As always, there are inherent contradictions in whatever style a retiree embraces. In a paper for the Stanford Center on Longevity two years ago, Pfau and two prominent actuaries, Steve Vernon and Joe Tomlinson, concluded that, if past were prologue, retirees who wanted to front-load their retirements and spend a lot in the early years would be better off with annuities, while those focused on growing their wealth and having more assets in their later years would be better off with equities.
At the same time, however, people concerned about outliving their money might find an annuity attractive. It’s a strange paradox.
But there is a silver lining. Many experts question whether the 4% rule—in reality the 4.5% rule—is sustainable in light of today’s lofty financial asset prices. But millions of Americans are now approaching retirement with much larger nest eggs than they ever imagined. So if they have to cut withdrawal rates to the 3.5% rate in their early retirement years, they are working off a much larger net worth and thus able to make things work.