Case Study: Jeff’s Retirement Journey

Market Withdrawals vs. Annuity Solution (2000–2024)

Imagine stepping into a time machine and traveling back to January 2000. Jeff, a 65-year-old retiree, is planning his financial future with a $1,000,000 portfolio and $30,000 annually from Social Security. To maintain his desired lifestyle, he needs $100,000 per year, leaving a $70,000 income gap to bridge from his investments. Jeff faces a critical decision: rely entirely on S&P 500 market withdrawals or incorporate a fixed annuity for guaranteed income. Using actual S&P 500 total returns from 2000 to 2024, this case study explores two paths Jeff could have taken, revealing starkly different outcomes. For those researching retirement income strategies, S&P 500 sequence risk, or annuity benefits, Jeff’s story offers a data-driven lesson in planning for a secure retirement.

Jeff’s Retirement Challenge in 2000

In 2000, Jeff is optimistic but cautious. The S&P 500 has been strong, but whispers of a tech bubble loom. With a 7.8% annualized return over the next 25 years (2000–2024), the market seems promising, yet its volatility—crashes in 2000–2002 and 2008—poses risks. Jeff’s goal is to cover his $70,000 income gap without running out of money. We’ll rewind to 2000 and simulate two scenarios using actual S&P 500 total returns (including dividends). Sourced from Yahoo Finance and S&P Dow Jones Indices:

Note: 2024 return is year-to-date as of September 24, 2025. Withdrawals are taken at the start of each year and are fixed (no inflation adjustment) for simplicity, excluding fees and taxes.

Let’s see how Jeff’s two paths unfold.

Scenario A: All-In on the Market

In January 2000, Jeff decides to keep his entire $1,000,000 in the S&P 500, withdrawing $70,000 annually at the start of each year to cover his income gap. He’s banking on the market’s long-term growth to sustain him, fully exposed to its ups and downs.

The Journey

• Early Years (2000–2002): Disaster strikes. The dot-com crash pummels the stock market, with returns of -9.10%, -11.89%, and -22.10%. Jeff’s portfolio shrinks rapidly as he withdraws $70,000 each year. By the end of 2002, his balance is down to $614,623, a 38% drop in just three years.

• Mid-Years (2008): The 2008 financial crisis delivers another blow (-37%). Jeff’s portfolio, already weakened, falls to $210,375 by year-end, even after a few recovery years. His 7% withdrawal rate is proving unsustainable.

• Year 12 (2011): After withdrawing $70,000, Jeff’s balance is $357,269. The market’s modest 2.11% return can’t keep up.

• Year 18 (2017): By 2017, Jeff’s portfolio is depleted. After taking $70,000, his balance drops to $47,120, insufficient to cover the withdrawal. For the remaining 7 years (2018–2024), Jeff faces a financial shortfall, potentially forcing lifestyle cuts or a part time job.

Outcome

Jeff’s portfolio ran dry in 2017, leaving him with $0 by 2024. The early crashes and high withdrawals amplified sequence-of-returns risk, wiping out his savings despite the S&P 500’s long-term growth.

Lesson: A 7% withdrawal rate, even in a growing market, is vulnerable to early losses. Jeff’s all-in market strategy failed to provide lasting security.

Scenario B: Annuity + Market

Now, let’s rewind to 2000 again. Jeff takes a hybrid approach, allocating $300,000 to a fixed indexed annuity that pays $38,500 per year for life. This covers over half his $70,000 gap, leaving $31,500 to withdraw annually from a $700,000 S&P 500 portfolio. The annuity provides a guaranteed income, reducing his reliance on market withdrawals.

The Journey

• Early Years (2000–2002): The dot-com crash still hurts, reducing Jeff’s portfolio to $429,937 by 2002. But his lower withdrawal rate (4.5% of $700,000) and the annuity’s $38,500 cushion soften the blow.

• 2008 Crisis: The -37% drop is painful, leaving Jeff’s portfolio at $149,994 by year-end. However, the annuity continues paying $38,500, ensuring most of his income needs are met.

• Recovery (2009–2021): Strong market years (+32.39% in 2013, +28.71% in 2021) allow Jeff’s portfolio to rebound. By 2017, it’s at $458,828, and the annuity payments remain steady.

• Year 25 (2024): By 2024, Jeff’s portfolio grows to $709,195, and he still receives $38,500 annually from the annuity. His total income is secure, and his portfolio can support future needs or legacy goals.

Outcome

Jeff’s hybrid strategy thrives. In 2024, he has $709,195 in his investment account plus $38,500 in ongoing annuity income, totaling a robust financial position. The lower withdrawal rate and guaranteed income protected him through market storms.

Lesson: The annuity’s guaranteed income reduced Jeff’s portfolio withdrawals to a sustainable 4.5%, allowing his investments to recover and grow. This balance ensured lifelong security.

Key Takeaways: Market vs. Annuity in Retrospect

Looking back from 2024, Jeff’s two paths reveal critical insights:

• Depletion Risk: Scenario A depleted Jeff’s portfolio by 2017, leaving him stranded for 7 years. Scenario B preserved $709,195 with lifetime annuity payments.

• Income Reliability: Pure market withdrawals collapsed under early crashes; the annuity’s $38,500 provided stability, covering over half Jeff’s gap.

• Wealth Preservation: Scenario B ended with $747,695 ($709,195 investments + annuity value), vs. $0 in Scenario A.

This aligns with research from sources like Morningstar, which highlights how annuities mitigate sequence-of-returns risk in volatile markets. While annuities sacrifice liquidity, they offer peace of mind for retirees like Jeff.

Plan Your Retirement with Historical Wisdom

Jeff’s 25-year journey shows the power of blending annuities with market investments. In 2000, choosing the hybrid path would have secured his retirement through crashes and recoveries. If you’re planning your retirement, consider investment only withdrawal risks, annuity options, and historical market data.

Disclaimer: This case study uses historical data for illustration. Past performance doesn’t predict future results. Consult a financial professional before deciding. Simulations exclude fees, taxes, and inflation for simplicity.Date: September 24, 2025