Opinions on longevity annuities

I'm "buying" a longevity annuity from the U.S. government by deferring taking SS until I am 70.
 
+2. Very few people like annuities, including me. The FA like them because of the commissions, ie, taking your money.
 
I'm a retired actuary (property-casualty, not life insurance) and annuities scare me. A plain ol' deferred annuity is the only type I'd consider buying (maybe purchase one at 65 that starts at 85 if I'm still around) but you have to part with a pretty big chunk of money to get an annuity that will have decent purchasing power in 20 years. I'm 62 now and agree with pb4uski- I'm deferring SS till age 70 and figure that if all my other assets run out (unlikely), that will still be there.
 
Longevity Insurance makes a lot of theoretical sense to me.

"Insurance" should cover low probability/high impact events.

Regular SPIAs mix high probability events (I'll need income for the first 20 years of retirement) with low probability events (I might be the one person in 10 who still needs income after __ years).

Longevity insurance tries to split these events apart. I manage my own income for the high probability first __ years. The insurance company helps me out for the low probability later ___ years.

The practical problem is inflation. I want real purchasing power in those later years, but they are so far off that I don't know what anything will cost. Before the financial meltdown, TIPS offered inflation protection plus a little bit more. So insurers could use TIPS to back an inflation protected longevity product.

Now, TIPS yields are so low that it's very hard to get a price that interests people. Presumably, those yields will go back up some day.

(Full disclosure - I used to work for a "diversified financial services corporation". While there, I pitched four ideas for retirement income products. This was one of them, and it didn't go anywhere with our management. Probably means I'm a lousy sales guy. )
 
Thanks for the replies. I have a FA promoting these. I think I'll slow down a bit.
 
LBrowning said:
Thanks for the replies. I have a FA promoting these. I think I'll slow down a bit.
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Never ever go to a non-fiduciary for money advice. They don't legally work for you. They're nothing more than salesmen pushing the products that make themselves the most commission money (at YOUR expense). Annuities are complex smoke and mirrors. They are usually sold with deceptive talking points like "the market is risky" (just diversify into bonds and it isn't) and they'll say look at the high interest payment rate (not the same as return on investment, especially when your surrender value / death benefit value is getting eaten away by high fees and what not).
What were the reasons why this salesmen said that an annuity is good for you:confused: I'm curious.
 
Longevity annuities are not the type of annuity that a financial salesman would be pushing if their main goal was do maximize the commission they would receive, variable or index annuities are much more profitable for the salesman. From what I've read because of recent law changes longevity annuities will likely become a common distribution (limited to 25%) offering within most IRA/401K types of plans.
 
Sunset said:
+ 1

That's my plan, too.
Of course I'm an optimist :duh:
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"There comes a time when all optimists should be shot" -- Jára Cimrman, the greatest Czech of all time.

I've never seen much point in buying any form of annuity although I expect social security to eventually show up and I also have several small pensions that look a lot like a SPIA. I worked for them and can only choose to take them or not take them.
 
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LBrowning said:
Thanks for the replies. I have a FA promoting these. I think I'll slow down a bit.
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I'm willing to bet that his version of a "longevity annuity" looks a lot like a typical variable annuity that you could get a "guaranteed" income in your retirement years.
 
Annuities are dangerous because there are opportunities to hid fees and expenses in their complexity. However, they can be useful in a portfolio if you know exactly what you are buying and don't buy through a salesperson.

I have a deferred annuity with TIAA-CREF and it's currently growing at 4.7%.
Over it's lifetime the return has bee 6% a year. It's not very liquid as it's structured to be turned into a stream of income when I retire, but there is an option to do a "pay out annuity" that pays the account balance out over 10 years.....so I just think of it a a 10 year CD with 4.7% interest. If you are looking for an annuity go directly to an insurance company. TIAA-CREF are a good one to try, although you get the best deal if you already have a retirement plan with them.
 
nun said:
Annuities are dangerous because there are opportunities to hid fees and expenses in their complexity. However, they can be useful in a portfolio if you know exactly what you are buying and don't buy through a salesperson.

