Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Immediate Annuity as part of your Retirement Portfolio
Old 02-25-2011, 06:14 PM   #1
Dryer sheet aficionado
 
Join Date: Mar 2007
Posts: 44
Immediate Annuity as part of your Retirement Portfolio

I was curious as to how many of our retired members use an Intermediate Annuity as part of their portfolio. I am considering purchasing one and would appreciate anyone's feedback on their experience researching and purchasing an IA.

If you do have a Immediate Annuity, did you purchase one with inflation protection based on CPI-U or go with a standard fixed payment.

Lastly, what % of total portfolio is the IA?

Thanks in advance.
__________________

__________________
freddyw is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-25-2011, 07:06 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,874
Quote:
Originally Posted by freddyw View Post
.......... I am considering purchasing one ..........
If we were fishing, I would say you are chumming.
__________________

__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-25-2011, 07:24 PM   #3
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 10,137
Immediate annuities are an oft-discussed subject here. Use the search function to find any number of threads.

Here's one from just last week:

Immediate Annuity

and another one from last month:

Annuities..You need one..Really

There are many more. Read some of them first. Then ask your question. I'll bet it won't be the same question.
__________________
Living an analog life in the Digital Age.
Gumby is offline   Reply With Quote
Old 02-25-2011, 07:46 PM   #4
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
Since you asked nice, I'll answer nice.

Yes, I/DW have one, purchased upon my retirement at age 59. It is not inflation adjusted, since it was purchased as a "pension replacement" (since I didn't have one) to primarily cover the gap from age 59 till age 70, when I will claim SS (that's another subject, completely).

Without going into details, I'll just say that an annuity - that is more specifically a Single Premium Immediate Annuity (SPIA) may have a place in your retirement income plan. Not all folks need one, and there are alternatives, based upon your risk assessment and desire to actively manage your income sources. For others, an SPIA may be the answer - as it was in our case.

Almost four years later, we have no regrets and we still have 90% of our original portfolio to manage without worrying about having sufficient ER income sources. The SPIA fits that niche quite well.
__________________
rescueme is offline   Reply With Quote
Old 02-26-2011, 12:17 AM   #5
Full time employment: Posting here.
 
Join Date: Nov 2009
Location: VA
Posts: 923
If I were in the position to buy a SPIA, I would hold off for now. The rates are so ridiculously low that unless you have a 95+ year life expectancy, you are locking yourself into a pretty weak contract IMO. If you don't need the immediate income, I would look into an indexed annuity with a guaranteed income rider. Others on the board here will trash the idea, but it gives you the flexibility to increase cash value in the present while guaranteeing an income in the future. You can always walk away with the cash and buy a SPIA after the surrender period if interest rates rise. Just my opinion, don't want to turn this into a 5-page ELIA thread.
__________________
Disclaimer - I am an independent insurance agent. If the above message contains insurance-related content, it is NOT intended as advice, and may not be accurate, applicable or sufficient depending on specific circumstances. Don't rely on it for any purpose. I do encourage you to consult an independent agent for insurance-related advice if you have a question that is specific in nature.
dgoldenz is offline   Reply With Quote
Old 02-26-2011, 08:10 AM   #6
Dryer sheet aficionado
 
Join Date: Mar 2007
Posts: 44
Quote:
Originally Posted by travelover View Post
If we were fishing, I would say you are chumming.
Geez, I'm not sure how to take your response?

I'm just trying to get quality feedback from a membership that I respect and realize has alot of useful information and experience to contribute to other members of this forum.

I am researching annuities and searched this forum for related topics however, sometimes there are others out there who have not posted to a particular thread topic and could provide useful information to my questions. Sorry I asked.
__________________
freddyw is offline   Reply With Quote
Old 02-26-2011, 08:23 AM   #7
Dryer sheet aficionado
 
Join Date: Mar 2007
Posts: 44
Quote:
Originally Posted by Gumby View Post
Immediate annuities are an oft-discussed subject here. Use the search function to find any number of threads.

