7.5% Beats 10%
How can this be true? It’s obvious 10% is higher than 7.5%, right? Well maybe not. My comparison is an exercise I did when considering moving $100,000 of retirement funds into an index annuity with a lifetime income rider. Let me know what you think.
Parameters
$100,000 / age 67 / 3% Bonus Index Annuity / Income at age 72
Withdrawals : 6% Annuity (guaranteed), 5% Stock/Bond (not guaranteed)
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7.5% |
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10% |
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Guaranteed |
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Hypothetical |
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Income Account |
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Stock/Bond Portfolio |
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Year |
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1 |
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$110,725.00 |
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$110,000.00 |
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2 |
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$119,029.38 |
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$121,000.00 |
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3 |
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$127,956.58 |
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$133,100.00 |
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4 |
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$137,553.32 |
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$146,410.00 |
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5 |
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$147,869.82 |
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$161,051.00 |
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Withdrawals |
6% |
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5% |
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Income |
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$8,872.19 |
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$8,052.55 |
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(Guaranteed for Life) |
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(Not Guaranteed) |
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My Thoughts
Can anyone really expect a stock/bond portfolio to earn 10% Every year for the next 5 years? Maybe it will, but it’s certainly NOT guaranteed. Would you advise anyone to take 5% annual withdrawals from a stock/bond portfolio without any kind of safety net?
Everything is guaranteed with the Index Annuity and Lifetime Income Rider. Nothing is guaranteed with the stock/bond portfolio.