Question 1 – 4% Rule Calculation (Inflation Adjusted)

I often see posts that say for $100,000 one can expect an income of $4,000/year (invested properly of course) – simple right? Getting inside this a little more though for my spreadsheet I’d like to know how you actually run the calculations? I see “inflation adjusted” a lot and not sure how that works. For example, I just read that “*the 4% rule -- initially withdrawing 4% of retirement savings and then increasing that dollar amount annually by the inflation rate.*” So that means that I calculate $4,000 for year one, and with a 3% level of inflation (as an example) year two would be $4,000 + $120, or $4,120 in income and so on (year 3 $4,000+$120+$124??).

I actually thought it worked differently and was only depending on 4% year over year, not adding the inflation factor. This was because I thought that the investment yielded approximately 7% in the 4% rule calculations (i.e., 4% + 3% for inflation), so you couldn’t count on getting the full 7%, but count on 4%.

I’m confused and would like help. I'm looking to see how to run the first part of the calculation, and that is expected return on my $100,000, and the second part being how much I can expect for income from year to year.

Sorry about the 4% Rule question, but when I research using the search tool it crashes (also there has been so much discussion over the years that it would take weeks to find what I'm looking for).

Question 2 - Immediate Annuity

In addition to my other income sources I may want to have some guaranteed income to count on. My tax advisor is also a financial advisor and he suggested that I put some of my cash (currently invested in Vanguard indexed funds and in my deferred comp.) into an annuity.

The problem is that he’ll want to handle that for me and the last time I worked through him I found some pretty hefty fees (therefore Vanguard!)! So, do any of you know how I can get one of these at a low cost (edit - I just discovered that Vanguard does this so I am researching this right now)? I would also entertain opinions on the use of these in the first place. I was thinking about one that guarantees income for 10 years because I'll be getting a pretty good raise when SS kicks in at age 62 for me (8 years away). Here is what I read:

*"A 10 Year Period Certain annuity pays income for 10 years. It does not pay for your lifetime. If you die during the 10 year period, your beneficiaries receive this income for the remainder of the term. At the end of the 10 years, your original premium is not returned since it was paid out during the term."*

Lastly, I might only put $100,000 of my $500,000 available into a "product" like this.

Other income sources include (and add up to about $100,000/year):

• DW’s IRA (in a few years)

• Invested deferred comp. (at the moment it is a deferred comp program, but I’ll convert that once I retire) in stocks/bonds

• Rental income

• Small insurance stipend

• Life insurance annuity

• Pension

• DW’s income(s)

• Side gig

• SS in a few years (I am 54 and DW is 55)