By JLP | June 28, 2007
Here’s a question for everyone:
I realize that most of my readers probably aren’t retired so this topic may seem a little silly to talk about. However, I ask this question because Jonathan Clements mentioned it in his column yesterday (the same column I talked about in my last post). There’s something about spending down principal that just doesn’t sit well with me. It seems risky. After you’re retired, once your principal is gone, it’s gone.
Of course the other side to the equation is that some people may not want to leave a lot of money behind and feel it is their right to spend it. I can understand that. My main concern is running out of money, not necessarily leaving lots of money behind.
Personally, I think the ONLY way I would recommend spending down principal is through a fixed immediate annuity. This type of annuity can even be structured to offer lifetime income no matter how long you live. More on this at a later time. Meanwhile,…
What do you guys think about this?
UPDATE – Reading through the comments and rereading my post, I figured out that I didn’t write clearly. There are low-expense fixed immediate annuities. Vanguard sells them. You’ll have to buy them yourself, but they do sell them and they are quite reasonable. Anyway, as I said, I’ll do a follow-up on this sometime in the future.