Should I Buy a $3M Annuity So I Never Worry About Money Again?

Dear Penny,

Please help me evaluate a tantalizing temptation. I am a 58-year-old single gay white male college graduate with no dependents. I worked hard, prospered, lived frugally and saved for over 30 years. In my early 50s, I was promoted beyond my skills and abilities and consequently floundered professionally.

Currently, I am self-employed owning/managing a vacation rental and three single-family residential rentals — all debt-free. These rentals gross/net approximately $6,000/$4,000 monthly, respectively. Additionally, five RV site rentals net between $1,200 and $3,000 monthly depending on occupancy.

In addition to the aforementioned $1.4 million of real estate, I have saved approximately $800,000 in qualified retirement accounts.

Soon, I will inherit a gift of two $400,000 debt-free houses, which I intend to own/manage as additional rentals that will gross a combined $4,400 monthly.

Oh, and at 70 (three years beyond full retirement age), I’ll start receiving $3,228 monthly in Social Security.

Here’s where I’d like advice, please. Why should I not, in some future year, liquidate this $3 million into a responsibility-free and work-free annuity and simply enjoy $15,000 or more monthly (plus Social Security) for the rest of my life? Oh, the temptation!

-Hard Working and Extraordinarily Fortunate

Dear Hard Working,

Annuities are a much-maligned financial product, but I’ll avoid giving you the knee-jerk reaction against them. Much of the bad rap is deserved, but I do think they’re appropriate in some circumstances. I’m just not sure it’s the best option for your particular circumstances.

An annuity is technically an insurance contract, not an investment — though some annuities do have underlying investments. Annuities protect you against the risk of outliving your money by providing guaranteed income, often for life.

Annuities can make sense for someone who’s in good health, since the longer you…

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