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..It appears by annuitizing roughly a quarter of her assets...

One risk of an annuity is that the company issuing it will run into difficulties and risk the payout of the annuity. If she does go with annuities, she might want to buy several smaller ones from several different companies to reduce the impact of any of the companies defaulting.

I assume that these would be carefully selected low fee annuities and that she understands why you have to be so careful when there are so many horrible annuities on the market.

My gut fee is that inflation is more of a risk to her than outliving her money. If she live to be a hundred even modes inflation will have cut the value of her annuity to a fraction of what it starts out at. If we get double-digit inflation she could really get zinged.

..I'd like to hear arguements for or against annuitization vs. bonds/bond laddering in this case:..

People often forget that with annuities there are really two decisions to make, if they are right and WHEN to do it.

Currently inflation and interest rates are still fairly moderate but have been increasing, The ideal time to buy an annuity would be when interest rates and inflation were high and about to decrease.

She could combine the two strategies and keep the money in CD's/bonds/TIPS until she is something like 80 then buy an annuity. Even though she will have spent down her money some, she will get a lot more out of the annuity then because she is older and the bond investments should have basically kept up with inflation.

One option might be to put $250K into an annuity now and plan to put the invest and slowley spend down the other $250K, then invest the remaining amount into an annuity when she is 80 if it makes sense then.

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