The Case for Replacing Some Bonds With Annuities

Unless you die relatively young, income annuities will give you more retirement spending power than bonds, some economists say.

If you want to maximize how much you can safely spend in retirement, some economists say, sell some of your bonds and buy lifetime income annuities.

While you’re still working, a diversified portfolio of stocks and bonds is an efficient way to save for retirement. But once you’ve retired and are drawing down that nest egg, income annuities can outperform bonds, some economists’ research shows.

The most efficient portfolio for retirees consists of stocks and income annuities, says Wade Pfau, a professor of retirement income at the American College of Financial Services. The annuities provide dependable income, while the stocks provide growth, cover unexpected expenses and help leave a legacy for heirs.

Read More from the Source: Neal Templin in the Wall Street Journal