A Pseudo-Life Annuity: Is There a Downside?
Last year, I wrote an article that shared ideas on how not to outlive, with virtual certainty, one’s money (“A Pseudo-Life Annuity: Guaranteed Annual Income for 35 Years,” AAII Journal, June 2012).
Specifically, I demonstrated how an individual investor with a $1 million portfolio on March 19, 2012, could have invested the money to have virtually a 100% probability of both not outliving his or her money and leaving a legacy for heirs at death.
Though the data showed that income for the investor would be assured throughout retirement, a question that was left unanswered is, “Is there a downside to the beneficiaries when the individual dies and the remaining bonds must be sold prior to maturity?” That is, will there be a loss of original principal? In this article, I will answer that question.
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