No. of Recommendations: 2
What if someone's main concern really is downside protection, and not so much upside potential and leaving money for heirs? Then would this be a reasonable approach?

Then giving money to an annuity company isn't an advantage. With some annuities, upon the death of the person/couple getting the payments, the money is completely gone. With others, there's the guarantee that you'll have gotten at least as much as you put in, or the balance goes to your beneficiaries...you get a lower annual amount for that guarantee, of course. If you are getting paid, say, 5% of however much you put in and live 12 years, then your beneficiaries get 40% of what you put in. So, no growth over the 12 years.

If you want to do something annuity-like, delaying your social security to age 70 instead of age 62 (or 67) and using your savings to pay for your annual expenses *instead of buying an annuity to cover those expenses* gives you a better return. Check my recent posts for the math.

Finding out the details about annuities a couple years ago allowed me to play with the numbers because I'm kind of a spreadsheet nerd. There appeared to be some advantages because you might lose some upside gain in the best cases, you limit your "run out of money" likelihood. But, the fees can be pretty bad one every annuity other than the simple lifetime immediate annuity (on which they're not good, but not as terrible). BUT there are other ways to mitigate risk, like using the bucket system...not just thinking of time frames in "buckets" of investments, but actually investing in programmed ways.
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