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Old 01-01-2011, 09:33 AM   #21
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Ralph, I would let the money stay in savings/CDs for now while you do the more important thinking about where you go from here. What are your expenses? What will you get if you file for Social Security? Are there any life changes (relocate, pursue a business or part time job, etc.) you would make when you retire? Before you decide what to do with your savings you should figure out what you want to do with the rest of your life, what your expenses are, and how much you might be able to cover from SS, part time work and other sources of income. If you can hang in there until you are 65, you will be eligible for Medicare and not have to worry about health insurance for yourself (dunno how old your wife is). Figure this stuff out, then move on to the investment side.
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Old 01-01-2011, 09:46 AM   #22
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Ralph,

Look at it this way. A savings account/CD/Money Market accout is a GREAT place to park your money while you figure out what you really need to do.
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Old 01-01-2011, 09:53 AM   #23
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My thanks to all that have replied. It looks like the verdict is in.....don't purchase the annuity. But what do I do? I will be losing my job soon. Finding another job at 64 in my part of the country (Ohio) will be a chore to say the least. I talked to my buddy last night at a New year's Eve party who invests heavily in the stock market. He told me that he lost $5,000 in one week a while back but was able to make that up and then some. He is a retired teacher with SS and a pension from the state. He said "don't buy" also, but invest in the S&P 500 by myself. But I'd be gambling with my income I told him and what happens if the market goes down again and it looks like we are going to take another hit with the predicted $5 a gallon gas prices. I'm considering the fixed indexed annuity so I will have a steady stream of income at low risk. My buddy said "low risk, low return". But I'm not worried about making more money I just need income so I can get out of the place I'm working at now. I have lost everything. No more health insurance, vacations, sick days. Plus I have taken two pay cuts so far. When I go to work Monday morning I have absolutely nothing to do. I have to act busy. I create problems with the printing presses just so I can fix them to act busy. The days are sooooooo long. I'm always in a bad mood now says my wife. BUT, on the other hand I'm soooo lucky I haven't been laid off...yet. I do everything in the shop. Fix the roof. Fix the toilets, presses, computers, delivery van etc. When the boss is sick or on vacation I take over. So he needs me and I'm guessing that's why I'm still there. 11 others are history. I just HAVE to get out of there. I know I'm going to be used to make money for the insurance company but is there anything else I might consider at low risk? The term for the annuity I was advised to take was 7 years. Then I get 100% of my money back to do what I want with it. I will be going to SS on Wednesday to see where I stand with them and then to the bank to talk to the advisor about the annuity. Then I have some "hard thinking" to do. I didn't know retiring was going to be so hard. I was hoping that someone had an indexed annuity to let me know how it was doing for them. Going to check out now some of links now that you have provided. A BIG "thank you" to everyone.
Ralph, I question the applicability of your buddy's advise to your situation. Most retired teachers have very good pensions and health benefits. IF that is the case for your buddy, he can likely afford to take more risks with his invested money since he may have the pension and benefits as his fall back position. In your case your savings is all you have so your risk is much higher than his.

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Old 01-01-2011, 09:57 AM   #24
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chinaco, I have been doing what you suggested for the past year or so. Waiting til 70 to retire is not an option. I have to go soon. No work and unemployment is staring me in the face. I'm willing to let the insurance company make money on my money IF I get a guaranteed monthly income for the next 7 years. My bank advisor told me that Jackson Insurance will deposit $1500 into my account every month and possibly more if the S&P improves and it will be in "writing". I'm not interested in making more money anymore. Just wondering if anyone has done this and how things are going for them.
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Old 01-01-2011, 10:10 AM   #25
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+1 on Brewer's comment.

Hang on the job as long as you can. You said you are tired of it... but at 65, you will qualify for Medicare which is important.
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Old 01-01-2011, 10:14 AM   #26
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Just wondering if anyone has done this and how things are going for them.
I hope someone will chime in soon to give you a first-hand report.

Unfortunately for you, I think most here have done their homework, read the fine print on these insurance products and said "no way in hell" to a purchase. Those who are willing to admit they were suckered sold on a EIA generally did so when they were younger and less informed.
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Old 01-01-2011, 10:16 AM   #27
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........... I have to go soon. No work and unemployment is staring me in the face. I'm willing to let the insurance company make money on my money IF I get a guaranteed monthly income for the next 7 year..........
I think you are letting desperation overwhelm the good advice you have gotten here. Take a deep breath and reconsider at your leisure. Once you pull the trigger on that annuity, you are stuck with your decision.
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Old 01-01-2011, 10:21 AM   #28
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chinaco, I have been doing what you suggested for the past year or so. Waiting til 70 to retire is not an option. I have to go soon. No work and unemployment is staring me in the face. I'm willing to let the insurance company make money on my money IF I get a guaranteed monthly income for the next 7 years. My bank advisor told me that Jackson Insurance will deposit $1500 into my account every month and possibly more if the S&P improves and it will be in "writing". I'm not interested in making more money anymore. Just wondering if anyone has done this and how things are going for them.
Ralph,

I understand. But retiring does not mean you have to take SS. Of course, if you need it to live... you might have to take it.

