A few days ago we looked at an article about whether or not to end up as the richest person in graveyard. Basically, dying with too much leftover could lead to regret for people when they get to a very old age. The article from William Bernstein and Edward McQuarrie gave permission to have a lot of unspent money at the end because going through with that sort of safety net, even if unspent, has utility, it has value. They validated the idea of moving financial security further up the priority list.
This week, the WSJ reported on Fidelity moving toward allowing target date funds to partially convert into immediate annuities. I am not a fan of annuities, I've never sold one and I am not licensed to sell annuities. Anything bad you can say about them, I am likely to agree.
That said, there are positives to annuitizing a portion of a retirement portfolio. I think this will come at some point without getting tied up with a complex insurance contract. One point that I made ages ago, more anecdotal actually, was that people I knew who had annuities love them.
Someone living a $6000/mo lifestyle, getting $3500 from Social Security, maybe they can peel off a chunk of their IRA into an immediate annuity to generate a $1000/mo income stream while having most of their retirement money still in their brokerage account where they maintain control of the assets. The lifestyle in this example might be $6000 but if SS plus the $1000 annuity stream covers the fixed expenses, then that might reasonably create utility, value, for the end user in the form of peace of mind.
So if you want an annuity, go buy an annuity if the trade offs would be worth the peace of mind.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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