Bond ladder vs annuity

What this is

Two ways to turn a lump sum into guaranteed income

An annuity converts a lump sum into a guaranteed lifetime income, but the capital is gone (no estate). A bond ladder uses the interest income only, capital preserved for heirs.

• ·Annuity (SPIA): give insurer $500k → receive ~5.5%/yr ($27.5k) for life. Zero left for estate.
• ·Bond ladder: hold $500k of staggered Canadian bonds → ~4%/yr ($20k) interest income, principal preserved.
• ·Annuity wins on income per dollar (insurer pools mortality risk). Bond ladder wins on flexibility + estate.
• ·Hybrid: annuitize part to cover essentials, ladder the rest for flexibility.