For example, you could live off your other resources and delay taking SS a few years to increase the amount you will draw.... Remember SS has a COLA.

But whether or not this works for you will take some analysis.

If you are considering buying an annuity.... you should determine if your best option is to buy an annuity to spend your assets and defer taking SS till a later age. You get a quote from Social Security. What would be the increased amount you would get if you waited till 70 vs 66.x or 65?

Some other things to think about.

What would be the cost of purchasing a CPU-I adjusted Annuity at age 70 for you? Would it be more than you would spend while waiting?


You will want to factor in your longevity if you are considering buying an annuity. If you have health problems and do not live for many years, you may not recover the cost of the annuity. The same consideration should be factored in if you plan to defer taking SS for a few years.


There are a lot of issues to consider. This is why it is so important to spend some time educating yourself on the issues.

You can post questions on this forum. People on this forum will help you understand the issues better.
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Old 01-01-2011, 10:23 AM   #29
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chinaco, I have been doing what you suggested for the past year or so. Waiting til 70 to retire is not an option. I have to go soon. No work and unemployment is staring me in the face. I'm willing to let the insurance company make money on my money IF I get a guaranteed monthly income for the next 7 years. My bank advisor told me that Jackson Insurance will deposit $1500 into my account every month and possibly more if the S&P improves and it will be in "writing". I'm not interested in making more money anymore. Just wondering if anyone has done this and how things are going for them.
Ralph, the advise here is sound. We can only advise you and shake you so much till you jump in the toilet and realize at some point you made a mistake. Believe me I've made them along the way also.
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Old 01-01-2011, 10:25 AM   #30
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Ralph, you didn't mention whether the annuity payout was based solely on your life or on the joint life expectancy of you and your wife.

Be sure to run all of your SS, income and spending numbers on two scenarios: one where you die first and one where your wife passes first.
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Old 01-01-2011, 10:45 AM   #31
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Dumb general question here, not specifically directed at Ralph:

Isn't this the "red-light" situation where Otar demands suggests buying a cheap SPIA? Or is the problem that the FIA (or EIA, or whatever we're calling it now to avoid prosecution) seems to offer more payout for less upfront cost?
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Old 01-01-2011, 10:54 AM   #32
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Dumb general question here, not specifically directed at Ralph:

Isn't this the "red-light" situation where Otar demands suggests buying a cheap SPIA? Or is the problem that the FIA (or EIA, or whatever we're calling it now to avoid prosecution) seems to offer more payout for less upfront cost?
I think the problem (for Ralph) is he views the SPIA as "I'm giving up my nest egg forever" while the [insert term of you choosing here] option offers the promise of getting your money back after a defined number of years.
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And, after the term is up I can take 100% of my initial premium and do what I want with it or reinvest it again at possibly a higher rate. Even though the immediate life annuity would give me $600 more a month to live on, getting ALL my money back in 7 years makes it sound pretty good..
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Old 01-01-2011, 11:06 AM   #33
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I think the problem (for Ralph) is he views the SPIA as "I'm giving up my nest egg forever" while the [insert term of you choosing here] option offers the promise of getting your money back after a defined number of years.
The problem for Ralph is that he has the bit in his teeth. We've seen it before, and we'll see it again.

These products are not designed or sold by people with no understanding of human psychology.

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Old 01-01-2011, 11:27 AM   #34
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Originally Posted by Nords View Post
Dumb general question here, not specifically directed at Ralph:

Isn't this the "red-light" situation where Otar demands suggests buying a cheap SPIA? Or is the problem that the FIA (or EIA, or whatever we're calling it now to avoid prosecution) seems to offer more payout for less upfront cost?
As Ha observed, the problem is that Ralph likes the sound of the sizzle from this product (but the steak is full of gristle). A SPIA might be the way to go, but he needs to figure out a lot before making any decision about his use of funds.
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Old 01-01-2011, 11:36 AM   #35
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The problem, as I understand it from Ralph's notes here, is that he wants a guaranteed return of principal AND a stream of income. He is being offered that with the insurance product. But the cost is high: not all of his investment will go into the annuity; some of it will go to the sales person. So not all of his money will be earning income.

Simple choice: CD's or bonds. With bonds one needs to understand the issuer, plus there is generally a commission to pay. With CD's your investment is protected up to $250,000. But Ralph has $300,000.

So, Ralph, stick it in CD's. But not in your local bank, and not in one bank. You will want to look at this website: Bank Ratings They rate banks for safety, and provide a list of the best rates for CDs of varying time periods.

