Ted, I agree with your math. $5,500/month is $66,000/year, or an 8.6% initial withdrawal rate on $768K. But I think the more interesting question is when you make the annuity decision.
In our hypothetical, Person C commits $100K to a deferred annuity at age 45 in exchange for $5,500/month for life beginning at 65. That's a legitimate way to insure against longevity and market risk. My objection is committing the money 20 years before you know whether you'll actually need that insurance.
The alternative is to leave the $100K invested. If it achieved the historical return of the total U.S. stock market over those 20 years, it would be worth approximately $768K at age 65. At that point, you have both wealth and flexibility:
Stay invested in VTSAX/VTI.
Diversify to something like 60/40.
Annuitize some or all of the portfolio.
Buy an immediate annuity—or another annuity product.
Or decide you don't need an annuity at all.
And you can make that decision based on your actual circumstances at 65: Social Security, other assets, health, spending needs, whether you're still working, risk tolerance, longevity expectations and desire to leave money to heirs.
As for the $5,500/month withdrawal, I don't think "8.6%" tells the whole story. The portfolio doesn't have to earn 8.6% and preserve the $768K. It can consume principal.
As an illustration, using long-term historical average returns:
A 100%-stock portfolio could still have substantial assets after 20 years of $66K annual withdrawals and, under a simple constant-return illustration, could have significant assets remaining even at 100.
A 60/40 portfolio produces a less favorable result but, under those assumptions, could still last into the late 90s.
Those aren't forecasts—sequence-of-returns risk could produce a much worse result. But again, the 65-year-old gets to assess that risk at 65, rather than having the 45-year-old make the decision for him.
And if the portfolio does well, the retiree gets something the pure-life annuity doesn't provide: remaining capital and potential money for heirs. My question is why voluntarily give up the flexibility of $100K at age 45 when you can preserve the option to buy that insurance at 65—or later—when you actually know whether you need it. The annuity buys certainty of a specific outcome. The investment preserves optionality and the potential for growth. I'd rather preserve the optionality and only buy the certainty later if I feel I need it. In my case, I don't see that day coming, so I'm glad I deflected all those annuity sales pitches years ago.
$100K invested in Vanguard Total Market Index Fund (VTSAX) for the last 20 years with dividends reinvested would be worth approximately $768,000 today (source AI).
Those buying an annuity over that period not only incurred the comparatively high cost structure of the annuity but also incurred the lost opportunity cost.
Annuities are the gateway to a mediocre retirement when purchased far ahead of retirement.
I personally could not imagine buying one even now after retiring but for some it may help them (and the annuity sales person) sleep better.
For those young enough to begin to plan accordingly, the best long term plan when it comes to Social Security is to plan on ZERO benefits. None of all this anxiety is new. The projections have been dire for decades particularly for those on the latter part of the Baby Boomer Demographic. Nothing substantive will be fixed near term or "after 2028" for that matter. We've heard that all before. The dented, rusty can will just get kicked down the road again right into your future retirement.
This is all the more reason that for those young enough and with the means to begin to plan accordingly; I strongly recommend assuming ZERO benefits as I did four decades ago. The freedom from the angst of relying on what entrenched, elected officials decade after decade will do to your income is simply not worth the relatively small benefits that Social Security provides. A suitably sized, diverse portfolio you manage yourself is the pathway out of this decades long morass and into an optimistic retirement.
If you end up getting anything out of the system decades from now, you can be pleasantly surprised and consider it a bonus vs something you depend on and worry about.
The outgoing transfer lock referenced is a great idea. I am going to act on that.
Another time tested approach is 'security through obscurity". Avoid the big house and the fancy car even when you can afford it. I saw this in practice growing up in semi rural New England where as it turned out there were quite few closet multi millionaires in our area. Back in those days, the only potential giveaway was they tended to drive rusty Volvos. :)
Predictably, you have received some excellent feedback below here on H.D.
I will amplify the wise counsel from W.D. Housley, below in particular.
I found my self a number of times in the latter half of my career either leaving positions by choice or as part of merger activity-not by choice. I kicked myself for not taking time off between positions on one occasion in my mid 40's and promised myself I would take a year off after I finished a subsequent two year contract. After completing that role, I ended up making it only 7 months before I dove into the workforce again.While the 7 months was nice, I did not give myself as much "permission" or leeway as W.D. Housley wisely prescribes during that time.