Here's one from just last week:

Immediate Annuity

and another one from last month:

Annuities..You need one..Really

There are many more. Read some of them first. Then ask your question. I'll bet it won't be the same question.
Gumby
Thanks for the reply. I had read the previous posts as well as many other posts based on searching "immediate annuities" in this forum. There are alot of opinions both pro and con for a SPIA for sure. However, I am attempting to get feedback from those retired forum members who do have an IA as to the type they choose and what % it is of their total portfolio. Right now I am in the "gray zone" based on Otar's book, and considering ways to offset risk such as using a SPIA.
__________________
freddyw is offline   Reply With Quote
Old 02-26-2011, 08:41 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,874
Quote:
Originally Posted by freddyw View Post
Geez, I'm not sure how to take your response?

I'm just trying to get quality feedback from a membership that I respect and realize has alot of useful information and experience to contribute to other members of this forum.

I am researching annuities and searched this forum for related topics however, sometimes there are others out there who have not posted to a particular thread topic and could provide useful information to my questions. Sorry I asked.
Sorry, no offense intended. It is somewhat of an inside joke here, but because annuities tend to be very profitable for the selling agent, we are constantly besieged by salesmen. Anyone posting that they want an annuity is somewhat akin to tossing blood into the water to watch the sharks work up a froth.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-26-2011, 09:11 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,812
We're currently buying CPI-adjusted life annuities from the federal government. Each month that we defer SS benefits we're buying another little annuity. Our current plans are that we won't start SS until 70, but that could change with a change in health.

I think an SPIA is a fine idea, but at current prices the government's deal is better than the private annuities I've found. If the gov't didn't give us this option, I'd probably be in the private SPIA market.

If we wait till 70, our combined SS benefits will easily cover all our regular spending, and that seems like "enough" annuity to me. I wouldn't target a particular percent of my portfolio for an annuity. Instead, I put enough in to provide a particular income.

Note that if you're serious about buying a private SPIA, be sure to consider deferring to an "older" age. Unlike life insurance, you don't risk losing insurability with an SPIA
__________________
Independent is offline   Reply With Quote
Old 02-26-2011, 11:44 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 7,884
I like the idea of having a SPIA annuity. Though maybe not the best investment, it offers peace of mind.

It's kind of like having one's mortgage paid off. The certainty offers comort.

In certain times, one can get a better return having a mortgage and investing the money somewhere else. However, with a paid off mortgage, as long as you pay your taxes, no one can kick you out of your own place. As for the SPIA, when the market tanks, it sure is nice to have a constant amount of cash coming in like clockwork every month.

That said, I wouldn't get one in this climate as the interest rate is so low.
__________________
Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
easysurfer is offline   Reply With Quote
Old 02-26-2011, 12:15 PM   #11
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,826
I am thinking of getting a fixed immediate lifetime annuity with inflation adjustment, but I will wait until I am older (80-85, maybe?) in order to take advantage of a better pay-out at that age. Interest rates might be better by that time, too.

By age 80-85, I will have a better idea of what my expenses in old age might be, too, so I'd have a better idea of what size annuity I might want.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 02-26-2011, 12:21 PM   #12
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,378
W2R, if you have a pension and it covers your expenses and you still haven't taken SS why would you want an annuity? Do you plan to spend more money at the age of 85? Annuities confuse me but I think that's the way the ins companies want it.
__________________
73ss454 is offline   Reply With Quote
Old 02-26-2011, 12:25 PM   #13
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,826
Quote:
Originally Posted by 73ss454 View Post
W2R, if you have a pension and it covers your expenses and you still haven't taken SS why would you want an annuity? Do you plan to spend more money at the age of 85? Annuities confuse me but I think that's the way the ins companies want it.
Well, maybe my expenses would be higher at that age than they are now, due to the rising cost of medical expenses and the rising proportion of those expenses that the individual is supposed to be paying. And who knows what Medicare will pay if it even exists in 20 years. I'll have a better idea when I am older.

