Originally Posted by MN JIM
With our expenses at 65 we can easily get by with SS and about a 5% interest on our nest egg. A VA would get me that. Again I am not sold on a VA I just want something that is safe so I don't out live my money and there is something for my kids when we are gone.
I assume you're thinking about a VA with some sort of "Guaranteed Lifetime Withdrawal Benefit" which is fixed at 5%.
That isn't "interest". It's partially investment earnings and partially a return of your principal.
Also, it's not guaranteed to keep up with the CPI. You're still exposed to a down market. Ask for an illustration that assume 0% gross
investment returns and see what happens to your income and balance.
An alternative would be a regular Single Premium Immediate Annuity. It also provides a guaranteed monthly income, using both investment returns and principal. Generally speaking, insurance companies incur lower expenses on SPIAs than on VAs, so an SPIA may be a better deal.
For example, the initial monthly benefit on the SPIA may 6% of your premium. So, you can put 5/6 of your assets in the SPIA and still generate the same monthly income as you would get from 100% of your assets in a VA. The remaining 1/6 of your assets provides an emergency fund or some offset to inflation.
SPIAs are priced off bond yields, which are very low right now. So benefits are not that great. However, note that if some of your VA assets go into bonds, you're buying into the same low yields.
Most people on this board who have looked at VAs come away with an
or maybe a
response when they see the expense loads. They can usually assemble some SPIA + mutual fund solution which gives a better result.