A Reddit person posed a query that hits dwelling for lots of households making an attempt to assist their ageing dad and mom 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 bought round $687,000 in investments and roughly $69,000 in annual earnings from Social Safety and a pension. The person thought of letting them observe the variable proportion withdrawal methodology—mainly taking round 5.1% from the portfolio annually. That may give them about $85,000 in earnings yearly, which ought to cowl their estimated $75,000 in yearly bills.
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Nonetheless, they weren’t absolutely satisfied. “I do not belief that she actually understands how a lot they spend,” they mentioned about their mother, who believed their retirement spending would naturally drop. So the person began trying into annuities. Fastened, assured earnings for all times? Fewer surprises? It appeared interesting, particularly for fogeys with such a big age hole. They usually have been wonderful with the concept it would deplete a lot of the cash. “Sure, they will not depart something to us after they move, however it will be cut up six methods anyway,” they wrote.
That form of honesty sparked loads of responses. Some steered the VPW methodology may nonetheless work. Others have been fast to deliver up annuity charges, which in mid-2025 have climbed considerably. A number of mentioned that mounted annuities have been now paying over 5%, with joint lifetime annuities providing much more for older patrons. That is the place the mathematics begins to matter.
The unique publish did not specify precisely how a lot they’d take into account changing, however to illustrate the dad and mom determined to place $500,000 right into a joint fast annuity. Based mostly on present market charges, that might generate round $2,350 to $2,500 monthly, or roughly $28,000 to $30,000 per 12 months. Add that to their current $69,000 in Social Safety and pension earnings, and their complete annual earnings may 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 isn’t accessible for emergencies, sudden medical prices, or any huge one-time bills. In the event that they select inflation safety, the month-to-month payouts drop at the beginning in trade for gradual will increase later. And except they add particular riders, there’s usually no cash left over for heirs. For retirees centered on assured earnings 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 huge a sacrifice.
A Reddit person posed a query that hits dwelling for lots of households making an attempt to assist their ageing dad and mom 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 bought round $687,000 in investments and roughly $69,000 in annual earnings from Social Safety and a pension. The person thought of letting them observe the variable proportion withdrawal methodology—mainly taking round 5.1% from the portfolio annually. That may give them about $85,000 in earnings yearly, which ought to cowl their estimated $75,000 in yearly bills.
Do not Miss:
Nonetheless, they weren’t absolutely satisfied. “I do not belief that she actually understands how a lot they spend,” they mentioned about their mother, who believed their retirement spending would naturally drop. So the person began trying into annuities. Fastened, assured earnings for all times? Fewer surprises? It appeared interesting, particularly for fogeys with such a big age hole. They usually have been wonderful with the concept it would deplete a lot of the cash. “Sure, they will not depart something to us after they move, however it will be cut up six methods anyway,” they wrote.
That form of honesty sparked loads of responses. Some steered the VPW methodology may nonetheless work. Others have been fast to deliver up annuity charges, which in mid-2025 have climbed considerably. A number of mentioned that mounted annuities have been now paying over 5%, with joint lifetime annuities providing much more for older patrons. That is the place the mathematics begins to matter.
The unique publish did not specify precisely how a lot they’d take into account changing, however to illustrate the dad and mom determined to place $500,000 right into a joint fast annuity. Based mostly on present market charges, that might generate round $2,350 to $2,500 monthly, or roughly $28,000 to $30,000 per 12 months. Add that to their current $69,000 in Social Safety and pension earnings, and their complete annual earnings may land round $97,000 to $99,000.
Trending: $100k+ in investable belongings? Match with a fiduciary advisor totally free to study how one can maximize your retirement and save on taxes – no value, no obligation.
However as soon as they decide to an annuity, that cash is locked in. It isn’t accessible for emergencies, sudden medical prices, or any huge one-time bills. In the event that they select inflation safety, the month-to-month payouts drop at the beginning in trade for gradual will increase later. And except they add particular riders, there’s usually no cash left over for heirs. For retirees centered on assured earnings 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 huge a sacrifice.
