# Personal Finance and Investing

In reply to the discussion: I am retired and 73 years old, where can you park [View all]#### progree

(10,899 posts)them compared to today.

If your yield was 1.45 X today's rate (8.164% instead of 5.63%), I find that the rate of return for the immediate annuity is much better: for example 5.20% for N=20, 7.13% for N=30, and 7.75% for N = 40, quite a lot more than shown in my table:

1.16% for N=20, 3.78% for N=30, and 4.75% for N=40.

Edited to add - I didn't bother doing similar for the deferred annuity, yet.

I wasn't trying to compare to what you bought 10 years or so ago, but rather what's available now at today's rates. As the bond fund yields upthread were today's rates. And I have no idea what you bought, frankly. Just a warning to others that the yield and the rate of return are very different things with income annuities.

The 4% rule that is often quoted as safe is where one takes 4% out the first year. Then each year after the dollar amount that is taken out is increased by the rate of inflation. So if one has a million dollar nest egg, one can safely (if the future is like the past) take out $40,000 the first year, then $41,000 the second year, then $42,025 the 3rd year and so on, By the 20th year one can take out $65,545. By the 30th year, $83,903. My numbers above is an example assuming a 2.5% inflation rate (midway between the 2% of the last 2 decades and the 3% that we averaged before that).

Isn't the amount of residual value in the contract? Or does it depend on the performance of some bond or equity index?

I'm not dissing your financial adviser. Besides emphasizing diversity, you've written that your equities are all in equity funds, the choice of which were designed to have relatively low portfolio volatility. Sounds very sensible to me, but then I am biased. I only have one individual stock - a utility stock (Sempra, SRE) that I inherited. I've thought of selling it for portfolio simplification, but the capital gains tax would be quite large (a first world problem ). Individual stocks are way too volatile for me, and would take me way to much time and attention to do well at it.

Thank you for getting me to look into annuities. (So many varieties!)

Edited to add "besides emphasizing diversity" in the 2nd to last paragraph.

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