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Subject:  Annuities vs Investments? Date:  3/15/2007  12:31 AM
Author:  retof Number:  56275 of 88542

Greetings! Fools!

I have a question regarding immediate annuities versus stocks and bonds for generating retirment income streams. Hoping someone knows more about annuities than I do.

In the March 2007 AARP Bulletin, beginning on page 22 there is an article titled "Fixed for Life". It's about immediate annuities as an income producing vehicle. It makes the point that a retired couple, each 65 could purchase an annuity for $100,000 and could recieve about $584 per month as income.

If you crank through the numbers that works out to just a little over $7000 per year for about a 7% return on your initial $100,000.

That seems like a pretty high rate of return for an annuity. Any ideas?

Secondly, several articles that I have recently read say that if you want to outlive your money in retirement and leave a little for the kids you should only withdraw about 4% from your retirment savings each year. So my question is how can the insurance companies do better than the 4%? What are they investing in that can pay 7% for life. What am I missing here?

Also any ideas on annuities? Are these a good deal for the retired fool?


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