My partially COLA'd tiny pension is in the mid 3 figures per month (gross) at present. It doesn't pay my expenses (sorry if I was misleading about that!). Once I claim SS I will be doing pretty well in that regard, relative to my present expenses, but with inflation, and cutbacks on SS cost of living increases, again we are facing the unknown 20 years from now. My objective will be to have SS+pension+annuity = expenses in old age.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 02-26-2011, 12:34 PM   #14
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by 73ss454 View Post
W2R, if you have a pension and it covers your expenses and you still haven't taken SS why would you want an annuity? Do you plan to spend more money at the age of 85? Annuities confuse me but I think that's the way the ins companies want it.
All she needs to do is say "wheee!" about the market and then go immediately short. Who needs an annuity?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 02-26-2011, 12:48 PM   #15
Thinks s/he gets paid by the post
Free To Canoe's Avatar
 
Join Date: May 2008
Location: Cooksburg,PA
Posts: 1,738
It is amazing how that Wheeeeeeeeeeeeeee! thing works!

I really wish I had more warning of the market collapse.



Free to canoe
__________________
Free To Canoe is offline   Reply With Quote
Old 02-26-2011, 01:25 PM   #16
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,826
Quote:
Originally Posted by Free To Canoe View Post
It is amazing how that Wheeeeeeeeeeeeeee! thing works!

I really wish I had more warning of the market collapse.



Free to canoe
Oh, OK, I'll work on that....

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 02-26-2011, 05:45 PM   #17
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
In regards to the original post, no age was stated. In addition to the pathetic payouts at current interest rates, it always makes sense to first delay SS to 70 for the cheapest COLA'd annuity available -- if you trust the future of SS -- not a political statement but some people don't -- I personally do.

I personally recommend deferring annuity decisions until after age 70. First, death or a serious medical conditions usually says that it's a bad decision. Second, the payout after age 70 actually starts to look decent although they still don't quite match the mortality tables.

If you would like to bring up any version of variable or indexed annuities, I will assume you are a troll and suggest you put all of you free cash into them because my index funds hold stocks that fake a fortune off of people that buy them. Based on my father's and FIL's behavior, they are only bought by those with limited financial understanding or diminished mental capabilities.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 02-26-2011, 06:20 PM   #18
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,378
2B, I love the last line.
__________________
73ss454 is offline   Reply With Quote
Old 02-27-2011, 05:48 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
I will FIRE this year. We are planning on a SPIA purchase... but will wait till the Fed is done with QE and see what happens to interest rates. We may purchase it in several smaller purchases.

I am not considering an inflation rider at this time. I am not sure it is worth the money.... but it obviously depends on future inflation which is hard to predict.

I would rather have more of the money at a younger age (in early FIRE) to reduce the WR% on our portfolio in the early years. Since most of our net worth will be in our portfolio, we will use it to deal with inflation.
__________________
chinaco is offline   Reply With Quote
Old 02-27-2011, 08:23 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,432
Quote:
Originally Posted by W2R View Post
I am thinking of getting a fixed immediate lifetime annuity with inflation adjustment, but I will wait until I am older (80-85, maybe?) in order to take advantage of a better pay-out at that age. Interest rates might be better by that time, too.

By age 80-85, I will have a better idea of what my expenses in old age might be, too, so I'd have a better idea of what size annuity I might want.
85? I hope I'm still alive at that point.
__________________

__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
2.8 years to go....looking for part time retirement into brucethebroker Hi, I am... 2 12-19-2010 10:05 AM
Fidelity Personal Retirement Annuity advice Dimsumkid FIRE and Money 11 08-03-2010 01:36 PM
Portfolio rebalancing question - Variable Annuity shotgunner FIRE and Money 4 10-13-2009 09:50 AM
Do you have an annuity for retirement income? nun FIRE and Money 21 11-03-2008 04:22 PM
Transitioning part of portfolio into fixed income? Synergy FIRE and Money 32 11-27-2007 04:36 AM

 

 
All times are GMT -6. The time now is 10:36 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.