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Old 05-14-2019, 08:35 AM   #141
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All fine and well, and if you want to maximize your pile to your last day and take the risk that is up to you.

For me, the question is a different one: how do I best manage the risk that dw or I will outlive our money? The solution set includes a huge pile of assets, but that doesn't need to be the only tool used. The reality is that longevity runs in dws family, and my family seems to stick around a long time even when they are in poor health. I also see how dad has lost a lot of his business acumen at 80 and mom is getting a lot less on the ball at 77. It would be nice to think I will still be at the top of my game then, but I can't count on it.

I am some years away from making a decision, but for me simply maximizing the pile is not going to be the most important outcome.
I understand your rationale. At 65 I may have a different perspective, and I will admit I have a healthy distrust of most insurance companies that issue annuities. That being said I may look at Vanguard's offerings in that regard, since I have dealt with them for some years now and feel they are the best of breed. Good luck whichever way you decide to go. Nice that we have first world problems like we do, such as having to make investment decisions for relatively decent amounts of assets.
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Old 05-14-2019, 08:56 AM   #142
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What makes an SPIA acceptable to many, while other annuities are not? Is it the simplicity and competition that makes it hard to hide expenses and keeps the prices low? Or something else? I see this tossed around all the time with no explanation why.
I think it's primarily what you wrote - SPIAs tend to be straightforward products with fees that are harder to hide vs. other annuity types (primarily variable types) that tend to obfuscate fees and have heavy pushes from salespeople who may earn a pretty high commission which is also part of the fees.


Here are a couple of good articles from one of the Bogleheads founders on the subject:
SPIAS: https://www.forbes.com/2010/07/29/si...l#5b623f4c2d89
All types but discusses variable annuities at length: https://www.forbes.com/2010/06/04/va...l#34f1683d653e
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Old 05-14-2019, 09:14 AM   #143
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I understand your rationale. At 65 I may have a different perspective, and I will admit I have a healthy distrust of most insurance companies that issue annuities. That being said I may look at Vanguard's offerings in that regard, since I have dealt with them for some years now and feel they are the best of breed. Good luck whichever way you decide to go. Nice that we have first world problems like we do, such as having to make investment decisions for relatively decent amounts of assets.

I own Vanguard annuities and will buy more as I age. It was the right decision for me, good luck to you.
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Old 05-14-2019, 09:23 AM   #144
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I think it's primarily what you wrote - SPIAs tend to be straightforward products with fees that are harder to hide vs. other annuity types (primarily variable types) that tend to obfuscate fees and have heavy pushes from salespeople who may earn a pretty high commission which is also part of the fees. ...
+1 I think it is the simplicity and straighforwardness... I pay a single premium of $x and receive $y for life, joint life or for a period certain. For the period certain I can calculate what my reate of return is. For the life contingent versions I am protecting against longevity risk.

Most other annuities have various explicit fees and charges or complicated interest crediting mechanisms that make them harder to understand.

Also, with a SPIA (and to a lesser extent a SPDA) since the terms are similait is easier to compare competing products.
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Old 05-14-2019, 09:58 AM   #145
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What makes an SPIA acceptable to many, while other annuities are not? Is it the simplicity and competition that makes it hard to hide expenses and keeps the prices low? Or something else? I see this tossed around all the time with no explanation why.

In my mind, a spia is a transparent longevity hedge. All the other products are basically a shell game.
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Old 05-14-2019, 12:37 PM   #146
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In my mind, a spia is a transparent longevity hedge. All the other products are basically a shell game.
(Emphasis added by me)

+1

As a non financial person I can understand a SPIA. I can evaluate it using tools I understand.

Toss a virtual variable annuity or an equity indexed annuity at me, and I am at a loss to compare its value to a SPIA or laddered CD's.
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Old 05-14-2019, 10:11 PM   #147
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The value of an annuity depends on the numbers and your circumstances. They have been very poor value for a long time because pf low interest rates.

Just before I retired I got the chance to use DC pension money to buy into my employer's DB pension plan. I looked at the numbers and I found I could get a $20k index linked annual pension starting at age 55 by transferring $280k from my DC plan to the DB plan at age 52. So the payout rate was 7% and I estimated that if I lived to 83 I'd have to get an 7% annual return on the money to match the pension. As I had plenty of other DC and investment money I bought into the pension. I'm now 57 and collecting the pension each month and can be pretty sanguine about the stock market.
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Old 05-15-2019, 04:53 AM   #148
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As previously stated, I have about 8% of my NW in SPIAs and have never regretted it. The funds used to purchase these annuities are from monies that I have no need to pass on as a financial legacy. I am 68 y o, receive a payout of ~ 7 % which is much higher than the interest (payout) that I would receive from a 5 year CD, and will not be bothered that upon my last breath, I leave some otherwise principal on the table.

