Thanks. Has good reviews on Amazon !
... An annuity probably has a better return than a bond fund, and is likely safer. ...
Lump Sum | 100,000 | |
Monthly benefit | 462 | |
Age | n | IRR |
60 | 0 | |
61 | 1 | -98.4% |
62 | 2 | -81.6% |
63 | 3 | -61.5% |
64 | 4 | -46.1% |
65 | 5 | -35.0% |
66 | 6 | -27.0% |
67 | 7 | -21.0% |
68 | 8 | -16.5% |
69 | 9 | -13.0% |
70 | 10 | -10.2% |
71 | 11 | -8.0% |
72 | 12 | -6.2% |
73 | 13 | -4.7% |
74 | 14 | -3.4% |
75 | 15 | -2.3% |
76 | 16 | -1.5% |
77 | 17 | -0.7% |
78 | 18 | 0.0% |
79 | 19 | 0.6% |
80 | 20 | 1.1% |
81 | 21 | 1.5% |
82 | 22 | 1.9% |
83 | 23 | 2.2% |
84 | 24 | 2.5% |
85 | 25 | 2.8% |
86 | 26 | 3.0% |
87 | 27 | 3.3% |
88 | 28 | 3.5% |
89 | 29 | 3.6% |
90 | 30 | 3.8% |
91 | 31 | 3.9% |
92 | 32 | 4.1% |
93 | 33 | 4.2% |
94 | 34 | 4.3% |
95 | 35 | 4.4% |
96 | 36 | 4.5% |
97 | 37 | 4.6% |
98 | 38 | 4.7% |
99 | 39 | 4.7% |
100 | 40 | 4.8% |
Not really in terms of return... not even close. On immediateannuities.com a 5 year period certain annuity yields 0.7%... you can easily beat that with an online savings account that is FDIC insured. The 10 year period certain annuity yields 1.6% but for longer terms an online account/CD ladder would beat that. The insurer invests in the same bonds but needs a profit.
If you have better than average longevity, then the mortality credits embedded in a life annuity might help it outperform a bond fund but it depends on how long you live.
The Vanguard Intermediate-Term Investment-Grade Fund Admiral has an SEC yield of 2.36%... a 60 yo male would need to live to be 84 to get that... live longer and your return increases... die early and it sucks. And you need to live beyond 80 to beat a plain old FDIC insured savings account that pays 1%.
That is interesting. I never really looked at the interest rate return, and every time I ask an annuity guy, they dodge the question.
I went to that site and just did a 5 year immediate annuity. $100K now, only gives back $101,820 over five years, or $1,697 per month. According to my HP12C, that is 0.593% interest. Most bonds, or even DVY, would give that. I get a lot more than that by paying off my mortgages.
The security of a 'guaranteed' investment is what you are buying I guess.
I think you got 0.0593%, which is per month, which converts to 0.72%/year. Math is hard.
I think you got 0.0593%, which is per month, which converts to 0.72%/year. Math is hard.
Are you talking about a ladder of life annuities, period certain annuities or deferred annuities?
Are you sure about that 3%? Looks high in comparison to these SPDAs from Fidelity. Usually CDs and bonds and annuities returns are within similar range and I'm not aware of any 5 year 3% money out there though Andrews CU is offering a 7 year, 3% IRA CD.
Guaranteed Rates for Tax-Deferred Fixed Annuities (SPDAs) Available Through Fidelity
Sentinel Security Life
Personal Choice Annuity 5 (MVA)5 yrs.$2,500 min 3.00 %apy B++ - See more at: https://www.immediateannuities.com/deferred-annuities/#sthash.NEH9HHTL.dpuf
The early withdrawal penalty on the Andrews 7yr CD is only 6 months so it would still earn 2.74 if you early withdraw after 5 yrs and they allow partial withdrawals so it may be a good substitute for a CD ladder.
The early surrender charges only apply to withdrawals which are greater than the annual accrued interest amount. You can always withdraw the annual accrued interest penalty-free. If surrender charges apply, they start at 9% and decline to 0% after the 5th year. The schedule is 9%, 8%, 7%, 6%, 5%, 0%.
Be careful. The surrender charges are steep if you want your money before the 5 years is up and there is a market value adjustment as well.