I would suggest you start by not even thinking about work or the next job for 2-3 months and then see how you feel. (easier said then done, I know). Keep busy, I found manual labor in the yard, working on the house, cars etc. to be helpful. Pick up dormant hobbies or get new ones, exercise, spend more time with family and friends, research things that interest you. Take longer vacation(s) than perhaps your working life allowed. Most importantly...Let your mind clear ....you'll be surprised how cluttered it can be after working for so many years!
After I finally retired again (just before COVID by sheer luck), I did some consulting. Some engagements more labor intensive than others.....and then one day knew that I had enough. The "dry run" I had during my 7 month "sabbatical" some years prior was very instructive for my final approach to full retirement. It was a soft landing in the end.
My prediction is this transition albeit abrupt, will be something you will look upon very positively in future years when all is said and done.
All the best.
Joan, Thanks for sharing some great observations. To add a bit to each point: 1) Spot on that on line with maybe a bit of phone work is the way to go. Never negotiate on the dealers' own playing fields. In fact whenever I go to look and maybe test drive, I never even ask for a price quote. I usually do that at a dealer I am unlikely to or know I won't buy from then move on line from there with a generally wide search radius.
2) Unfortunately tires on new cars are not the best and Bridgestone would not be my first choice to see. On the bright side, at least they were not Dunlops as Toyota has periodically used over the years. You probably would have gotten even fewer miles on those.
3) The Finance office games are my absolute least favorite part of the process. I've been able to head most of that off by pre-warning the sales person to tell the finance office that if my contract is even one cent off of what was already emailed to me the deal is absolutely off. I started doing this after a purchase some 18 years ago when similar to your example they told me that they had "etched the windows" as an "anti theft" measure and tried to charge me $200+. I just handed the contract back to the gentleman and told him "no deal" and walked out. As I walked down the hallway I passed the salesman who I could tell knew something was up. I just uttered "he blew your sale" as I passed him. I was not walking particularly fast by design and sure enough before I got out the door the finance guy yelled that he would take it off. I finished the sale and still have the car (with it's etched windows) to this day. Just for fun after I got home I called my insurance company to see if they really offered any discount for "etched windows" as the finance guy tried to claim. They did not....big surprise. All the more reasons why the Dealership model is broken and needs to go the way of the dinosaur.
People who choose cars wisely and maintain and keep them for 20 years and 200,000 miles or far more can splurge on all kinds of things just from those savings alone.
It's all up to personal preference on what is or is not deemed "excessive" for any given category of expenditure.
....and therein lies part of the problem with S.S. While those were the rules of the game when most of us contributed to the system ( therefore you were due that lifetime "income assurance", no issue there); it is not sustainable to have future high lifetime income retirees become a drain on the system beyond what they have contributed.
A lifetime cap needs to be placed on benefits for people at or near the maximum S.S. recipient levels in the future. Naturally the cap should have some time value of money factored in vs just the number of dollars contributed over the years. If that future cap or some "opt out" diminished payout is in place by the time I turn 70 fine by me, I'll sleep better.
Things need to be restructured so that in the future, those with the means should be fountains, not drains to help sustain the system.
Let’s hope the “ all on line” model gains more traction. It seems to be, albeit slowly. The dealer model we are largely forced to use is archaic and not in the best interest of consumers who would otherwise choose to avoid it- key word “ choose”.
On a positive note, many people keep their cars much longer just to avoid the unsavory process of buying a car.
There have been some very good thoughts on how to at least minimize the interface with the dealers in the comments below. This includes but is not limited to buying cars that last for 300K plus miles with a basic maintenance program best done at non dealership, independent shops or better yet in your own garage!
Comments
Ted, I agree with your math. $5,500/month is $66,000/year, or an 8.6% initial withdrawal rate on $768K. But I think the more interesting question is when you make the annuity decision. In our hypothetical, Person C commits $100K to a deferred annuity at age 45 in exchange for $5,500/month for life beginning at 65. That's a legitimate way to insure against longevity and market risk. My objection is committing the money 20 years before you know whether you'll actually need that insurance. The alternative is to leave the $100K invested. If it achieved the historical return of the total U.S. stock market over those 20 years, it would be worth approximately $768K at age 65. At that point, you have both wealth and flexibility:
- Stay invested in VTSAX/VTI.
