When thinking about the role of annuities in a retirement plan in today’s extraordinary climate, however, many people will contemplate if it is prudent to buy an annuity after the market has already dropped. Should one wait for markets to rise again?
The easiest way to answer this question is to think in terms of the funded ratio for retirement. This requires calculating the household’s total assets and liabilities. Assets include values for the financial portfolio and other real assets, as well as the present discounted value of other potential income sources, including Social Security, pensions, annuities, part-time work, etc. Liabilities include current debt such as a mortgage or loan balance, as well as the present value of lifetime spending needs and taxes.