In my particular situation, after much research, it would appear a major SPIA stake (ie, ~ >25% of assets) may statistically not be the wisest choice at current market rates and my young-ish (~51) age.
… BUT… maybe a relatively small stake now in a SPIA with laddered DIA’s probably does make considerable sense, given I otherwise will have no regular stress-free, guaranteed, market independent cash-flow, guilt-free income that I will be able to rely on no matter what and forever.
I figure this would cover just half my minimum current income needs, but will still provide enormous mental relief and confidence in my ability to remain reasonably financially independent, even in the worst and most prolonged downturn we’ve historically seen. Worst case, I can supplement income by literally ANY work, even minimum wage if need-be + move elsewhere if things get really bad to substantially reduce my cost of living, even if that is another country.
And, with the much cheaper-to-purchase but very potent (because of the time leverage) thoughtfully-laddered DIA’s, this income floor would likely approximately keep up with inflation and therefore maintain the same general spending power over time. And I would still have a reasonable portfolio of equities and bonds to help track inflation (in case inflation really got out of hand, which is unlikely in the U.S. for any extended period).
Primarily though, given all my research and thinking on this topic, essentially annuities come down to PEACE OF MIND and establishing/making up a portion of a STABLE INCOME FLOOR… which is not only mentally so much more healthy, especially for worriers like me, but ALSO allows me to spend a bit more w/o as much guilt in the early days of financial independence, when I’m HEALTHIEST and most able to enjoy life. It also allows me to head off much of the menace of “Sequence of Return Risk” in the early days of retirement, and have a stronger investing hand at ANY time in any market… I will always be less likely to be forced to sell stock holdings at the worst possible times… at or near bottoms of deep market corrections, which can be devastating to a portfolio.
And of course, annuities seem to be the only financial product that can provide at least some level of guaranteed lifetime income and mitigate longevity risk, allowing me to spend down more of my assets more confidently and thus better enjoy my retirement knowing that virtually no matter what, I’ll always have something to help sustain me.
Here is just one of many good articles I’ve read supporting some of the mental benefits of having a solid, dependable, income floor:
Much research by the well-respected Wade Pfau has even shown how annuities, properly deployed, can substantially reduce risk of running out of money/assets in retirement in many, if not most, cases. I don’t have the exact article/study link handy, but his site (https://retirementresearcher.com) is a treasure trove of fact-based investment research.
Even IF (huge “if”, especially with this overly-inflated market and overly extended bull run) it was marginally statistically more beneficial to go it alone w/stocks/bonds and rebalancing only, the fact is, I’m not Data from Star-Trek… I’m human, so need to factor in human emotion, foibles, peace, happiness, and those type of aspects too… keeping in mind markets have gone sideways for ~20+ years more than once in the past 100 years. I need to plan for success in ANY circumstance to the best of my ability. Yeah, the chance of failure may be 10% without the annuity, but that 10% risk of ruin has catastrophic consequences, so I should plan accordingly. I may or may not optimize total wealth, but likely will optimize my chance at a decent, workable, happy, retirment and almost completely remove the absolute worst-case scenario.
So Blueprint… and forum members:
Please provide any feedback to help me further refine my thinking here. What major pros and cons am I missing here based on this limited info of my exact situation… more focused on the general / big-picture ideas suitable for a public discussion.