Partial annuitization beats the 4% rule, new research finds
How the four strategies ranked
The study benchmarked four approaches for a baseline profile: a single female retiree, age 65, with $1 million in savings. Strategy A was the classic Bengen 4% rule. Strategy B was full annuitization of all savings into a nominal immediate life annuity. Strategy C was a one-time 50% annuity purchase with systematic withdrawals on the remainder. Strategy D was a gradual annuitization from 20% to 60% of savings between ages 65 and 75.
Outcomes were measured using average certainty equivalent (ACE) consumption, a utility-based metric that accounts for income, asset balances, longevity risk, and bequest preferences. After taxes and Medicare premiums, Strategy C ranked highest at 59.12, followed by Strategy D at 58.94. Full annuitization scored 54.58, and the 4% withdrawal rule ranked last at 53.79.
The income numbers reinforce why. The 4% rule produced the lowest average annual net income at approximately $58,100 — reflecting its structural tendency to underspend — while full annuitization generated around $65,700 but left zero remaining balance in every scenario. The hybrid strategies produced comparable income of approximately $64,700 to $65,200 while preserving average asset balances of $470,000 to $537,000, delivering both income and legacy potential.
The failure risk embedded in the 4% rule also stands out. The study found assets were depleted before death in 12% of scenarios by age 90, 24% by age 95, and 38% by age 100.
Why the hybrid edge holds up
The partial annuitization advantage proved durable across a wide range of real-world variables, including retirement ages of 62 and 67, asset pools of $250,000 and $2 million, poor and excellent health, lower and higher risk aversion, and weaker and stronger bequest motives. In nearly every case, the combination strategies outperformed the extremes.
