I can’t argue that this is a strategy for the ‘Average Joe,’ even if they live in Lake Wobegon, and perhaps ‘hybrid annuities’ are a reasonable default for these folks. I do hope, however, that the inflation bug doesn’t spoil things for them. Given the state of all things global these days, I worry. If the financial behemoths can invent these things for Joe and Jolene, maybe they can conjure up some options that will help mitigate inflation risk for their customers instead of fully exposing them to it.
Just a quibble. It’s a question of who is Roth’s audience. Is it the disengaged majority? I’d argue it’s folks more like the ones who follow this site, and others such as Bogleheads, and might have some healthy skepticism about no-brainer offerings like target date funds with embedded annuities.
If one’s retirement assets are such that 100% has to be invested either in an annuity or a 30-year TIPs ladder, then you must flip a coin between betting on inflation risk (the annuity) or longevity risk (the TIPs ladder) - an unfortunate dilemma. But for many of us, we probably have the financial ability to devote something less than 100% of our wealth to either alternative. As Allan Roth suggests, for example, 90% could be put into TIPs and 10% could be invested in stocks and left alone to grow for 30 years while we live off level real income from our TIPs ladder and Social Security. We could also do the same thing with an annuity, but the problem is that we may need to tap into our stocks along the way to make up any shortfall due to declining real annuity income from inflation. After conducting an analysis, I determined that both strategies would have fared much better historically than plunking 100% of one’s wealth into either an annuity or a 30-year TIPs ladder. However, the TIPs+Stocks strategy left one with residual wealth after 30 years that was significantly greater than the Annuity+Stocks option. In fact, if you started at age 65 you would have been able to maintain level real spending until you were older than 105 before that strategy failed - assuming the inflation rate and stock returns that have prevailed since 1972. My money is on the TIPs ladder accompanied by an equity investment sleeve. I’m willing to bet that I won’t live past 105 more than I’m willing to bet on what inflation is going to be over the next 40 years.
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I can’t argue that this is a strategy for the ‘Average Joe,’ even if they live in Lake Wobegon, and perhaps ‘hybrid annuities’ are a reasonable default for these folks. I do hope, however, that the inflation bug doesn’t spoil things for them. Given the state of all things global these days, I worry. If the financial behemoths can invent these things for Joe and Jolene, maybe they can conjure up some options that will help mitigate inflation risk for their customers instead of fully exposing them to it.
Post: Better Alternatives to Buying an Annuity
Link to comment from June 10, 2026
Just a quibble. It’s a question of who is Roth’s audience. Is it the disengaged majority? I’d argue it’s folks more like the ones who follow this site, and others such as Bogleheads, and might have some healthy skepticism about no-brainer offerings like target date funds with embedded annuities.
Post: Better Alternatives to Buying an Annuity
Link to comment from June 10, 2026
If one’s retirement assets are such that 100% has to be invested either in an annuity or a 30-year TIPs ladder, then you must flip a coin between betting on inflation risk (the annuity) or longevity risk (the TIPs ladder) - an unfortunate dilemma. But for many of us, we probably have the financial ability to devote something less than 100% of our wealth to either alternative. As Allan Roth suggests, for example, 90% could be put into TIPs and 10% could be invested in stocks and left alone to grow for 30 years while we live off level real income from our TIPs ladder and Social Security. We could also do the same thing with an annuity, but the problem is that we may need to tap into our stocks along the way to make up any shortfall due to declining real annuity income from inflation. After conducting an analysis, I determined that both strategies would have fared much better historically than plunking 100% of one’s wealth into either an annuity or a 30-year TIPs ladder. However, the TIPs+Stocks strategy left one with residual wealth after 30 years that was significantly greater than the Annuity+Stocks option. In fact, if you started at age 65 you would have been able to maintain level real spending until you were older than 105 before that strategy failed - assuming the inflation rate and stock returns that have prevailed since 1972. My money is on the TIPs ladder accompanied by an equity investment sleeve. I’m willing to bet that I won’t live past 105 more than I’m willing to bet on what inflation is going to be over the next 40 years.
Post: Better Alternatives to Buying an Annuity
Link to comment from June 10, 2026