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A 65-year-old couple drawing $30,000 in Social Security will need $1,750,000 in securities assuming a withdrawal rate of 4% ($1,750,000*.04 =$70,000 to have a $100,000 income before taxes.This safe withdrawal rate assumes historical rates of return and that stocks will outpace inflation. Others have put a 90% safety factor on the 4% rate. Others argue the SWR should be around 2 %. For $1,169,255 Vanguard will through AIG sell you $70,000 annuity with a 3-1/2% inflation factor for as long as you or your spouse may live, a savings of $580,745. Other 5* rated insurance companies have similar quotes or spread your money around. Jonathan Clements was not too wrong, was he? When a 65-year-old couple finances retirement with stocks and bonds there are six risks they take on: 1.That stock and bond returns will be close to some estimate of future returns. 2.That the sequence of poor returns will not occur in the early years. 3.That inflation will not exceed portfolio 4.That the tax rate will remain somewhat the same. 5.That a court judgment will not wipe out their savings. 6.That you will not incur astronomical medical bills depleting your portfolio. The insurance company takes on risks 1 to 4, you are judgment proof for risks 5-6. And they make a profit as well. How is this done? Rates are set by their estimate of their investment returns plus a profit for the median age longevity of the group. Half of the people in the group will die before the median age and the other half well beyond the median age. If you live beyond the median age, part of your annuity payments have been paid for you by those who have already died. Originally posted in thread: 54229

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