..Social Security: The Cheapest Annuity in Town
By Alicia Munnell | SmartMoney Fri, Jun 1, 2012 10:02 AM EDT
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Share39EmailPrint.....The Center for Retirement Research at Boston College has just released a new study that shows that the best way for people to turn their 401(k) balances into a stream of income is to buy an annuity from Social Security. Many people dont recognize that Social Security is in the annuity business, but it is and it has the cheapest product in town.
For example, consider a retiree who could claim $12,000 a year at age 65 and $12,860 at age 66 $860 more. If he delays claiming for a year and uses $12,860 from savings to pay the bills that year, $12,860 is the price of the extra $860 annuity income.[1] The annuity rate the additional annuity income as a percent of the purchase price would be 6.7 percent ($860/$12,860). Remember that Social Security benefits are indexed for inflation, so the retiree is buying a real annuity. Vanguard a wonderful company also sells real annuities but it pays much lower rates.
Social Security: The Cheapest Annuity in Town - Yahoo! Finance
By Alicia Munnell | SmartMoney Fri, Jun 1, 2012 10:02 AM EDT
....
Share39EmailPrint.....The Center for Retirement Research at Boston College has just released a new study that shows that the best way for people to turn their 401(k) balances into a stream of income is to buy an annuity from Social Security. Many people dont recognize that Social Security is in the annuity business, but it is and it has the cheapest product in town.
For example, consider a retiree who could claim $12,000 a year at age 65 and $12,860 at age 66 $860 more. If he delays claiming for a year and uses $12,860 from savings to pay the bills that year, $12,860 is the price of the extra $860 annuity income.[1] The annuity rate the additional annuity income as a percent of the purchase price would be 6.7 percent ($860/$12,860). Remember that Social Security benefits are indexed for inflation, so the retiree is buying a real annuity. Vanguard a wonderful company also sells real annuities but it pays much lower rates.
Social Security: The Cheapest Annuity in Town - Yahoo! Finance