I have always found (and please do your own homework) that Vanguard paid about 1 point more than brokered annuities.

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Old 05-15-2019, 05:13 AM   #149
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I was never a fan of annuities but I came across an article that people who buy annuities are happier about their finances because they know their revenue stream. That is itself for me is a big enough reason to buy some annuities in the future.
It's always a question of "how much are you willing to pay for peace of mind?"
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Old 05-15-2019, 07:30 AM   #150
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.... I am 68 y o, receive a payout of ~ 7 % which is much higher than the interest (payout) that I would receive from a 5 year CD, and will not be bothered that upon my last breath, I leave some otherwise principal on the table. ...
I guess if you don't care about principal then it works.
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Old 05-22-2019, 03:01 PM   #151
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A SPIA is the only type of annuity I would ever buy. The others are complicated, have the highest fees (mostly hidden) and pay the sales person who sells it to you the highest commissions. That reason alone made me skeptical. I bought my SPIA's (I spread them between two companies) when I retired. Interest rates were better then so I'm getting a decent return. The payments are mostly tax free because they were purchased with after tax money. Only the portion they consider gains are included on my return.

I'll have my entire investment back in another five years. The insurance companies will continue making my monthly payments for the rest of my life. I am debt free so the payments plus SS more than cover my basic living expenses. It's comforting to know those payments will always be there no matter what the market does. I'm just now starting to withdraw from my IRA RMD's only because I am required to.
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Old 05-22-2019, 04:37 PM   #152
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I apologize in advance, If I have posted this in another thread.

It's a warning. Do not buy an annuity from MetLife/Brighthouse.

Long and shot:
$8400 annuit boght 1984. Value today $65,000+
Asked for a 5 year monthly payout of $1200 / month on Feb 3.
Upwards of 40 phone calls with promises hangups, confusion, ignorance and every negative you can think of. Finally received acknowledgement on May 15.

MetLife had an impossible marriage with Brighthouse. Neither accepts responsibility for claims... even to the office of the CEO's of both companies. "We don't handle that!. Both hung up on me.

Here's why.... Years ago, metlife stiffed 30,000 people who invested with insurance or annuities. They made no contact when a policy holder died or moved. after a period of time, they took the money and paid the executives and stockholders.

After a court case, the company was required to hold aside $500 million dollars, but with no requirement that the company contact the debtors or their families. Too complicated to explain, but avoid this company at all cost.

https://www.investmentnews.com/artic...ing-pensioners
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Old 05-22-2019, 08:07 PM   #153
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If you run into a runaround like this with an insurer, tell them that you need the nonsense to stop immediately or you will be filing a complaint with the state insurance commissioner. This will usually get their full intention. If not, contact the commissioner and file a complaint.
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Old 05-23-2019, 04:24 AM   #154
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+1 but I had already recommended to imoldernu that he contact his insurance commissioner a couple weeks ago. He's a bit like a broken record.

Also, at the mid-sized life insurer that I worked at any written complaints addressed to the President or CEO got special andling by more senior and experienced personnel (in some cases, me) who had broader relationships in the company to bypass roadblocks and who had the authority to do things that went beyond the script.... but I don't know whether other insurers have similar practices or not.

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I posted a warning on annuities on a recent thread.. This may be a good time to renew a caution on the subject.
We have an annuity from Brighthouse/Metlife that has caused a serious problem, in that they have stalled and refused to pay out our legitimate claim (monthly income stream). After about 20 hone calls and numerous letters, there has been no action at all for four months, and we are hopefully awaiting action from the Attorney Generals of Illinois and South Carolina that we have contacted.

In looking for comments that might mirror mine, I came across this legal judgement (link below) against the company for fraud.

For older persons who had forgotten about annuities from long ago, or had passed away, the company did no research on where the monies should have gone... but... closed the accounts and kept the monies that were due. Between 13,000 and 30,000 customers were affected. A slap on the wrist for the company with a $1,000,000 fine, and a transfer of $500,000,000 to an account for future claims.

https://www.bna.com/metlife-brightho...-n73014476623/

Despite this, the company retains an "A" rating.

