Stands to reason IRR convergence point is the same as payout rate as that's the rate at which you just make payouts from interest only never needing to touch the principal. Of course, it'll probably take a hundred years or so to reach anywhere near that point.I agree. Below is a IRR analysis based on a quote for a 5.78% payout rate for a 55 year old male from immediate annuities.com. Note that the IRR converges towards the payout rate at older ages.
For fixed COLA, just add it to the initial payout rate (e.g. if COLA is 2%, convergence is at 7.78%).
By the way, IRR seems wrong for the first couple of years. How is it lower than -100%? Mind, Excel does have a built-in IRR function.
Last edited: