How safe is Immediate Annuity?

[rs0460a]

I could go on but the champions of SPIAs will not be convinced.

True, but we are still willing to listen ...

BTW:
Money Magazine, Retirement Guide. Income plan - Sep. 12, 2006

- Ron

 

[Marquette]

Obviously an annuity has a value that can be easily calculated. How else would an insurance company sell them?

ha

Dude, have you SEEN an actuary with Excel? It's either a thing of beauty or the scariest thing ever. There's no easily about it.

 

[FinanceDude]

CuppaJoe,
I am also the beneficiary of a plethora of small retirement annuities due to multiple employers. Adding them all together, I'll start getting $15,000 per year (paid monthly) at age 60. They isn't any COLA so I consider this to be part of my "traveling money." By the time I'm not interested in doing much traveling, the value will have declined where I won't be able to.

There wasn't an option to take a cash value so I'm stuck with them.

Why did the various employers ALL have TSAs??

Looks like the guy who hates annuities is immersed in them..........

 

[2B]

Why did the various employers ALL have TSAs??

Looks like the guy who hates annuities is immersed in them..........

This is what you get with defined benefit plans. Vesting is with a minimum of 5 years company service. You can only get "cash" if the value is below a certain minimum. I think most were $5,000 max to get cash but they said the value was above that. With the value above that there isn't an option. I become the proud owner of a deferred annuity called a "pension." I have 4 of them and as a said before they will start paying about $15,000 per year starting when I'm 60.

I am stuck with these like I'm stuck with SS. I certainly won't turn any money down but there certainly isn't any reason to go out and buy one.

 

[rs0460a]

I am stuck with these like I'm stuck with SS. I certainly won't turn any money down but there certainly isn't any reason to go out and buy one.

So - you had a good decision (IMHO) "forced" upon you rather than make your own (as I did ).

Unfortunately, you also look at SS as a "bad decision". If you don't want it, you can always (as McCain has been asked to do) give it up ...

Sorry, I could not resist ...

- Ron

 

[FinanceDude]

I am stuck with these like I'm stuck with SS. I certainly won't turn any money down but there certainly isn't any reason to go out and buy one.

Well,you "bought them" by working there. Nothing wrong with DB plans, except they are now almost as rare as Sasquatch..........

 

[rs0460a]

Obviously an annuity has a value that can be easily calculated. How else would an insurance company sell them?

ha

I was responding to the statement that your principle is "now zero".

To every "equation" there is a corresponding "entry". My response was to just note that the comment should be "countered" with a statement that there is a corresponding "effect" for the "cause" stated - nothing more...

- Ron

 

[FinanceDude]

I was responding to the statement that your principle is "now zero".

To every "equation" there is a corresponding "entry". My response was to just note that the comment should be "countered" with a statement that there is a corresponding "effect" for the "cause" stated - nothing more...

- Ron

The income stream has a value........otherwise we wouldn't have so many underfunded pension plans in America..........

 

[Marquette]

The income stream has a value........otherwise we wouldn't have so many underfunded pension plans in America..........

Let's get back to the discussion of my underfunded bonus pool. Someone buy the stupid annuity already! Daddy needs a new pair of shoes.

 

[cute fuzzy bunny]

I thought there was a limit of four words you could put in quotes per post.

I wonder if he does that quotation thing with his fingers when he talks...?

 

[CitricAcid]

The income stream has a value........otherwise we wouldn't have so many underfunded pension plans in America..........

So, is a well paying job an asset or just a means to assets... hmmm, seems like the old rich emans income stream or wealth argument... and, yes, I believe that income streams do have value such that maybe by definition your "principal" is $0, but the value of it should be included when discussing wealth. This is slightly different from home equity, but similar. Since home equity isn't an income stream, I would not consider it, but I digress.

 

[FinanceDude]

So, is a well paying job an asset or just a means to assets... hmmm, seems like the old rich emans income stream or wealth argument... and, yes, I believe that income streams do have value such that maybe by definition your "principal" is $0, but the value of it should be included when discussing wealth. This is slightly different from home equity, but similar. Since home equity isn't an income stream, I would not consider it, but I digress.

If someone has a life only pension paying $1500 a month for the rest of his/her life, there's a VALUE to that. However, I think there is GREATER value to a plan that pays 50% to the surviving spouse, even though the monthly amount is smaller.

Does a $1,000,000 term policy have any value? According to a bank, no, according to an estate planner, yes..........

 

[cjking]

Buying an SPIA is a non-reversible decision. Come down with a serious illness the next week and the insurance company isn't going to give you a lump sum for treatment that is not covered by insurance. Don't expect a lump sum from them to avoid a Medicaid nursing facility but the income will be taken by the Medicaid facility for your care.

I could go on but the champions of SPIAs will not be convinced.

If you need a contingency fund you should have a smaller annuity. The price you pay for extra flexibility is less income.

There will always be uninsurable potential "events" to deal with, so (despite being an annuity fan) I would agree that you should always have some resources outside an annuity. A credit card or loan is probably not the best option for converting some of your long-term income into a short-term lump sum.

 

[2B]

If you need a contingency fund you should have a smaller annuity. The price you pay for extra flexibility is less income.

You don't get less income by [-]investing[/-] not buying a SPIA. You can beat the payout from an annuity by investing in readily available alternatives. The only way a SPIA makes true financial sense is if you live for about 10 years past your predicted mortality table lifespan. For most people that won't happen.

I've said before and I'll repeat again that it seems foolish to tie up your money in something that depends on an extended lifespan before you are well on your way to one. If you think that a SPIA is a great way to go, wait until you're 70 and still in absolutely great health. Then run the numbers again. They payout will be much higher.

 

[FinanceDude]

I've said before and I'll repeat again that it seems foolish to tie up your money in something that depends on an extended lifespan before you are well on your way to one. If you think that a SPIA is a great way to go, wait until you're 70 and still in absolutely great health. Then run the numbers again. They payout will be much higher.

With your analysis, everyone in America with a pension should be pissed, because ALL pensions are set up the same way you describe, with actuarial tables and insurance companies behind them...........

Have you done the calculation as to how long you and your spouse need to live before you get what you paid into SS? And then think of the opportunity cost of what you LOST trusting Uncle Sam to invest your money for your future benefit. SS makes GM's pension woes look like a walk in the park.........

 

[Marquette]

With your analysis, everyone in America with a pension should be pissed, because ALL pensions are set up the same way you describe, with actuarial tables and insurance companies behind them...........

Have you done the calculation as to how long you and your spouse need to live before you get what you paid into SS? And then think of the opportunity cost of what you LOST trusting Uncle Sam to invest your money for your future benefit. SS makes GM's pension woes look like a walk in the park.........

Well, show me where I can unenroll from SS. If I could CHOOSE to not participate in SS, I would unenroll and keep the money that they take from me. Granted, I'm fortunate that they only take their blood from the first $95k, but still...

 

[cute fuzzy bunny]

Yeah, but I'm pretty sure that in both the pension and SS cases, we werent given a choice to opt out.

And for the financially illiterate who dont care to learn, an annuitization of part of their money might be a good idea.

While there are a couple of people kicking around here who have absolutely no clue about finances, or the wrong clue, I'm not sure that the vast majority of users qualify as financially illiterate. Illiterate maybe, but not financially so...

 

[FinanceDude]

And for the financially illiterate who dont care to learn, an annuitization of part of their money might be a good idea.

Why do you think all annuities are annuitized? SPIA yes, others no........

 

[2B]

With your analysis, everyone in America with a pension should be pissed, because ALL pensions are set up the same way you describe, with actuarial tables and insurance companies behind them...........

Have you done the calculation as to how long you and your spouse need to live before you get what you paid into SS? And then think of the opportunity cost of what you LOST trusting Uncle Sam to invest your money for your future benefit. SS makes GM's pension woes look like a walk in the park.........

I have some trivial pensions and I'll get SS. Since I never had a choice, I'm stuck with these and I'll certainly cash the checks since I lost the income that went into creating these. That doesn't mean I wanted them rather than extra income. It certainly shouldn't cause anyone to think that since I've been forced to take these versions of annuities that I would want to go out and buy more.

 

[2B]

Granted, I'm fortunate that they only take their blood from the first $95k, but still...

This year it's the first $102K. Next year it will go up so stay tuned....

 

[Marquette]

This year it's the first $102K. Next year it will go up so stay tuned....

Ahh... ok

Well, I'm fortunate that they only take it out of the first $102k then.

 

[FinanceDude]

I have some trivial pensions and I'll get SS. Since I never had a choice, I'm stuck with these and I'll certainly cash the checks since I lost the income that went into creating these. That doesn't mean I wanted them rather than extra income. It certainly shouldn't cause anyone to think that since I've been forced to take these versions of annuities that I would want to go out and buy more.

Just like those of us under 50 will NOT have the choice when Congress decided to DECREASE our benefits. I for one am not planning to get SS, even though I have been paying into it for over 25 years.........

 

[Marquette]

Just like those of us under 50 will NOT have the choice when Congress decided to DECREASE our benefits. I for one am not planning to get SS, even though I have been paying into it for over 25 years.........

You could make up the difference by purchasing an annuity.

 

[FinanceDude]

You could make up the difference by purchasing an annuity.

Or I could just do like unclemick and buy the Norwegian widow's dividend portfolio and PSST!!! Wellesley...........