MathWizard wrote: ↑Sat Jun 06, 2020 4:32 pm
But where did the $700K come from? Investing, I assume.
The SPIA does get rid of investing in retirement, but I read the question as meaning no investment at all .
Also, is the SPIA inflation adjusted?
Likewise, I take the question to be whether you need to save (simpler meaning than 'investing') for retirement if you feel SS will cover your financial needs, not to classify whether buying an SPIA in retirement is 'investing' (which I would say it is anyway). It's just hands off investing, farming out your investing, with an insurance component (pooling the risk of very long life with others via an insurance co).
In the US market true inflation adjusted annuities are almost extinct. A fixed 2%/yr increase is a convenience, it's not inflation protection. Which is a significant drawback to SPIA's as *the* answer to deploy the whole $700k. Credit risk would be another reason not for it to be *one* annuity but that's nitpicking. Generally IMO SPIA's are a tool worth considering, for people with relatively aggressive spending goals relative to their assets (eg. people who need to use the old 4% rule to reach their goal), if they don't have a situation, health conditions, background etc. which strongly suggest a shorter than average life expectancy. In relatively few situations I think would just an SPIA plus SS be the answer though.
But like you say, nothing much to do with where that money came from. Unless somebody gives it to you as gift or inheritance, you have to save/invest to build it up. The problem with deciding not to save when decades from retirement is, as other posts have said, lots of uncertainty how your earnings (including possible unemployability well short of 65) and taste for consumption will develop over your lifetime. But I can see situations where people in later working years would put the brakes on their saving because otherwise they are headed toward having lots more money than it takes to support the style of life they now pretty well know will satisfy them, and have no particular goal to leave a particular size inheritance. In that case why not spend a little more now rather than having enough saved to spend fare more later, but which you might not be in any position to spend (declining health, or you're just not around), nor have any desire to.