- Diversify to something like 60/40.
- Annuitize some or all of the portfolio.
- Buy an immediate annuity—or another annuity product.
- Or decide you don't need an annuity at all.
And you can make that decision based on your actual circumstances at 65: Social Security, other assets, health, spending needs, whether you're still working, risk tolerance, longevity expectations and desire to leave money to heirs. As for the $5,500/month withdrawal, I don't think "8.6%" tells the whole story. The portfolio doesn't have to earn 8.6% and preserve the $768K. It can consume principal. As an illustration, using long-term historical average returns:- A 100%-stock portfolio could still have substantial assets after 20 years of $66K annual withdrawals and, under a simple constant-return illustration, could have significant assets remaining even at 100.
- A 60/40 portfolio produces a less favorable result but, under those assumptions, could still last into the late 90s.
Those aren't forecasts—sequence-of-returns risk could produce a much worse result. But again, the 65-year-old gets to assess that risk at 65, rather than having the 45-year-old make the decision for him. And if the portfolio does well, the retiree gets something the pure-life annuity doesn't provide: remaining capital and potential money for heirs. My question is why voluntarily give up the flexibility of $100K at age 45 when you can preserve the option to buy that insurance at 65—or later—when you actually know whether you need it. The annuity buys certainty of a specific outcome. The investment preserves optionality and the potential for growth. I'd rather preserve the optionality and only buy the certainty later if I feel I need it. In my case, I don't see that day coming, so I'm glad I deflected all those annuity sales pitches years ago.Post: For most retirees, the greatest fear is not death—it is running out of money before they die.
Link to comment from August 9, 2026
$100K invested in Vanguard Total Market Index Fund (VTSAX) for the last 20 years with dividends reinvested would be worth approximately $768,000 today (source AI). Those buying an annuity over that period not only incurred the comparatively high cost structure of the annuity but also incurred the lost opportunity cost. Annuities are the gateway to a mediocre retirement when purchased far ahead of retirement. I personally could not imagine buying one even now after retiring but for some it may help them (and the annuity sales person) sleep better.
Post: For most retirees, the greatest fear is not death—it is running out of money before they die.
Link to comment from August 8, 2026
For those young enough to begin to plan accordingly, the best long term plan when it comes to Social Security is to plan on ZERO benefits. None of all this anxiety is new. The projections have been dire for decades particularly for those on the latter part of the Baby Boomer Demographic. Nothing substantive will be fixed near term or "after 2028" for that matter. We've heard that all before. The dented, rusty can will just get kicked down the road again right into your future retirement. This is all the more reason that for those young enough and with the means to begin to plan accordingly; I strongly recommend assuming ZERO benefits as I did four decades ago. The freedom from the angst of relying on what entrenched, elected officials decade after decade will do to your income is simply not worth the relatively small benefits that Social Security provides. A suitably sized, diverse portfolio you manage yourself is the pathway out of this decades long morass and into an optimistic retirement. If you end up getting anything out of the system decades from now, you can be pleasantly surprised and consider it a bonus vs something you depend on and worry about.
Post: Short term and long term Social Security planning
Link to comment from August 5, 2026
The outgoing transfer lock referenced is a great idea. I am going to act on that. Another time tested approach is 'security through obscurity". Avoid the big house and the fancy car even when you can afford it. I saw this in practice growing up in semi rural New England where as it turned out there were quite few closet multi millionaires in our area. Back in those days, the only potential giveaway was they tended to drive rusty Volvos. :)
Post: Can we be completely safe?
