Skip to site content
The Show

The Price of Security – Immediate Annuities

Money-Guy 05-05-2008

With recent stock market ups and downs, immediate annuities are attracting attention from people looking to shelter themselves from volatility. But do they make financial sense? If so, for whom and when?

(An immediate annuity, you might recall, is an investment product that’s purchased with a single payment and begins to pay out a return right away.

In its simplest form, the annuity will pay you a set amount without fail until your death.)

Consumer Reports’ "Money Adviser Newsletter", a favorite resource of mine, recently examined immediate annuities in a research study titled, "Do immediate annuities really pay?". I enjoyed the article immensely because it provided a rare comparison of historical returns from buying an annuity versus investing in a diversified portfolio. It’s fact-based, highly detailed and data rich — qualities my listeners know I love 🙂

Listen to the show and I’ll share my thoughts about both strategies and if/when they might be appropriate for you. As you’ll hear:

  • Variable annuities charge sales commissions that average 6-7 percent
  • Fixed immediate annuities charge sales commissions that average 2-3 percent
  • A retirement account withdrawal rate of 8 percent only has a 41% percent probability of meeting income needs for 25 years (assuming 100 percent stock portfolio). You can increase that probability to 96-97 percent by diversifying and lowering your annual withdrawal rate to 4 percent.

Overall, I’m excited that the immediate annuity market is evolving and becoming more competitive and more transparent. With savvy, low cost providers like Vanguard and Fidelity Investments focusing on this market, consumers should see even lower fees, better service levels, and more innovation going forward.


I bought a rolling duffle from High Sierra Sport Company a while ago and was quite happy with it until two of the zippers recently quit working. With a little bit of research, I found that High Sierra has a lifetime warranty on their products — and that they actually stand behind their products. Even lacking a receipt or original tags, I had a brand new bag within a week. It’s nice when a company truly stands behind their promises.

My long-term listeners already know that I’m a movie fanatic. Can I rave about Iron Man for a moment? I simply loved the movie. In an age when few movies are worth your time — let alone $9.25 for a ticket — this movie was worth every minute and every penny. Check out the movie and let me know if you enjoy it as much as I did.

Enjoy the Show?

Where You Can Watch and Listen:

Subscribe on these platforms or wherever you listen to podcasts for new episodes every Friday, live streams every Tuesday at 10am CT, and new highlight clips throughout the week.

Related Content

Free Resources

How Much Should You Save?

How much of your income can you replace in retirement? You can replace different portions of your income in retirement…

View Resource

The Money Guy Guide to Retirement

Here are 9 insights you don’t want to miss… Whether you are 30 years away from retirement or 5 years…

View Resource

5 Healthy Ways to Deal with Investment Uncertainty

Fear is a powerful emotion that can hinder your ability to take action on your finances, but it can also…

View Resource


Exclusive Sneak Peek of Millionaire Mission by Brian Preston

, ,

Read More

How To Invest for Retirement the Right Way

, , ,

Read More

What Should I Count Towards My 25% Investing Rate?

, ,

Read More

Financial FAQs

Courses & Tools

How about more sense and more money?

Check for blindspots and shift into the financial fast-lane. Join a community of like minded Financial Mutants as we accelerate our wealth building process and have fun while doing it.

Millionaire Mission (Brian’s Book)

Buy Now

Know Your Number Course

Buy Now

The Money Guy Net Worth Tool

Buy Now

Recent Episodes

It's like finding some change in the couch cushions.

Watch or listen every week to learn and apply financial strategies to grow your wealth and live your best life.

maxresdefault 3

Is Retiring Early Really Worth It?

Watch Now
maxresdefault 1

Why Everything You Know About the Rich Is WRONG!

Watch Now

Is It Ever Okay to Break the 20/3/8 Car Buying Rule?

Watch Now