New Wrinkle on Annuities

[sheehs1]

Quote:

Originally Posted by 73ss454 Someone teach me! Lets say I purchased the annuity described above at 75 and lived a long life to 85. Now lets say I put the 503K under my matress and took out 4K a month. If I divide the 503K by 120 months I can take out $4191 for the full term. This is if I didn't invest it and make any % on interest. So why would I buy an annuity. I know you guys are going to say in case I live past 85. But if I invest it at a reasonable rate it would last me past 85 and if I die earlier my family would get something. Annuities make no sense to me but I'm sure they do to insurance co's.

This is valid. There is a "individual" asset level where a person can annuitize themselves with a percentage of their assets. I've asked this question of the last 2 people that wanted me to buy a variable annuity. It sort of stuns them. They don't know what to say. If they can pay me $4k a month with what I give them, why can't I do the same? Yes there may be some ifs, ands or buts....but unless it is has a cost of living adjustment what advantage is it?

The other thing I think I have pointed out on other posts is that a death benefit guarantee with these annuities and perhaps even the one discussed by the OP may not really be a guarantee. Had one large company run scenarios under all sorts of market conditions and my guaranteed death benefit that I was going to pay a premium for went to zero. I asked about it and he said, yes...it goes away under these market conditions. That is when I knew I really did not know "all" of what was happening inside this investment vehicle.

It is also valid that some may not want to handle the details of investing as they get older.

[rescueme]

Quote:

Originally Posted by sheehs1 ...the last 2 people that wanted me to buy a variable annuity.

Run Forrest, run!

[JOHNNIE36]

Quote:

Originally Posted by sheehs1 The article stated there is concern over people running out of money and so they are proposing to allow a percentage of a 401K to be used to buy what is basically a deferred annuity. It might be a good idea and it might not be. Not enough detail for me to make a determination. But...IF the purpose truly was concern over the elderly running out of money, well, then don't force the elderly to take RMD's at age 70 1/2. If we are truly living longer, the RMD age should also be allowed to increase IMHO. Every other age has increased! In the very least, allow us to make a determination whether we actually need the RMD that year or not. To me...this would have been a logical first step rather than the annuity proposal. Unless of course, the government is actually going to guarantee those annuity companies will be around 20 years after the decision is made. As Ha said, taxes later might be less than at 701/2 on the RMD side. I reread the article and did not see where money placed in this annuity was tax free. How can it be tax free if it is made with before tax dollars which I'm assuming it is since it is part of a 401K.

I guess that is the selling point, to use money from your IRA/401k to buy longevity insurance and to make it appealing, we will let you access that money tax free. Someplace along the line the g'mnt will want their tax money.

[sheehs1]

Quote:

Originally Posted by JOHNNIE36 I guess that is the selling point, to use money from your IRA/401k to buy longevity insurance and to make it appealing, we will let you access that money tax free. Someplace along the line the g'mnt will want their tax money.

Actually I think they know a large percentage will not make it to 85 so what happens to that again? Don't know about you guys but when I read the obituaries many are still passing on in their late 50s, 60's and 70's. Yes some are in their 80's and even a few in their 90's but I really don't think that is a huge percentage. Or am I wrong here.

[REWahoo]

Quote:

Originally Posted by sheehs1 Actually I think they know a large percentage will not make it to 85 so what happens to that again? Don't know about you guys but when I read the obituaries many are still passing on in their late 50s, 60's and 70's. Yes some are in their 80's and even a few in their 90's but I really don't think that is a huge percentage. Or am I wrong here.

Here ya go: Social Security Actuarial Life Table

[sheehs1]

Thanks ReWahoo...So at age 65 males have a life expectancy of 17.19 years and females of 19.89 years. Both are shy of 85, just when those benefits kick in. Probabilities are another matter.

If I'm reading this correctly at age 65, 20% are expected to have died. At age 85, 68% and at age 87, 75%.

Well...there you go. That's why.

What did we say happened to that annuity money in this proposal? Will the owner still own it or does it go poof? Or do we even have the answer for that question yet since all the details have not been ironed out.

[samclem]

Quote:

Originally Posted by sheehs1 What did we say happened to that annuity money in this proposal? Will the owner still own it or does it go poof?

I'm sure it goes "poof". You give that money to the annuity company just like any other annuity. If you die early it's gone, unless you pay about 50% higher premiums (in which case you'd generally have been better off to have saved that premium money and keep it in your estate).

[pb4uski]

I wonder if it would be more cost effective to buy a SPIA + life insurance for a period of time rather than a SPIA with a minimum payment option. I think you could accomplish the same objective but with two contract rather than one.

Has anyone shopping for SPIAs done this comparison?