"Are variable annuities the end-all-be-all?" he asked. "No, they're expensive. They're restrictive on the investment options. But the income guarantee right now is in a sweet spot."
For many annuities, the annual guarantee is 5 percent of the annuity value at its highest point, down from 7 or 8 percent a few years ago. Further out on the wealth spectrum, people with tens of millions of dollars would seem to be immune from worrying about running out of money. Not necessarily, if they want to use the expiring gift tax exemption.
J. P. Morgan Private Bank's Advice Lab calculates that a 55-year-old couple with $40 million and 30 years to live could pretty much rest assured; they could give the full $10.24 million this year and have a high probability of maintaining a spending rate of $750,000 a year.
The calculation assumed they lived in New York for tax purposes and that their spending grew at 3.25 percent a year to keep up with inflation. Their assets, 10 percent of which were held in tax-deferred retirement accounts, grew at 7.7 percent a year.
For others of lesser means, it would be tricky to make a gift and still be assured of not running out of money. Consider a couple with $10 million and the same assumptions on age, life expectancy, returns and adjustments to spending. The spouses spending $250,000 a year could give away $2 million this year and have a very good chance of maintaining their standard of living, or they could give away $4 million and have a 50-50 chance of doing that.
But with the same $10 million and annual expenses of $400,000, the couple would have only a 55 to 60 percent chance of being able to maintain current spending, even without making any gifts to heirs. If the couple gave even $500,000 away this year, they would face a 50-50 chance of having to curb their standard of living.
"When you increase these assumptions out over time, and you assume volatility in the market, what we find is there is amazing sensitivity to the amount you withdraw from your portfolio," said Janine Racanelli, managing director and head of the Advice Lab.
Various financial structures allow the wealthy to give away money without really giving it away. One is a so-called Crummey trust, often used for life insurance. It can be set up to allow someone who is worried about outliving his money to name a spouse as a type of beneficiary who can make a distribution to him later.
"If it turns out he lives longer, spends too much or has bad investments, he can say, 'Gee, I'm running low,' and his wife, as a discretionary beneficiary, can pay for lifestyle expenses," said Carter Ruml, senior wealth planner at PNC Wealth in Louisville, Ky. "If she dies, she can appoint assets to the benefit of her husband and descendants."
He added, "This is never the money you tap first because you've used your gift tax exemption to put money there," he added. "But it really takes a lot of the concern away about giving too much. It's an escape hatch."
To many, even running these numbers on the back of an envelope is an exercise in futility. They are going to die with little or nothing regardless. But to others it is a balancing act.
Stephen Pollan, an author, life coach and lawyer, caused a stir in the late 1990s when he wrote a book advocating that people stop fretting over their estates. His book "Die Broke: A Radical Four-Part Financial Plan" (HarperBusiness) was published in 1997 when the prospect of running out of money seemed less likely.
The mantra he preached in the book — quit today, pay cash, don't retire and die broke — could be summed up as take control of your career so you are not at the whim of an employer, don't go into debt, stay active and transfer as many of your assets to your heirs as possible during your life. Today it may resonate even more with retirees or near retirees.
"Retirement is a nonevent," said Mr. Pollan, 83 and still working. "It's the height of stupidity and it's lethal. One of the most important things in life is to have a purpose."
He got the idea for dying broke, though, not from concerns about his and his wife's financial situation but from a desire to buy his son, the food writer Michael Pollan, a pond for his house in Connecticut. His wife said if he kept spending money like that, they would die broke.
Mr. Pollan said he scoffed at the notion of people fretting about running out of money. "That's looking around the corner, which you should never do," he said. "We have small annuities, but we both still work. Working for us is the same as saying purpose. A life without purpose is empty."
If you agree with him, keep working. If you don't, it may be time to break out the calculator to do some serious math.