A Reddit user posed a question that hits home for a lot of families trying to help their aging parents navigate retirement: Does it make sense to buy an annuity?
The post laid it all out. Their dad is 80. Mom is 65. They’ve got around $687,000 in investments and roughly $69,000 in annual income from Social Security and a pension. The user considered letting them follow the variable percentage withdrawal method—basically taking around 5.1% from the portfolio each year. That would give them about $85,000 in income annually, which should cover their estimated $75,000 in yearly expenses.
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Still, they weren’t fully convinced. “I don’t trust that she truly understands how much they spend,” they said about their mom, who believed their retirement spending would naturally drop. So the user started looking into annuities. Fixed, guaranteed income for life? Fewer surprises? It seemed appealing, especially for parents with such a large age gap. And they were fine with the idea that it might use up most of the money. “Yes, they won’t leave anything to us when they pass, but it would be split six ways anyway,” they wrote.
That kind of honesty sparked plenty of responses. Some suggested the VPW method could still work. Others were quick to bring up annuity rates, which in mid-2025 have climbed significantly. Several said that fixed annuities were now paying over 5%, with joint lifetime annuities offering even more for older buyers. That’s where the math starts to matter.
The original post didn’t specify exactly how much they’d consider converting, but let’s say the parents decided to put $500,000 into a joint immediate annuity. Based on current market rates, that could generate around $2,350 to $2,500 per month, or roughly $28,000 to $30,000 per year. Add that to their existing $69,000 in Social Security and pension income, and their total annual income could land around $97,000 to $99,000.
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But once they commit to an annuity, that money is locked in. It’s not available for emergencies, unexpected medical costs, or any big one-time expenses. If they choose inflation protection, the monthly payouts drop at the start in exchange for gradual increases later. And unless they add specific riders, there’s typically no money left over for heirs. For retirees focused on guaranteed income and less day-to-day decision-making, it might be worth the trade-off. But for others, the loss of flexibility—especially with a large chunk of savings—can feel like too big a sacrifice.
