I recently retired at 70 with a good nest egg, all invested in mutual funds and ETFs with Fidelity, the majority in retirement accounts, including a 401k rolled over to an IRA.
I've done OK managing my investments and the Fidelity analysis shows I can easily get to age 93 with a cushion for my heirs even in bad market conditions, and probably longer, even if I ramp up spending a bit.
When I checked in with a Fidelity advisor, he told me I had a "spending gap" and suggested I put 20 percent of my assets in an annuity (fixed single premium).
The annuity claimed to have a "return" of around 9 percent. But when I look at the calculations, I wouldn't be growing my assets, since the payout reduces the cash value each year. It seems like I am paying myself with my own money, at least for the first 10 years. It is true that the payout is essentially double the value over 20 years, but if I calculate compound interest at 4 percent I get around the same result.
The advisor said it's safer to have a "guaranteed income stream" rather than drawing down my assets. But the annuity already draws down my investable assets by 20 percent, so don't see the logic.
I understand the longevity issue but that doesn't seem to be a problem for me unless I live to 105 (with reckless spending and a bad market).
The advisor showed me his analysis suggesting I could have 500k in increased spending over 20 years with the annuity. I don't really understand how he got that result, since the annuity doesn't grow.
What am I missing?