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Old 05-22-2011, 07:26 PM   #21
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Remember to always consider deferring SS as a way to purchase an annuity. The SS factors are usually more attractive than private SPIAs.
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Old 05-23-2011, 08:16 AM   #22
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Quote:
Originally Posted by rescueme View Post
that's why I commented on "interest rates are not everything", when considering an SPIA.

Especially if the principal you plan to use to purchase an SPIA when rates rise is currently sitting in a bond fund.
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Old 05-23-2011, 08:21 AM   #23
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Originally Posted by chinaco View Post
Here is a quote engine for several insurance companies.

Immediate Annuities - Instant Annuity Quote Calculator.

But since it does not specify the company... I am not sure which one it is based on.??

They used to provide a comparative report with rates from the different companies... but that is no longer available. They show an average and the highest for a few ages.

The insurance industry probably told them to cease and desist... they do not like transparency. It drives competition!
Is this a recent change? I requested a quote from them about a year ago and they mailed me a nice package with real time quotes from about a dozen different insurance companies. It included quotes for different options like inflation riders, etc.
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Old 05-23-2011, 09:59 AM   #24
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Good post. I'm not against annuitizing part of our nest egg one day, but I hope people realize this is one of the worst possible times to do so with interest rates at historic lows. And all else being equal (interest rates), generally the longer you wait the less it will cost (actuarially you will have fewer years to fund).
+1

Frankly, if interest rates are right the idea of "buying a pension" with a *portion* of my retirement savings is intriguing and something I'd consider at the right price. Current interest rates, of course, are not the "right price" as the cost of an income stream is at its highest when long term interest rates are at their lowest. "Buy high" is generally not good financial advice.
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Old 05-23-2011, 04:56 PM   #25
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Is this a recent change? I requested a quote from them about a year ago and they mailed me a nice package with real time quotes from about a dozen different insurance companies. It included quotes for different options like inflation riders, etc.
I was talking about a monthly report they produced that you could access anonymously.
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Old 05-26-2011, 03:56 AM   #26
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I'd also direct people to the TSP annuity calculator. The rates tend to be on the low side, but it is one of the few online annuity calculators that will give you a modified COLA annuity. I find that useful for comparing the annuity vs inflation protected FIRECalc runs.

Also I am guessing that TSP would be more likely to bail out an insurance company that went broke and reneged on their annuities.
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Old 05-26-2011, 05:15 AM   #27
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I'd also direct people to the TSP annuity calculator. The rates tend to be on the low side, but it is one of the few online annuity calculators that will give you a modified COLA annuity. I find that useful for comparing the annuity vs inflation protected FIRECalc runs.

Also I am guessing that TSP would be more likely to bail out an insurance company that went broke and reneged on their annuities.
Do you know if that is an actual quote (from an insurance company) or is it just an example using some interest rates?
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Old 05-26-2011, 06:04 AM   #28
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Are the payouts on SPIA's that much different based on age?
Yes.

Your "return" is calculated on the amount received with each payment, consisting of "interest", along with a portion of the preimum you originally paid.

The older you are when you start the SPIA, the less years (calculated on a normal lifespan) the insurance company has to pay you back.

Therefore, if you purchase an SPIA at age 75, your payments would be much higher than those of a much younger person (as I did at age 59, when I purchased my original SPIA). It's a bit like SS. The older you are when you claim, the higher the payments since you have a reduced lifespan to cover once you file for SS.

That's why a lot of folks say they will wait till they get older to purchase an SPIA - since they assume the payout is based upon some "magic formula". It isn't. It's just a smaller payout period that boosts the payment, without current interest rates having much to do to affect that return of preimum.
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Old 05-26-2011, 06:06 AM   #29
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What? I have them send me a check each month.
And also return a portion of your principal, as an SPIA does? (I doubt it).

So how much of your income is covered by your "monthly check"?

That's where a lot of folks confuse the two instruments. A CD is an investment vehicle (and can pay a higher rate, over the long term); an SPIA is an income vehicle, along with a small interest component.
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Old 05-26-2011, 06:21 AM   #30
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Do you know if that is an actual quote (from an insurance company) or is it just an example using some interest rates?

Not being fortunate enough to have access to the TSP (Ya ok I know you have to work for Uncle Sam...) I am not positive. My guess it is just a quote but a pretty accurate one.
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Old 05-26-2011, 07:55 AM   #31
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Remember to always consider deferring SS as a way to purchase an annuity. The SS factors are usually more attractive than private SPIAs.
But together, they work wonders! (I know )...

BTW, I purchased an SPIA in order to delay my SS (from retirement at age 59 till my claim for SS at age 70 - an 11 year span).

SPIA payments after that? Dosen't matter what they are "worth" (due to inflation), which I will take care of when I "trade up" from the SPIA to SS. Monthly SPIA checks (for both DW/me, for the rest of our lives) after I claim SS are just "icing on the cake" ...
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Old 05-26-2011, 08:55 AM   #32
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Originally Posted by rescueme View Post
And also return a portion of your principal, as an SPIA does? (I doubt it).

So how much of your income is covered by your "monthly check"?

That's where a lot of folks confuse the two instruments. A CD is an investment vehicle (and can pay a higher rate, over the long term); an SPIA is an income vehicle, along with a small interest component.
My CD's pay only interest and I have 3 of them with Pen Fed. and it provides 25% of my monthly spending. They are at 5, 6, and 6 1/4 % and pay about $1400 a month or so. Best thing is that when they end I get my money back.

Still can't wrap my pea brain around the SPIA.
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Old 05-26-2011, 09:01 AM   #33
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Do you know if that is an actual quote (from an insurance company) or is it just an example using some interest rates?
The TSP annuity calculator uses the current interest rate that MetLife offers for an annuity for TSP members. The interest rate is adjusted at the beginning of the month. Vanguard use to have a nice annuity calculator that had different inflation rider options, it was linked through AIG's web site. Haven't seen their new annuity quote calculator, it now requires an account login.
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Old 05-26-2011, 09:09 AM   #34
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My CD's pay only interest and I have 3 of them with Pen Fed. and it provides 25% of my monthly spending. They are at 5, 6, and 6 1/4 % and pay about $1400 a month or so. Best thing is that when they end I get my money back.

Still can't wrap my pea brain around the SPIA.
Of course not. You're looking at your CD's as an investment, while I look at my SPIA as a "consumable" (e.g. portfolio withdrawl).

The focus is different and you cannot equate the two. Two instruments, with two goals...
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