Based on our experience, I would never again trust this company, and would only go in to this kind of supposed future security with great caution. Caveat Emptor.
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You should be talking with the Insurance Commissioner for your state rather than the AG. The Insurance Commissioner is better positioned to press the for an answer and resolution. IME Commissioners do a pretty good job acting as an intermediary between the company and its citizens. The Commissioner would have the power to threaten to kill their authority to sell in Illinois if they didn't like the answer that the company was providing.

Having worked with MetLife (but albeit before the Brighthouse spinoff), I am surprised that they would be resisting a valid claim, so I suspect that there may be a bit more to this story. Have they stated why they won't start annuity payments?

The company has taken a hit for not chasing down annuitants dilligently and from what has been reported in the press and their own disclosures have released reserves prematurely... the money is still there (assuming that it hasn't been distributed as dividends to the holding company)... it is just in surplus rather than in reserves.
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Old 05-23-2019, 04:27 AM   #155
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You're right. I can't call participation rates, caps, surrender fees, spread/margin/asset fees fees, right? That would be misinformed.
Those things exist with index and fixed annuities, but they are not fees anymore than saying a local bank has fees on their 12 month CD.
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Old 05-23-2019, 04:34 AM   #156
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^^^^ Not for fixed annuities.... usually just surrender fees and an interest rate.

No need for a participation rate or cap with a fixed annuity since there is no index to participate in or cap. The spread is built into the interest rate.

The thing is that fixed annuities tend to be simple, an interest rate and surrender charge (analogous to an early withdrawal penalty on a bank CD... but usually much larger)... less moving parts so easier to understand.
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Old 05-23-2019, 04:44 AM   #157
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What makes an SPIA acceptable to many, while other annuities are not? Is it the simplicity and competition that makes it hard to hide expenses and keeps the prices low? Or something else? I see this tossed around all the time with no explanation why.
I feel it is because a SPIA has no alternative. Sure, you can setup an investment portfolio and draw income from it, but it will not be fixed and insured for the remainder of your and your beneficiary's life (even a 30 year bond stops paying in 30 years).

There are alternatives available to accumulation annuities, and many folks on this board have the wherewithall to handle their own money just fine.

This is not an endorsement for a SPIA. I still don't like the thought of turning over my principal and think you can find some high yielding ETFs, stocks and bonds to generate income and still retain access to principal.
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Old 05-23-2019, 06:40 AM   #158
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^^^^ Not for fixed annuities.... usually just surrender fees and an interest rate.

No need for a participation rate or cap with a fixed annuity since there is no index to participate in or cap. The spread is built into the interest rate.

The thing is that fixed annuities tend to be simple, an interest rate and surrender charge (analogous to an early withdrawal penalty on a bank CD... but usually much larger)... less moving parts so easier to understand.
I'd like to know more about that surrender charge you mention. I've never bought an SPIA. From what I read, the only way to get out of a "fixed" SPIA is to sell it on the secondary market. Essentially there is no surrender clause in a fixed SPIA, which I believe that most here are referring to. You are saying that is not true. Where do I go to learn more about this online without getting info tailored by the insurance company or getting a sales pitch?
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Old 05-23-2019, 06:50 AM   #159
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I'd like to know more about that surrender charge you mention. I've never bought an SPIA. From what I read, the only way to get out of a "fixed" SPIA is to sell it on the secondary market. Essentially there is no surrender clause in a fixed SPIA, which I believe that most here are referring to. You are saying that is not true. Where do I go to learn more about this online without getting info tailored by the insurance company or getting a sales pitch?
Sorry, I wasn't clear... surrender charge only on fixed deferred annuities...you can't surrender a SPIA.. but you can sell it.
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Old 05-23-2019, 06:50 AM   #160
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I'd like to know more about that surrender charge you mention. I've never bought an SPIA. From what I read, the only way to get out of a "fixed" SPIA is to sell it on the secondary market. Essentially there is no surrender clause in a fixed SPIA, which I believe that most here are referring to. You are saying that is not true. Where do I go to learn more about this online without getting info tailored by the insurance company or getting a sales pitch?
SPIA do not have surrender charges, you surrender sort of 100% up front.

I think the poster is referring to Multi Year Guaranteed Annuity(MYGA) which is basically the insurance equivalent of a CD. For example, You purchase 5 year MYGA at say 3% Fixed interest paid compounded each year for that 5 years. If you surrender early there is a fee similar but usually higher than surrender early of a CD. At the end of 5 years you either cash it in (and pay the tax on interest earned) or roll it into another MYGA etc....
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