Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
PSA: Annuity Cost vs Age Purchased
Old 04-13-2012, 11:22 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,967
PSA: Annuity Cost vs Age Purchased

I was doing this for my own benefit, thought it might interest others. Using online quotes from Immediate Annuities - Instant Annuity Quote Calculator. assuming a couple looking for a joint life annuity. Details shown below graph...FWIW only.
Attached Images
File Type: gif Annuity.gif (36.5 KB, 32 views)
File Type: gif Quote.gif (16.8 KB, 22 views)
__________________

__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   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 04-13-2012, 11:50 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
So it looks like a 5%, joint life, payout for a 55 year old couple? With a joint life expectancy of 36 years, that means a yield of 3.7%, which is better than I would have thought.
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 04-13-2012, 11:51 AM   #3
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
This simply shows how the insurance company's longevity tables work. The older you are, the sooner you'll die. Since most buyers know this too, they offer increased payouts as people age.

It does show that you need a lot of cash when young to buy a decent, non-COLA'd cash flow when young(er). It also exposes the purchaser to extensive heath risk. You might be healthy as a horse at 55 but develop cancer at 56. If you are healthy at 75, you have a better shot at beating the odds and actually collecting past your longevity table. Of course, the insurance companies book this into their tables. Your other benefit is that the ravages of inflation will be two decades less.
__________________
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 04-13-2012, 12:19 PM   #4
Full time employment: Posting here.
EvrClrx311's Avatar
 
Join Date: Feb 2012
Posts: 524
I'm a bit naive when it comes to Annuities so sorry for the 'dump question'...

If my family has a history of longevity (g-Grandfather lived to be 105, his wife 97, his 5 brothers all 93+... can't think of anyone 3 generations up that died before 78)... do the annuity companies take that into consideration? Do I have to disclose that information to them?
__________________
EvrClrx311 is offline   Reply With Quote
Old 04-13-2012, 12:25 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 7,885
Quote:
Originally Posted by EvrClrx311 View Post
I'm a bit naive when it comes to Annuities so sorry for the 'dump question'...

If my family has a history of longevity (g-Grandfather lived to be 105, his wife 97, his 5 brothers all 93+... can't think of anyone 3 generations up that died before 78)... do the annuity companies take that into consideration? Do I have to disclose that information to them?
No, the companies won't hold it against you if you come from healthy genes.
__________________
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 online now   Reply With Quote
Old 04-13-2012, 02:12 PM   #6
Full time employment: Posting here.
EvrClrx311's Avatar
 
Join Date: Feb 2012
Posts: 524
Quote:
Originally Posted by easysurfer View Post
No, the companies won't hold it against you if you come from healthy genes.
__________________
EvrClrx311 is offline   Reply With Quote
Old 04-13-2012, 02:37 PM   #7
Recycles dryer sheets
 
Join Date: Apr 2012
Location: Oswego
Posts: 76
Quote:
Originally Posted by EvrClrx311 View Post
Just watch out for Bus's and dont dry your hair while in the tub and you can beat them

Steel
__________________
Steel Rain is offline   Reply With Quote
Old 04-13-2012, 02:40 PM   #8
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by EvrClrx311 View Post
I'm a bit naive when it comes to Annuities so sorry for the 'dump question'...

If my family has a history of longevity (g-Grandfather lived to be 105, his wife 97, his 5 brothers all 93+... can't think of anyone 3 generations up that died before 78)... do the annuity companies take that into consideration? Do I have to disclose that information to them?
Insurance companies have legions of actuaries that create their longevity tables that ultimately price out a SPIA. They use standard mortality data but they then "handicap" it for people like you. Pretty much no one buys a SPIA if they have cancer, MS or any one of the obvious life shortening conditions. So that is also taken into account.

Even with the longevity in your family, I would encourage you to not rush out and get one. I think one of the big downsides of a SPIA is inflation risk. It doesn't take much inflation to make the nice, big annuity payment you started at age 60 to look pretty miserly at age 80. My normal advice to people wanting to buy an annuity is to wait and evaluate it around age 75. In your case, 80 or 85 may make more sense. The other factor would be the longevity history of your spouse's (if you have one) family.
__________________
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 04-13-2012, 04:55 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,812
Oddly, the Society of Actuaries puts a lot of mortality information on its website. I'd think it would be proprietary.
For example, item 3 here: SOA - Society of Actuaries
__________________
Independent is offline   Reply With Quote
Old 04-13-2012, 05:11 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,967
Quote:
Originally Posted by Independent View Post
Oddly, the Society of Actuaries puts a lot of mortality information on its website. I'd think it would be proprietary.
Interesting reading, I never would have found it myself, thanks!
__________________

__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   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


 

 
All times are GMT -6. The time now is 12:24 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.