For example, one popular rule of thumb for retirement spending is the “4 percent rule,” whereby you withdraw 4 percent from your savings each year of retirement. Well, with annuities, your annual payouts will probably amount to more than 4 percent of what you put into the annuity—and, unlike the 4 percent withdrawals, those payouts are guaranteed to continue for the rest of your life. The reason the insurance company can give you a rate of return that is both steady and reasonably high is that you are not leaving any money on the table. You relinquish your principal forever. In the extreme
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