things are looking extraordinarily well for the y2k retiree.