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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 81632  
Subject: Re: Vanguard Guaranteed Life Withdrawal Benefit Date: 10/30/2011 3:41 PM
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culcha asks,

I don't know much about annuities ... but isn't it the case that even though the person has a guaranteed dollar amount of income, that dollar amount is fixed, and the forward march of inflation will mean that the purchasing power of that income will grow smaller and smaller?

This seems to compare most unfavorably with something like the 4% Safe Withdrawal Rate, which then adjusts the annual dollar amount withdrawn in order to keep up with inflation.


There are annuities available that increase your payment each year for inflation, but they cost about 40% more.


An inflation-adjusted annuity should be safer than taking a 4% withdrawal from a stock portfolio if you believe the insurer can survive the next financial market meltdown. But it comes at great cost -- up to 30% of the purchase price of an annuity is lost to the insurance company's various fees, costs and expenses.


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