A Reddit person posed a question that hits dwelling for lots of households attempting to assist their getting older mother and father navigate retirement: Does it make sense to purchase an annuity?
The publish laid all of it out. Their dad is 80. Mother is 65. They’ve got around $687,000 in investments and roughly $69,000 in annual revenue from Social Safety and a pension. The person thought-about letting them observe the variable proportion withdrawal technique—mainly taking round 5.1% from the portfolio annually. That may give them about $85,000 in revenue yearly, which ought to cowl their estimated $75,000 in yearly bills.
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Nonetheless, they weren’t totally satisfied. “I do not belief that she really understands how much they spend,” they stated about their mother, who believed their retirement spending would naturally drop. So the person began trying into annuities. Fastened, assured revenue for all times? Fewer surprises? It appeared interesting, particularly for fogeys with such a big age hole. And so they had been high-quality with the concept it would burn up many of the cash. “Sure, they will not depart something to us once they cross, however it might be break up six methods anyway,” they wrote.
That form of honesty sparked loads of responses. Some advised the VPW technique might nonetheless work. Others had been fast to convey up annuity charges, which in mid-2025 have climbed considerably. A number of stated that mounted annuities had been now paying over 5%, with joint lifetime annuities providing much more for older consumers. That is the place the mathematics begins to matter.
The unique publish did not specify precisely how a lot they’d think about changing, however as an instance the mother and father determined to place $500,000 right into a joint immediate annuity. Primarily based on present market charges, that would generate round $2,350 to $2,500 monthly, or roughly $28,000 to $30,000 per 12 months. Add that to their present $69,000 in Social Safety and pension revenue, and their whole annual revenue might land round $97,000 to $99,000.
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However as soon as they decide to an annuity, that cash is locked in. It is not accessible for emergencies, sudden medical prices, or any large one-time bills. In the event that they select inflation safety, the month-to-month payouts drop at the beginning in change for gradual will increase later. And until they add particular riders, there’s usually no cash left over for heirs. For retirees centered on assured revenue and fewer day-to-day decision-making, it could be definitely worth the trade-off. However for others, the lack of flexibility—particularly with a big chunk of financial savings—can really feel like too large a sacrifice.
