No. of Recommendations: 2
I don't usually post on this board, but Vicki linked Greg's excellent post on annuities on the bond and fixed income board (my usual hangout), and I thought I would add a comment and, more importantly, remind people that we do have a bond and fixed-income board, with extensive (if somewhat dated) FAQs, where we regularly discuss ways of balancing "safety" and risks in the bonds/fixed-income universe, of which lifetime fixed or inflation adjusted annuities are one option. (See our discussion in the last part of the FAQs.)

I did note in this discussion that someone mentioned that bond indices cannot lose money. This is incorrect. There is an extensive discussion of risks on bond funds in the bond and fixed-income board FAQs.

One point I'd like to add to Greg's comment. For some people, turning at least a portion of assets into a lifetime annuity may be the only way to insure you do not run out of money if you live beyond what the actuaries predict. However, this needs to be a hard-headed decision at the time this really becomes an issue. It should be no earlier than when you start drawing down your original principal (i.e., the principal you had when you started living off your assets instead of your employment). And even then, if you reach this point late enough in life that you won't run out even if you live well beyond average life expectancy (factoring in longevity in your family), you won't need an annuity. For example, if at age 80 I have a 5% withdrawal rate (including taxes and everything), I only need to stay even with inflation for the money to last until I'm 100, so if I'm getting 4% returns with 3% real inflation, I don't need an annuity.
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