I know a ex Fed Gov employee that gets a $8k/mo Gov pension for life. That is nuts! A working stiff in the private sector would have to accumulate say $2.5 million in capital in a safe investment (with principle not at stake) at say 4% to throw off that income per month! Or work their whole life to develop a free & clear rental property portfolio for a $8k annuity per month. Yet the tax payer is paying out thousands and thousands of these big ‘ol pensions!![/quote]
This is an apples/oranges comparison because you assume the principal is not touched.
My understanding of fixed annuities is that it is like life insurance paid out over your retirement years. Actuary tables are applied and the company selling them (usually life insurance company) is betting that you’ll die before the principal is gone. Your 2.5 Million assumes the estate has 2.5 million at the end.
Assuming your friend is 65 and male it’s not 2.5m, more like 1.3M assuming the online calculator I used is correct. And most annuities are purchased in advance of when the payouts start – for a lower initial cost.
