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Subject:  Re: Safe Withdrawal Rate Date:  10/12/2007  1:55 PM
Author:  ziggy29 Number:  59638 of 95802

>> If company A makes 7% on immediate annuity but gives you 4%, then the relevant "fee" is 3%. If company B makes 6% on the annuity but gives you 3.5%, the "fee" is 2.5% but you get a lower interest rate.

If that was a CD, would you buy the 4% CD or the 3.5% CD? Does it matter that the "fee" is lower on company B? Absolutely not - and there is no way that you will even know what that "fee" is. Each bank and insurance company will have different profit margins so where BoA might breakeven at 5.5% on their CDs, Chase might breakeven at 5.65%. If they both offer CDs at 5%, the "fee" difference for Chase doesn't hurt your 5%.

Very good point. It's similar to people asking about what investments they should use to minimize their taxes when what they should usually be interested in is maximizing after-tax returns.

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