Link to comment from July 24, 2026
Predictably, you have received some excellent feedback below here on H.D. I will amplify the wise counsel from W.D. Housley, below in particular. I found my self a number of times in the latter half of my career either leaving positions by choice or as part of merger activity-not by choice. I kicked myself for not taking time off between positions on one occasion in my mid 40's and promised myself I would take a year off after I finished a subsequent two year contract. After completing that role, I ended up making it only 7 months before I dove into the workforce again.While the 7 months was nice, I did not give myself as much "permission" or leeway as W.D. Housley wisely prescribes during that time. I would suggest you start by not even thinking about work or the next job for 2-3 months and then see how you feel. (easier said then done, I know). Keep busy, I found manual labor in the yard, working on the house, cars etc. to be helpful. Pick up dormant hobbies or get new ones, exercise, spend more time with family and friends, research things that interest you. Take longer vacation(s) than perhaps your working life allowed. Most importantly...Let your mind clear ....you'll be surprised how cluttered it can be after working for so many years! After I finally retired again (just before COVID by sheer luck), I did some consulting. Some engagements more labor intensive than others.....and then one day knew that I had enough. The "dry run" I had during my 7 month "sabbatical" some years prior was very instructive for my final approach to full retirement. It was a soft landing in the end. My prediction is this transition albeit abrupt, will be something you will look upon very positively in future years when all is said and done. All the best.
Post: Fear of the Unknown…
Link to comment from July 23, 2026
Joan, Thanks for sharing some great observations. To add a bit to each point: 1) Spot on that on line with maybe a bit of phone work is the way to go. Never negotiate on the dealers' own playing fields. In fact whenever I go to look and maybe test drive, I never even ask for a price quote. I usually do that at a dealer I am unlikely to or know I won't buy from then move on line from there with a generally wide search radius. 2) Unfortunately tires on new cars are not the best and Bridgestone would not be my first choice to see. On the bright side, at least they were not Dunlops as Toyota has periodically used over the years. You probably would have gotten even fewer miles on those. 3) The Finance office games are my absolute least favorite part of the process. I've been able to head most of that off by pre-warning the sales person to tell the finance office that if my contract is even one cent off of what was already emailed to me the deal is absolutely off. I started doing this after a purchase some 18 years ago when similar to your example they told me that they had "etched the windows" as an "anti theft" measure and tried to charge me $200+. I just handed the contract back to the gentleman and told him "no deal" and walked out. As I walked down the hallway I passed the salesman who I could tell knew something was up. I just uttered "he blew your sale" as I passed him. I was not walking particularly fast by design and sure enough before I got out the door the finance guy yelled that he would take it off. I finished the sale and still have the car (with it's etched windows) to this day. Just for fun after I got home I called my insurance company to see if they really offered any discount for "etched windows" as the finance guy tried to claim. They did not....big surprise. All the more reasons why the Dealership model is broken and needs to go the way of the dinosaur.
Post: Buying a car in retirement
Link to comment from July 22, 2026
People who choose cars wisely and maintain and keep them for 20 years and 200,000 miles or far more can splurge on all kinds of things just from those savings alone. It's all up to personal preference on what is or is not deemed "excessive" for any given category of expenditure.
Post: FIFA Financials
Link to comment from July 20, 2026
....and therein lies part of the problem with S.S. While those were the rules of the game when most of us contributed to the system ( therefore you were due that lifetime "income assurance", no issue there); it is not sustainable to have future high lifetime income retirees become a drain on the system beyond what they have contributed. A lifetime cap needs to be placed on benefits for people at or near the maximum S.S. recipient levels in the future. Naturally the cap should have some time value of money factored in vs just the number of dollars contributed over the years. If that future cap or some "opt out" diminished payout is in place by the time I turn 70 fine by me, I'll sleep better. Things need to be restructured so that in the future, those with the means should be fountains, not drains to help sustain the system.
Post: Many seniors think we paid for our Social Security benefits based on the FICA taxes we paid. Let’s dispel that myth- we didn’t
Link to comment from July 18, 2026
Mark, Once again you made my day over my morning coffee. Thanks for helping keep Humble Dollar content fresh.
Post: The Paradox of Wealth
Link to comment from July 17, 2026
Let’s hope the “ all on line” model gains more traction. It seems to be, albeit slowly. The dealer model we are largely forced to use is archaic and not in the best interest of consumers who would otherwise choose to avoid it- key word “ choose”. On a positive note, many people keep their cars much longer just to avoid the unsavory process of buying a car. There have been some very good thoughts on how to at least minimize the interface with the dealers in the comments below. This includes but is not limited to buying cars that last for 300K plus miles with a basic maintenance program best done at non dealership, independent shops or better yet in your own garage!
Post: Buying a car in retirement
Link to comment from July 15, 2026