Annuities vs. 4% Rule: Which Strategy Wins for Retirement Income?
This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend Reading
A new study by economists Mark Warshawsky and Gaobo Pang reassesses the widely used four percent rule for retirement withdrawals, finding it less effective compared to strategies incorporating annuities.
READ THE ARTICLEKey findings include:
📌 Partial Annuitization as Optimal: Combining annuities with stock and bond investments creates a steadier, more reliable income throughout retirement
📌 Annuities Outperform the Four Percent Rule: While the four percent rule keeps assets accessible, it risks depletion in longer retirements or during market downturns
📌 Full Annuitization Provides High Initial Income: This guarantees lifetime income but reduces liquidity, which may limit funds for unexpected costs
📌 Annuities Reduce RMDs: Recent legislative changes exclude annuity funds from required minimum distribution (RMD) calculations, allowing retirees to retain more income
Key Takeaways: When tailored to your individual circumstances, incorporating annuities into retirement strategies can help provide steadier income, reduce risks of depletion, and maximize overall income potential.