Does This Pandemic Tear Up The 4% Rule?

The Annuity Man

A recent article in ThinkAdvisor by Jane Wollman Rusoff where she interviewed retirement guru and annuity deep thinker Wade Pfau about how the Coronavirus pandemic is destroying the beloved 4% withdrawal rule.  In typical "Pfau fashion," he actually uses facts and common sense to make the argument for annuities to be used within a portfolio.  I know that people say that they "Hate All Annuities," but after reading this article...I can guarantee you won't hate my well respected colleague...Wade Pfau.

Below is a sampling of Jane Wollman Rusoff's article with Wade.

"You’re saying that now, in the middle of all the turbulence, would be a good time to buy a single income or variable annuity? Why not wait awhile?

If someone is at retirement, there’s not much sense in waiting. Because interest rates have been plummeting, annuity payout rates are also going down. It may take time before they go up again, and they could go down further. So people might want to try to take action.

What about buying a fixed indexed annuity? Will that help?

I worry about those because right now there’s a perfect storm. They do protect on the downside, but they’re not going to offer very much upside because of the low interest rates and high market volatility.

At this juncture, what percentage of assets should someone who’s at retirement put into an annuity?

They need to look at that from the perspective of: How much would it take for them to feel they have a comfortable amount to spend. If they say they want $40,000 of spending [annually] but don’t feel comfortable having stock market risk, then the allocation for the annuity can be how much it would take to achieve that."

Read the entire article.  It's worth your time, and it might be something to consider for your specific retirement plan.

Stan The Annuity Man

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