An annuity is a good estimate of the lowest-risk rate of return on a given sum. You can only do better by increasing your risk profile. If you need a reliable source of income over the long-term, increasing the risk is a bad idea.
Assuming the annuity is tax-free (a big if), your rate of return on a million would be $60k/year. But that’s ignoring the fact that you need to live somewhere. Assuming you live in a non-shithole urban area, you’re not going to find much that’s under $500k that’s worth living in. If you use $500k on property instead of taking on a mortgage, you’re down to an annuity of $30k. And a sizeable chunk of that will go on property tax and health insurance.
$30k is nice, but not life-changing. Having $1M in net worth is somewhere in the middle of middle-class. It’ll help you retire without having to live on pet food, but you’d still better be maxed out on your Social Security contributions if you want to live semi-comfortably.
Source: I’m retiring soon and have done lots of planning, and have had my plans reviewed and validated by financial planners. It takes more than $1M in net assets to live in a decent house, have some discretionary income, and keep some reserves to cover possible long-term care, car replacement and other contingencies.
Having said all that, you’ll never hear me whine about my financial situation. I’m in my present bourgeois position due to a combination of hard work, deferred gratification and luck, and few of my peers have been as fortunate. An unexpected layoff, a divorce, or a health crisis in our family, could have left me far worse off.
Not really, no. Look at this: https://www.annuity.org/annuities/rates/
An annuity is a good estimate of the lowest-risk rate of return on a given sum. You can only do better by increasing your risk profile. If you need a reliable source of income over the long-term, increasing the risk is a bad idea.
Assuming the annuity is tax-free (a big if), your rate of return on a million would be $60k/year. But that’s ignoring the fact that you need to live somewhere. Assuming you live in a non-shithole urban area, you’re not going to find much that’s under $500k that’s worth living in. If you use $500k on property instead of taking on a mortgage, you’re down to an annuity of $30k. And a sizeable chunk of that will go on property tax and health insurance.
$30k is nice, but not life-changing. Having $1M in net worth is somewhere in the middle of middle-class. It’ll help you retire without having to live on pet food, but you’d still better be maxed out on your Social Security contributions if you want to live semi-comfortably.
Source: I’m retiring soon and have done lots of planning, and have had my plans reviewed and validated by financial planners. It takes more than $1M in net assets to live in a decent house, have some discretionary income, and keep some reserves to cover possible long-term care, car replacement and other contingencies.
Having said all that, you’ll never hear me whine about my financial situation. I’m in my present bourgeois position due to a combination of hard work, deferred gratification and luck, and few of my peers have been as fortunate. An unexpected layoff, a divorce, or a health crisis in our family, could have left me far worse off.