And then, what will your annuity’s REAL return look like if we are in for a period of 5-10%/year inflation?

No one thought gas could hit $119/barrel (it did today). And I never thought a starter house would run $300K (it did until recently).

Though, stable returns are certainly attractive to a lot of people.

As long as there are actual “returns.”

Compounding even 1% additional cost over a 20 year retirement means a 20% loss of capital that you have to make up somehow.

Paul Grangaard (’The Grangaard Strategy’) set out a similar approach using Bond Laddering instead of Annuities at a much lower ‘buy in’ cost.

Another excellent, and again much lower cost method, of funding a ‘cash rich’ retirement was laid out by a highly respected professor, Zvi Bodie, in his book Worry Free Investing which also advocated bonds (Inflation-protected Treasury Bonds, called TIPS).

I would check out all three of these books (and seek some bloody good advice) before committing my retirement to any one strategy!

I have always completely avoided annuities based on their administrative costs and their low rate of return. However I’ve always been secretly enticed by the guaranty of a certain amount per month in the later years of life. I never knew annuities could be purchased with start ages and length of runs. This would radically change their cost basis. By offsetting the “Forever Run Time” with a very old start age will radically reduce the costs. I would assume since I haven’t read the book yet that this is just for the “I don’t want to eat dog food money” but this book is going on the must read list.

Thanks