DIY Single Premium Immediate Annuity (SPIA)
The concept is simple: build a Series EE bond ladder. Series EE bonds are guaranteed to double when they mature in twenty years. Therefore, if a couple buys $20,000 worth of bonds from age 35 to 65 (an individual can by $10,000 worth of bonds per year), they will have a guaranteed income stream of at least $40,000 per year from age 55-85.
You can keep this up well past 55 if you buy more bonds with the proceeds from your more volatile investments. From the moment you stop buying, you'll still have 20 years of guaranteed income!
Nobody Buys Annuities
Eight Reasons Retirees Don't Buy Annuities http://www.forbes.com/pictures/mjd45hged/eight-reasons-retirees-dont-buy-annuities-2/
- advisors don't push them
- longevity risk isn't scary
- longevity underestimation
- the stock market is shiny
- they look bad for women
- couples' annuities look expensive
- they can't be willed to the kids
- no one wants to think about being very old and very poor
The ugliness of variable and equity-indexed annuities:
Fixed Deferred Annuities:
Single Premium Immediate Annuities (SPIA) can make sense:
You can use an SPIA to push off taking social security, which reaches max benefits at age 70. It also reduces the value of your estate, and can allow you to give your heirs their inheritance while you're still living.