The Forever Paycheck: Is Jean Chatzky Right About Annuities?

Annuities have a reputation for high fees, so why did Jean Chatzky change her mind about them in her new book, The Forever Paycheck? A viewer asked me what I think. In this video I share my take.

First, the types of annuities. Simple income annuities, immediate or deferred, pay you a monthly check for life. Variable and indexed annuities are a different story. They're complicated and expensive, and I stay away from them.

Then I put numbers to it with Schwab's free annuity calculator: what $100,000 buys a 65-year-old couple in a joint-life immediate annuity, how 10- and 20-year certain options protect your heirs for a few dollars a month, and what it costs to buy $2,000 a month of income for life.

Next, Jean's approach. Start with your spending, subtract Social Security and any pension, and cover the gap, or just your essential expenses, with guaranteed income.

I also cover two downsides. Annuities sold today aren't adjusted for inflation, and the state guaranty that protects you if an insurer fails has limits. I show how to add an annuity to a retirement plan in Boldin, too.

Finally, why I see an immediate annuity as insurance, not an investment, and why I'd build a TIPS ladder first for guaranteed income. I also share an article on pairing a TIPS ladder with stocks, and why you should get advice from someone who isn't selling the annuity.

Resources mentioned in the video:

The Forever Paycheck by Jean Chatzky: https://link.amazon/B0gsfCDnf

Schwab's Income Annuity Estimator: https://www.schwab.com/annuities/fixed-income-annuity-calculator

A TIPS Ladder Plus Stocks (Alpha Architect): https://alphaarchitect.com/tips-ladder/

Boldin (the retirement planner in this video; I'm an affiliate, they are not a sponsor): https://go.robberger.com/boldin/yt-annuities-forever-paycheck

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0:00 Jean Chatzky's The Forever Paycheck: a viewer's question
1:06 Income annuities: immediate or deferred
1:36 Variable and indexed annuities
2:23 What $100,000 buys (Schwab's annuity calculator)
3:08 10- and 20-year certain options
4:17 Jean's forever paycheck formula
5:23 What $2,000 a month costs
5:58 Downside #1: no inflation protection
6:40 Adding an annuity in Boldin
7:59 Downside #2: state guaranty limits
9:01 Why a SPIA is insurance, not an investment
9:44 Why I prefer a TIPS ladder
11:16 Annuities and TIPS together
11:57 A TIPS ladder as a "virtual annuity"
12:59 My take on annuities
13:49 Get advice from someone not selling annuities

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. I've since sold my websites, bought them back, and started a new website and this YouTube channel.

I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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