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Secured Part of our Retirement Today
05-27-2016, 05:33 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,659
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Secured Part of our Retirement Today
With retirement coming up, I decided to sell $210,000 of stocks today. This money (plus another $25,000) will be used in a year to buy an annuity of $12,000 per year. The annuity will start at age 50, have a cola of 3%, and will last until both me and my wife are dead.
This will provide about a third of our base expenses and about a sixth of our expected withdrawal. I could have let it ride until the end in stocks but with only a year left and the market up it felt like the right thing to do.
Feedback welcome and I also want to thank everyone here for a great forum. The discussion and knowledge found here is incredible.
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05-27-2016, 05:36 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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There are a lot of mixed feelings about Annuities. They are a high profit item that is sold. And they do provide a stable income.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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05-27-2016, 05:40 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2009
Posts: 9,343
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Congrats Retire! Im a full bellied pensioner here, so if I said anything else it would be hypocrisy. I wont even worry about digging into the numbers. The bottom line is you secured a base of your income with a cola bump. You will sleep better knowing you have that secured base to build off of.
One should have the luxury of bit of peace of mind in retirement shouldn't they?
Sent from my iPad using Tapatalk
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05-27-2016, 05:55 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Oct 2009
Posts: 1,190
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Surprised at that pricing. Start at 50 with a 5.1% yield and 3% COLA for two people. Sounds pretty good in this current rate environment.
Sent from my iPad using Early Retirement Forum
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05-27-2016, 05:56 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,134
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If it works for you, great. I think the key is balance and diversity in the income producing investments. While annuities are not for me, they can help diversify income sources and, as such, can be great for many people.
__________________
Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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05-27-2016, 05:59 PM
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#6
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Recycles dryer sheets
Join Date: Nov 2013
Posts: 125
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Congrats, not for me but if it gives you some peace of mind well worth it.
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05-27-2016, 06:53 PM
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#7
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,137
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Variable or Fixed?
__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
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05-27-2016, 07:16 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Aug 2009
Posts: 1,577
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Quote:
Originally Posted by LARS
Surprised at that pricing. Start at 50 with a 5.1% yield and 3% COLA for two people. Sounds pretty good in this current rate environment.
Sent from my iPad using Early Retirement Forum
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Well done. Peace of mind is worth a lot.
Me too, I'm surprised by the payout. Is it a SPIA?
Sent from my iPad using Early Retirement Forum
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05-27-2016, 09:09 PM
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#9
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Confused about dryer sheets
Join Date: May 2016
Location: Sun City
Posts: 6
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Good Luck. Between SS and Pensions I didnt want another annuity, so I created my own annuity. I'll tell you how it works in a few years.
Gerry
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05-27-2016, 09:58 PM
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#10
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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: 36,204
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Sounds too good to be true... the payout rate for a fixed SPIA with a $235k premium for a 50 yo couple with benefits starting in a year is only $997/month on immediateannuities.com .... and COLAed SPIAs are more expensive. My BS meter has turned red....
__________________
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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05-27-2016, 10:41 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,659
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Thanks for the responses. I'm not really into annuities, do not even know what variable, fixed, or SPIA means. This is an optional annuity offered by the state for teachers. It is more like a benefit I guess instead of something sold to us.
There were no fees or anything for this. It is legit and as far as I can tell too good not to do it.
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05-28-2016, 06:49 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Michigan
Posts: 4,939
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I am not a fan of annuities and would suggest high grade bonds instead. I do support reducing equities on the eve of RE.
__________________
"The mountains are calling, and I must go." John Muir
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05-28-2016, 07:07 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2005
Posts: 6,098
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Quote:
Originally Posted by pb4uski
Sounds too good to be true... the payout rate for a fixed SPIA with a $235k premium for a 50 yo couple with benefits starting in a year is only $997/month on immediateannuities.com .... and COLAed SPIAs are more expensive. My BS meter has turned red....
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i agree , there is more here then the poster is aware of .
likely it is one of those guaranteed growth rates with monopoly money that counts towards annuitization but is not really your money .
i saw one that had a guaranteed 5.50% growth rate and it really did . but for each year you delay annuitizing you only get 1/10% more in draw against that monopoly money balance when you annuitize it .
you cannot access or have that money in any other way .
they all work the same way . if anyone wants i can go in to more detail how these guaranteed growth rate plans work .
all you ever really get other then the annuity money is your actual account balance which is linked to some investment you can never do well in .
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05-28-2016, 07:39 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Mar 2014
Location: Apex and Bradenton
Posts: 1,762
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From my MegaCorp pension data, at age 52 years 7 months (sorry, my only datapoint) $235k from 401k for a "Pension Purchase Option" gives $12.6k/year additional on a 100% Joint & Survivor Level Benefit. No COLA though! RetireAge50, you have a much sweeter choice than I do, because of the COLA. Congrats!
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05-28-2016, 07:39 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,405
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What the OP is purchasing is not a commercially available annuity, but a pension substitute offered by the Washington state retirement system for teachers.
Purchasing an Annuity or Service Credit
If the OP could post more details or a better link describing what he is buying, that would help explain what s/he is doing.
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05-28-2016, 08:43 AM
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#16
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Recycles dryer sheets
Join Date: May 2015
Location: Houston
Posts: 337
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Quote:
Originally Posted by Another Reader
What the OP is purchasing is not a commercially available annuity, but a pension substitute offered by the Washington state retirement system for teachers.
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Too bad... it's a much better looking annuity than what I've been offered by my megacorp.
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05-28-2016, 10:21 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,659
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Quote:
Originally Posted by Another Reader
If the OP could post more details or a better link describing what he is buying, that would help explain what s/he is doing.
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Here is a link:
http://www.drs.wa.gov/publications/m...nnuity.htm#tap
Seems like one of those opportunities you have to take advantage of and also a good time to move from stocks in preparation to execute this.
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05-28-2016, 10:53 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,148
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Quote:
Originally Posted by RetireAge50
Thanks for the responses. I'm not really into annuities, do not even know what variable, fixed, or SPIA means. This is an optional annuity offered by the state for teachers. It is more like a benefit I guess instead of something sold to us.
There were no fees or anything for this. It is legit and as far as I can tell too good not to do it.
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You got a nice deal RetireAge50 and, IMHO, you would have made a mistake to not take it. It was a bit misleading, however, to describe it as simply an "annuity."
As long as your state pension fund for teachers is in excellent shape and your state has a history of funding it consistently using sound actuarial principles, you can't go wrong with what you're getting for the price.
In Illinois, even with attractive numbers like you got, I would have never done it since the politicians are intent on collecting fully and not paying at all or paying partially. It would be like buying an annuity from an insurance company rated CCC.
I do have a couple of questions:
The link you gave says that the cola is "up to 3%." Does that mean you might get less than 3% under certain circumstances such as inflation being less than 3%?
In your pension system, do you also contribute to and receive SS?
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-28-2016, 12:45 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2013
Posts: 9,358
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We took our non-COLA pensions as annuities instead of lump sums. We were interested in diversification and a unique income stream unrelated to our portfolio income. Our pensions are mostly non-COLA, but they offset a low fixed rate mortgage we will not pay off early.
We ran the numbers of lump sum vs. annuities and decided the annuities worked best for us.
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Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
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05-28-2016, 06:50 PM
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#20
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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: 36,204
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Quote:
Originally Posted by Another Reader
What the OP is purchasing is not a commercially available annuity, but a pension substitute offered by the Washington state retirement system for teachers....
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That was not apparent from the OP.... sweet deal if you can get it...good decision by OP... I would have taken it too.
__________________
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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