When you get to the web site, at the top of the screen, click on CD Rates, then click on Consumer CD's. I see a choice here for investments, that won't pay you 7% but could pay you above 3% for the next 5-7 years. That would assure the return of the $300,000 with some income during the period. Your income would keep you even with inflation, assuming inflation doesn't go above 3%.

As others have said, if you can hold on until you are laid off, there would be unemployment along with the earnings from our CDs. You may be able to find part-time work as well.

See: in the 5 year CD section - Everbank paying 2.55%; in the 6-10 year section - Discover Bank paying 3%. All have 800 numbers and the customer service folks are happy to explain the process to getting the CDs.

If it were me, with the issues Ralph raises, I'd invest $200,000 in one bank with the highest APR, then $100,000 in another bank with the next highest APR. There might be two different maturity dates on the CDs, but one could always then buy a smaller term when they mature to make the 7 year window Ralph wants.

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Old 01-01-2011, 12:59 PM   #36
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Ralph,

Have you considered setting up an automatic withdrawal to put a proper amount in your checking account each month? That will simulate a monthly paycheck for the year.

I just rebalanced my portfolio (happy new year) and calculated my "monthly paycheck" set up for automatic withdrawal for the year --from my money market fund to my checkbook.

It is a nerve wracking move, to be used to having a regular paycheck from work, then go from not having one. So you need to figure out how to creatively simulate your own monthly check. The thought of a monthly check for life from a SPIA sounds good -- you know a "paycheck" will never stop. Yet as others have pointed out, plunking all your retirement savings into that basket probably isn't the best option.

Would you really be comfortable putting all that into a SPIA?

Would you really be comfortable not having some of it into a guaranteed income stream (such as a SPIA)?

Maybe something in between the two extremes is your happy compromise?

IMHO, you need to take a step back and look at the overall picture.
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Old 01-01-2011, 02:42 PM   #37
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I think the problem (for Ralph) is he views the SPIA as "I'm giving up my nest egg forever" while the [insert term of you choosing here] option offers the promise of getting your money back after a defined number of years.
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As Ha observed, the problem is that Ralph likes the sound of the sizzle from this product (but the steak is full of gristle). A SPIA might be the way to go, but he needs to figure out a lot before making any decision about his use of funds.
Well, OK then, I get that part.

Ralph, like so many other posters who've started off here with an annuity question, it sounds as if you've already made up your mind and you're just looking for someone to help you justify your preconceived decision. I'm not going to do that, and I doubt I'd be able to change your mind.

But for everyone else who's reading this thread someday, Larry Swedroe's written an excellent book on alternative assets which still seems timely-- even though the annuity sales forces keep changing the vocabulary. A copy is probably available at the local library. You could also go to that Amazon.com link, choose "Search inside the book", search for the keywords "equity annuity" (no quotes), and then read pages 229-234. That 10 minutes could change a lot of minds.

If nothing else you'll be able to learn how to really have the Way of the Weasel Words with the English language.
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Old 01-01-2011, 08:49 PM   #38
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73ss454, A CD at 5% would be nice. I'd much rather do it that way. I remember some years ago I was getting 9% on a CD. That's what I had planned but things didn't work out. As for unemployment. Getting half of what I earn now wouldn't cut it as my wife's medications would take up most of that. My wife said to me today "it seems so odd that you would give away $300,000 to get just a little back at a time. I hope you know what you are doing". So for now I will go into work on Monday and "create" some problems with the machinery just to make it look like I'm fixing them just to keep busy. Thanks for the heads up on that Pen Fed CD. I will look into it ...now.
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Old 01-01-2011, 09:39 PM   #39
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fixed indexed annuity

OK, I have read all your replies several times and I respect your advice on NOT purchasing a fixed indexed annuity. It seems unanimous. But how else can I start receiving a guaranteed monthly income to supplement my SS? That CD that 73ss454 (sounds like a Chevelle I once owned..) suggested might do it...for a while. I don't have much time. I'm expecting to be told to go home this week as the work isn't there anymore. It's not only the threat of being laid off that bothers me, it's working in a place where I haven't had a raise in past 8 years. Lost my health ins., vacations, sick days etc. I can't gamble with my savings as it will be used for my income. The days for making money are over. I just need money to live on from now on. BTW. That PenFed CD was only 2.4% at 5 years.
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Old 01-01-2011, 10:10 PM   #40
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Ralph, the 5% CD ended a few months ago. Pen Fed usually comes out with a deal on CD's in January so keep your eyes open.

You should be able to buy Cobra for health ins if you are laid off. Also unemployment will help out for a while till you can get your head together.

Stay away from sales people till you get a handle on things.

If for some reason you can't stay from the annuity sales person just take the paperwork home before you sign anything.

Some of the folks on the forum will help you figure out what it says. It will be 20 to 40 pages of things that are not good for you.
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