No. of Recommendations: 1
wan123, Suppose you opt for a 'do it yourself' annuity. I downloaded historical prices for SPY and BRK-a from Yahoo and tested a couple of scenarios with no inflation adjustments. ..

FWIW, my analysis suggests that there is no such thing as a do it yourself annuity, nor can there ever be.
You can run down a portfolio till it runs out, or you can live from the income on a portfolio, but you can never get a reliable "good for life" income stream unless you either
* join a shared risk pool with an annuity or similar, or
* withdraw so little that your portfolio might as well be designed to last perpetually

Most "safe withdrawal rate" calculations work on the principle of *probably* working.
Usually they are designed to optimize income with no more than a 5% failure rate based on historical outcomes.
Even leaving aside the observation that the future may not much resemble the past, the important
point is that a "failure" here means being simultaneously very old and stone broke.
I don't think that's an outcome one should allow as a possibility, certainly not a 5% chance.
It's worth insuring against. The appropriate insurance is available (and only available) at an affordable price as part of a pooled risk scheme.
At least, that's my conclusion.

If you're really rich and can live very comfortably from 2% dividends, then that's great.
But most people should have some sort of longevity insurance. They get a much higher retirement income that way, since few people live to 105, yet you have to be prepared for it.
e.g., at age 85, maybe convert some or all of your remaining portfolio to an annuity.
Or at whatever fairly old age you get a rough income match between running down some fraction of your remaining portfolio in N years,
and the income from an N-year-deferred annuity purchased with the rest of the money.

Thus endeth my two cents : )

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