I have a deferred annuity with TIAA-CREF and it's currently growing at 4.7%.
Over it's lifetime the return has bee 6% a year. It's not very liquid as it's structured to be turned into a stream of income when I retire, but there is an option to do a "pay out annuity" that pays the account balance out over 10 years.....so I just think of it a a 10 year CD with 4.7% interest. If you are looking for an annuity go directly to an insurance company. TIAA-CREF are a good one to try, although you get the best deal if you already have a retirement plan with them.
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1+ I don't know much about non-retirement annuities at TIAA, but my "TIAA Traditional" is the only typical annuity I would consider. And in reality, it isn't very typical. I too am credited with 4.6% overall/year and the payout rate, if I took it at 59.5 IIRC, is north of 7%
 
nun said:
Annuities are dangerous because there are opportunities to hid fees and expenses in their complexity. However, they can be useful in a portfolio if you know exactly what you are buying and don't buy through a salesperson.
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That depends. Are we talking about a variable annuity with a GMWB? That's complex with plenty of moving parts.

OTOH, a plain SPIA is a simple product that's easy to comparison shop.
 
they are such a new product I haven't seen but maybe one or two insurers that offer them


I also don't know how they are priced so it's tough to tell if they are a good "deal" or not. I'll probably end up buying one when the time comes. The last thing I want to do is outlive my $$$$.
 
Independent said:
That depends. Are we talking about a variable annuity with a GMWB? That's complex with plenty of moving parts. OTOH, a plain SPIA is a simple product that's easy to comparison shop.
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Agreed SPIAs are the only annuity I would ever buy.
 
I'm pretty sure these longevity products will have to be run through the plan.


The ability to shelter 25% of the balance from MDIB is very appealing, at least to me.
 
If you buy an annuity it puts a price on your head. Something to think about.👺
 
robertf57 said:
1+ I don't know much about non-retirement annuities at TIAA, but my "TIAA Traditional" is the only typical annuity I would consider. And in reality, it isn't very typical. I too am credited with 4.6% overall/year and the payout rate, if I took it at 59.5 IIRC, is north of 7%
Click to expand...

Yes not surprisingly that's the same quote I got from TIAA for turning my TIAA Traditional accumulation into a single life annuity. TIAA Traditional isn't the most exciting part if my portfolio, but it's a fantastic steady performer with a guaranteed minimum annual growth of 3%
 
nun said:
Yes not surprisingly that's the same quote I got from TIAA for turning my TIAA Traditional accumulation into a single life annuity. TIAA Traditional isn't the most exciting part if my portfolio, but it's a fantastic steady performer with a guaranteed minimum annual growth of 3%
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Of course TIAA-Traditional guaranteed annuity and the SPIAs TIAA-CREF sells are not actually "longevity insurance". My TIAA-Traditional account is in a 401a and has RMDs at age 70, but you can use it to buy an SPIA that will provide lifetime income, so that provides some insurance for later life. But they don't sell an insurance policy that will start to pay you income at....say... age 85.
 
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Big_Hitter said:
they are such a new product I haven't seen but maybe one or two insurers that offer them


I also don't know how they are priced so it's tough to tell if they are a good "deal" or not. I'll probably end up buying one when the time comes. The last thing I want to do is outlive my $$$$.
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Isn't it just a SPIA with a deferred start? If so, I think they have been available for some time but just haven't sold in very significant numbers. It's just a SPDA but where the annuitization isn't optional so I suspect it is easier to price than an SPDA.
 
RetireAge50 said:
If you buy an annuity it puts a price on your head. Something to think about.��
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Something to think about...... under your tin foil hat! :D

I just saw an ad by an insurer for hit men just the other day.:facepalm:
 
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