Build Your Own Annuity


Annuities are a very common way to fund or partially fund retirement in the UK and US – they are also gaining popularity in Australia too.

But first – I am NOT a financial adviser and this post is not financial advice. I am sharing my personal thoughts and musing on the subject of retirement income streams. Always do your own research and seek professional advice if required.

Also, none of the links in this posts are affiliate links, nor am I commercially connected in any way to these sites, resources or companies.  The links are purely to assist the reader with further research.

One of the big perceived benefits of annuities is that your retirement income is guaranteed for life or for an agreed period no matter what the stock market, bond market or money market is doing.


For UK readers click here for some more details on the pros and cons of annuities

For US readers click here for some more details on the pros and cons of annuities

For Aussie readers click here for some more details on the pros and cons of annuities


I have studied, as deeply as I know how, the subject of annuities and I personally believe they are not a good fit for many folk in retirement for the following reasons:

·       Very low rate of return (some well less than 1%) on your hard earned savings

·       Restrictive structures that may lock your money away for life

·       Can be very complex

·       No choice on how your money is invested or the return it averages

·       High fees in proportion to the return on investment

·       A very low income payment, especially if the annuity begins in a low interest rate period.

In simple terms, I believe that the spruiked perceived benefits of a lifetime of safe steady retirement income from annuities are underwhelming, to say the least. Essentially, you’d have to own a very sizable nest egg tied up in an annuity to realise a livable income.

I think the average person can do much better managing their own income stream from simple manageable investments other than annuities.

Simple is good, especially as we get older - the last thing we want to do is have a complex retirement money management system that becomes too hard to maintain in old age.

Here are some elegantly simple ideas that will make sure our saved money is working hard for us in retirement.

  • Stable dividend and distribution income from low cost index stock and/or bond funds
  • Capital gain drawdown from low cost index stock and bond funds
  • Regular drawdowns from target-date diversified investment funds
Here is some reading on living off dividends  - click here
Here is some reading on living off portfolio draw-down - click here
Here is some reading on living off target date retirement funds - click here

A good place to start educating ourselves on low cost index funds for the above three scenarios might be with Vanguard (for example only).

Vanguard UK - click here

Vanguard USA - click here

Vanguard Australia - click here

All three Vanguard sites are chock-a-block with internal topic links and are very educational and easy to read and understand.

Some other important reading to start the process of self-education on funding your retirement  - try these links for size.

USA retirement funds - click here

UK retirement funds (SIPP and ISA) - click here

Australian retirement funding methods - click here

When all's said and done, whether we choose to retire off dividend income, portfolio drawdown income, an income stream form a target date retirement fund or a combination of these and other methods, then, the likelihood of our retirement income exceeding that of an annuity (and be working hard for us for many decades) is very likely and is absolutely achievable.

Start some self-education - hopefully the links in this post help start that journey for you.

Take care and stay nice.