Unlike (most) others responding to you, I actually have an annuity (SPIA), purchased last year upon my retirement at age 59.
Some have some responded with good questions. I'll let you have "my list" to consider:
- Is he married? Does the annuity income continue if he dies the day after he retires? (For example, my SPIA has guaranteed payments for a 28-year term, at 100% to me, or 100% to my wife if I pass within that period. If we both pass before the 28-year period, the remaining payments are paid to our estate, in either monthly or lump sum). However, if either/both live beyond the 28 year period, the payments continue at 100%.
- There is a good chance that if he is married (and the annuity is not term-specific) that his DW would collect at 50%, which is normal for a "pension type" annuity. Is this possible "reduction in income" in his retirement income projections?
- Does he want to leave a "legacy"? That is, if he died tomorrow (and the payments were not continued after his death) would the lump sum need/want to go to a "future generation"? In our case, our joint remainder estate is going to charity, so "saving" the lump sum was of minor concern to us.
- I'll assume that the annuity is not inflation adjusted. If it represents a minor part of his "entire retirement portfolio value" (as ours does) it may not be a point to consider, but if it is, he may be better off investing the lump sum into a good mix of funds (regardless of the current "flux" in the marketplace.)
Anyway, that's my input.
- Ron