Continuing on the annuities and lifetime income topic, I’m going to look at a modification of last month’s analysis.  Last month, I analyzed putting capital into S&P500 stocks, and taking the dividends and a fixed percentage of assets every year as payout.  The advantage of this strategy is that capital will never go to $0 (unless the S&P500 goes to 0), because the capital withdrawn is a fixed percentage of its current value.  The downside is that year to year payout varies greatly, making budgeting extremely difficult.

In this month’s analysis, I look at what happens if the amount taken out each year is constant (adjusted for inflation).  Obviously budgeting is a lot easier, because the same amount of income is available each year.  However, with this strategy the capital can go to $0, and as you’ll see it would have gone to $0 with higher withdrawal rates over the study period.

If there are investment topics you’re interested in that I haven’t covered yet please send me an email:

joseph AT StockMarketMovement.com