To add to the annuity discussion, a recent article by Barron's (FWIW):
Picks the 25 Best Annuities - Barrons.com
As some know, I do have an SPIA (life, for DW/me, with a guaranteed payout if we pass early).
For those of you that believe current interest rates are of upmost importance (I don't BTW), assuming you had no other sources of retirement income (beyond your savings/investments) - in other words you are in an ER situation, no pension nor SS to be applied for till sometime in the future (depending on your personal SS plans), how would you fund your retirement income needs while waiting till you got old and had a higher "return rate" (which is driven by return of your own money, as discussed earlier)?
I see many postings (here and other places) saying you should wait till interest rates get higher. The questions are wait till when, and how do you get income (without market or current interest risk)?
Also, the "4% rule" may not apply in those situations for those that retire before "traditional age" (whatever that is), as it does for DW/me. I've been retired a bit over four years (DW is expected to retire within the next year - we're the same age). To reduce the market risk out of our retirement income, we purchased the SPIA (using 10% of our combined portfolio value, at the time of purchase four years age) along with coming up with an SS scenerio that uses joint SS income options (e.g. DW files at FRA age of 66, I file for 50% spousal benefits at the same time, and I delay SS till age 70).
That means that (my) portfolio withdrawls are in
excess of that magic 4% (even with the SPIA income), but by the age of 70 when all of our "income sources" come on-line (including two small single-life non-COLA'ed pensions for DW), our WD rate drops to just over 2% (even with "excess withdraws" in the previous 11 years), and stays there for our expected passing.
The SPIA does not guarantee all of our retirement income, but it does provide a "tool" that along with other options (such as those related to SS) provides options for the future, in our case. Granted, our situation (or solution) applies to us. If it would for others? That's their decision - each person/couple must come up with a decumulation plan on their own - with the exception of course of those that have an inflation adjusted pension that covers most/all of their expected retirement expenses (lucky them).
Just another post on my POV on the subject...