However, what do you do in 20 years when your rent is up to $1264 (700*(1.03^20)) due to inflation and your annuity is still putting out its $1000? Sure, you could have invested the surplus earlier, but that somewhat defeats the worry-free point of the annuity doesn't it?I knew someone would catch me on that. What I would actually do, is approximate my rent 30 years from now using a similar assumption of 3% increase per year and buy an annuity to match that figure. In the meantime I would put the excess away. The excess would be growing and in 30 years my annuity would still cover my rent and the excess I was putting away early on would be gravy. That is the simple answer.
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