Drawdown period calculations

Albermarle

Secret2ndAccount said:

They could be paying out to your wife for 45 or 50 years. What SWR starting % would you pick at those ages?  3.5% is good for 30 yrs.

I am not an expert in this area, but I was wondering why having a spouse payment did not bump up the cost more than it does, considering your comment above.

I presume it is that the actuaries have worked out that there are various scenarios, including the spouse dying first and both dying at similar ages . Overall they probably only expect on average to pay a few years of spousal pension, although it will vary depending on gender and starting age.

Secret2ndAccount

Without getting into conditional probability and running another simulation, I can oversimplify:
For a male, 62, median life expectancy is 23 years. A single life RPI annuity would pay ~4.9%. Even the slightest health issue (high cholestorol?) would push it over 5%.
The wife, 55, median life expectancy 32 yrs. So the payout might be 23/32×4.9% = 3.5% Or consider it a single life annuity for the wife from age 55 which pays 4.1%.   So 3.8% seems reasonable.

Secret2ndAccount

Remember, when you buy an annuity, you are effectively converting your pot into bonds, and giving up growth in exchange for certainty. At younger ages, you might prefer to keep some of the pot in equities for greater growth - you still have time to wait for recovery if there is an equity crash.
If the pot is big enough, and ceratinty is what you seek, an annuity could still be for you.