I tend to agree that retirees with either very small or very large retirement portfolios will likely not find an SPIA to be a tool that they need to use. I certainly don't expect to use one in MY retirement because we've been fortunate so far to build a portfolio that (it seems) will more than meet our desired level of retirement spending.willthrill81 wrote: ↑Tue Oct 09, 2018 9:44 pmI think that there is a segment of retirees for whom a SPIA may make sense. As longinvest has pointed out, it probably doesn't make sense for retirees with tiny portfolios to do anything other than hold their capital for the most essential spending needs, doing their best to make ends meet on other income streams like SS.
That said, there is a large slice of America in the middle, who have a retirement portfolio somewhere between nothing and enough for whom an SPIA should at least be considered as a rational and possibly even wise part of their retirement plan. Especially since, for the majority of Americans, the number one goal in their retirement planning is to provide "guaranteed money every month to cover [their] living costs in retirement". (source).
In fact, according to a TIAA survey, 62% of employees would prefer to receive $2,700 a month for life rather than a $500,000 lump sum at retirement. Arguing that investors value the wrong thing only takes you so far if what we care about is meeting their ACTUAL needs instead of the needs we WISH they had.