View Poll Results: Qs 1&2: Did you will you delay SS to 70; Qs3 &4-Did you/ will you buy annuity?
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yes
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19 |
24.05% |
no
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10 |
12.66% |
yes
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12 |
15.19% |
no
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38 |
48.10% |
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12-06-2013, 07:40 AM
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#21
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Thinks s/he gets paid by the post
Join Date: Apr 2008
Posts: 1,251
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Hope this isn't sidetracking the conversation too much but I've been thinking of buying a SPIA inside my Roth IRA. Is this a reasonable approach to provide a continuing stream of tax exempt income?
__________________
"Don't you draw the queen of diamonds, boy, she'll beat you if she's able.
You know the queen of hearts is always your best bet" -- The Eagles, Desperado
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12-06-2013, 07:46 AM
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#22
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
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IF you decide a SPIA makes sense for you (regular income, peace of mind, etc.) then I would think a Roth would be a perfect place to have it. At least, it would avoid the tax nightmare that ETFs_Rule mentioned a few posts ago.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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12-06-2013, 07:50 AM
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#23
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: Bernalillo, NM
Posts: 2,717
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Yes for 70 and No for annuity. The survivor benefit for the SS at 70 is really important for DW.
__________________
"We live the lives we lead because of the thoughts we think" ...Michael O’Neill
"We can cannot compel others to do our will" ....Norman Goldman
"There never is shortage of the gullible to accept the illogical"...Anonymous
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12-06-2013, 10:25 AM
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#24
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Recycles dryer sheets
Join Date: Dec 2013
Location: Manhattan Beach
Posts: 195
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Yes (at least that's the plan) and No for us.
Modeling waiting until 70 to collect SS, as it makes a pretty big difference for me and DW in terms of what we may get (47 now) ... frankly not counting on getting much anyway. SS will be a small portion of our FIRE income, so why not maximize if we can afford it.
No on annuity unless there is a material decline in our port returns. I've looked at the models and the $$$ you need to fork over for any kind of decent annuity is just so large in relation to the payouts (esp if you're >50 YO), that I really struggle to see how even a DIY reasonable portfolio couldn't do better than the underlying investments the insurers use to fund the payment streams.
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12-06-2013, 01:42 PM
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#25
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,357
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SS at 70 is logical for me because of some longevity genes I have probably inherited. Late 90s would be quite possible for me, which is far beyond any break-even point.
Too soon to say about buying an annuity, although I could see at least the possibility of a SPIA at some point down the road.
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12-06-2013, 02:17 PM
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#26
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gone traveling
Join Date: Nov 2013
Location: Los Angeles
Posts: 202
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Quote:
thinking of buying a SPIA inside my Roth IRA. Is this a reasonable approach to provide a continuing stream of tax exempt income?
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Do you mean "tax deferred"? Eventually an annuity is taxed at the ordinary income rate. Normal investments (outside of retirement accounts) are taxed at a lower rate. It's not what you make, but rather what you get to keep after Uncle Sam takes his cut.
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12-06-2013, 02:30 PM
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#27
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Quote:
Originally Posted by ETFs_Rule
Do you mean "tax deferred"? Eventually an annuity is taxed at the ordinary income rate.
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No, not in the case that is being considered. If the SPIA is set up within a Roth IRA (and funded according to the Roth IRA rules) then all payments from the SPIA will be tax free. Gotta meet all the regular Roth rules (5 year wait for tax free interest/growth, etc). And, using a Roth for an annuity does give up the ability (inherent in other Roth IRA methods) to pass along this tax-free income to children, but for some people this is not an issue.
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Aren't Roth Earnings Tax Free
12-06-2013, 02:31 PM
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#28
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Thinks s/he gets paid by the post
Join Date: Apr 2008
Posts: 1,251
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Aren't Roth Earnings Tax Free
Quote:
Do you mean "tax deferred"? Eventually an annuity is taxed at the ordinary income rate.
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I meant "tax free". My understanding was that the earnings from a Roth were never taxed. If this isn't true for the proceeds from a SPIA (inside the Roth) then it would obviously be a very bad option.
__________________
"Don't you draw the queen of diamonds, boy, she'll beat you if she's able.
You know the queen of hearts is always your best bet" -- The Eagles, Desperado
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12-06-2013, 02:47 PM
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#29
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Recycles dryer sheets
Join Date: Feb 2013
Location: Morton
Posts: 56
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To an earlier post about using a SPIA inside a Roth, I see it differently. Like many I may purchase a SPIA at age 75 and up and if I do I will do so with after tax money. When one buys an annuity this way, there is a tax benefit due to the structure of the payments which are made from interest earnings, survivorship credits and return of principal. The return of the principal is not taxed. I don't want to shelter income if it isn't going to be taxed anyway.
So if part of my annuity income isn't taxed I wouldn't use a Roth. Instead I would use the Roth for the rest of investments where the tax savings would be more advantageous.
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12-06-2013, 02:57 PM
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#30
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Here's a short WSJ article on having an annuity inside of a Roth IRA.
Like Independent, I'd probably only buy an annuity if I were heading into Otar's danger zone: getting older, assets falling, and looking like I might not have enough to generate a monthly income to have a satisfactory quality of life. At that point I'd be in a fairly low tax bracket, so the whole "Roth or after-tax" question for funding it becomes only a minor issue.
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12-06-2013, 03:02 PM
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#31
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
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Quote:
Originally Posted by misanman
I meant "tax free". My understanding was that the earnings from a Roth were never taxed. If this isn't true for the proceeds from a SPIA (inside the Roth) then it would obviously be a very bad option.
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You are correct. The annuity payments would be tax free because the are being distributed from the Roth (assumes the Roth account funds and owns the SPIA).
If a tIRA bought the annuity then the annuity payments would be 100% taxable (assumes deductible tIRA). If a taxable account bought the annuity then the annuity payments would be part income and part return of principal.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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12-06-2013, 07:45 PM
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#32
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Location: west bloomfield MI
Posts: 2,223
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What if a person takes SS at 62 and 70? Claim and suspend type options.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
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12-06-2013, 09:38 PM
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#33
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2012
Posts: 6,180
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We will take SS earlier than 70 (currently considering age 63), as that plus my pension will likely be enough to cover our projected expenses, and give us more flexibility with our savings/investments. No need for an annuity due to my pension.
__________________
FIREd date: June 26, 2018 - "This Happy Feeling, Going Round and Round!" (GQ)
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12-07-2013, 08:43 AM
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#34
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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I will take SS at 70, but I am currently taking SS under my wife's account. No on annuities. I have a pension.
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12-07-2013, 02:01 PM
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#35
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Recycles dryer sheets
Join Date: Feb 2013
Location: Makakilo and Reno
Posts: 374
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Quote:
Originally Posted by ETFs_Rule
Annuities are crap financial products. So easy to do better with a conservative portfolio of stock / bond based ETF's. There's so many commission hungry annuity salesmen out there saying good things about them that people start believing that they're "an important part of a portfolio". Nonfiduciary "advisers" typically earn between 5 and 10% when selling annuities. With index annuities and SPIA's the insurance company compensates for that commission by reducing what they pay you. All annuities are also a tax nightmare. With SPIA's and other annuities that have an "income phase" you cannot get out of the contract for life. Kiss your principal goodbye if you ever need it.
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Sorry, this is only applicable if you buy from an insurance company. I pay no salesperson. There is no tax because I am withdrawing from my account. I can get all my balance back within 5 days of purchase. My payments keep going up as does my balance.
Aloha!
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