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Old 05-21-2011, 11:26 PM   #1
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SPIA Quote

Do all insurance companies have EZ qoute like Berkshire Hathway group?

How do they compare to others?
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Old 05-22-2011, 04:37 AM   #2
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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!

So you will probably need to find a few agents (trustworthy ones) and compare quotes.

Bottom line: do not trust a single agent. Let them know up front you are looking only at quality companies (very high rating) and get quotes... since the products are different you may have a little work to turn it into equivalents for comparison purposes.
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Old 05-22-2011, 05:36 AM   #3
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DW/I have an SPIA (my disclaimer on the following):

You cannot use BH to purchase an SPIA with qualified (e.g. retirement) funds. From their FAQ:

Can I purchase an SPIA from BRK Direct with funds from a Qualified Retirement Plan?
Currently, you cannot purchase an SPIA from BRK Direct with qualified funds.”

When we started our research on SPIA’s (about two years before retirement), we used the Instant Annuity site, but we also got direct quotes from our two main investment firms, VG & Fidelity. Be aware that the Instant Annuity site represents many different insurance companies and will not tell you who has the best "terms" on the tool. However, you can just contact them (as we did) to examine the detailed info, provided by the referenced insurance company.

IMHO, there are more important considertions than just the rate is the term of the policy. Every person/couple has a defined set of circumstances that they need to insure (remember, an SPIA is income insurance) and you can’t just make a selection based only upon monthly payment – although that is part of the selection criteria.

For instance, our desire was to have a policy that would pay at 100% as long as either/both were alive, with remaining payments to be made to our estate if we would both die before the end of our expected life spans.

We also looked for a non-COLA policy, since our primary requirement was for the SPIA to act as a defined benefit (e.g. pension) since I did not have a pension; it was stopped by my company many years ago. If I would have retained the pension, it also would have not been adjusted for inflation, and the payment would have been reduced as soon as I reached age 62, with the expectation that I would have filed for SS. Since the primary use of this SPIA is to allow me to delay SS till age 70 (primarily for the benefit of my DW, expecting that she will survive me), I wanted the highest possible payments in the front end, as the SPIA would act as “SS gap insurance”, with remaining life payments being icing on the cake after my SS started.

Also be aware that rates change frequently – as much as every week. In our case, our provider (Fidelity) contacted us immediately to send a new contract due to rates going up two days after they had sent us the original contract.

And no, you do not have to go through an “agent” if you don’t want to. For one thing, a pure SPIA’s costs are recovered within the profits of the policy. While our policy from Fidelity was “sold” to us by a licensed agent (who worked for Fidelity), there were no up-front or ongoing fees within the contract. Their costs are derived by the extra amount of income they can derive from investing your policy premium.

Just a couple of comments from somebody who actually has gone through the process, and quite pleased with the result…
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Old 05-22-2011, 06:15 AM   #4
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Is It Time to Buy an Annuity?

How to Create Your Own Pension - WSJ.com


Which Annuity Is Right For You?


http://blogs.smartmoney.com/encore/2...M_home_blogsum
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Old 05-22-2011, 06:20 AM   #5
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Quote:
Originally Posted by chinaco View Post
Is It Time to Buy an Annuity?

How to Create Your Own Pension - WSJ.com
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).
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Old 05-22-2011, 06:36 AM   #6
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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).

Yes. Rates are low and manipulated (excessively right now).


However, an interesting exercise is to get quotes for a premium amount (say $100k) and plot the line at different ages to see the difference in the longevity credits. It definitely varies from company to company... but using immediate annuity (which I assume is an average... I could be wrong)... you do not see a huge difference between certain age brackets.


There are many considerations (aside from rate expectations and longevity credits).... when one factors it into their overall financial plan.


I think many people struggle with some of the ideas because of the complexity and non-determinant nature of the whole thing (upside/downside).... people tend to try to turn a very complex situation into a one dimensional problem/decision.

Just for the record.... We will buy and use a ladder technique. But I intend to hold off on beginning the purchases until after the fed stops the excessive manipulation of rates... which could be a year or two.. [added] if the fed continues their current course of action.


Now is probably the best time to borrow in decades... probably the opportunity of a lifetime for many (if one needs to hold debt).
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Old 05-22-2011, 06:40 AM   #7
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The rates to convert to a SPIA are so low right now. I was hoping to convert at least one of the IRAs to a SPIA at this year-end; however, it looks like it may be the latter part of next year - possibly - for the conversion.

We can pull up to 10% a year from our IRAs. Our short-term plan is to take money from the IRAs (only if absolutely necessary) if there is need for extra immediate money.
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Old 05-22-2011, 07:07 AM   #8
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I often hear that folks will not consider purchasing an SPIA until rates go up, or they have achieved an age that insures a higher payment (which is really not anything but a return of your own money due to a shorter payout period, due to age, and has nothing to do with current interest rates).

However, may I suggest that there are reasons why you may want to consider a portion of your portfolio being converted, even when it is a low interest (and low inflation rate) period?

First of all, at the time of our purchase (mid-2007) rates were higher than currently, but not as much. In our case, the purchase was done to ensure early retirement guaranteed income (at age 59), not subject to the whims of the market, along with converting part of our joint portfolio value (10% at the time) that would not be subject to later RMD rules (an SPIA, if a life annuity meets the requirements of removing the balance from RMD consideratons).

Secondly (and in our case only), we were "trading" current interest payments (on the SPIA) for future SS inflation and higher longevity payments, since the primary use of the SPIA was to allow delay of SS payments to FRA (for DW) and age 70 (for me). Since the SPIA covers around 33% of my current expenses, this also meets the income ratio of my long gone former pension.

While I've mentioned the term "cash flow is everything in retirement" more than once, I believe that once you reach retirement (or are currently retired), that term takes on a whole new meaning. Before retirement, returns are everything (such as taking on more of a risk, to hit "your number"). However in retirement and having your normal day-to-day expenses being covered by just your income sources (e.g. SS and possible pension) and the current value of your portfolio - subject to market flux, you find that current return rates may not be #1 in your decision.

We're doing an "offset" in our SPIA, due to the reason we bought it. I'm not saying that anybody needs nor should buy an SPIA; that's why I said you have to look at the reason behind purchasing such a policy before actually doing so.

However in our case, current (reduced) interest/return rates are also being compared (and replaced) with expected future higher interest/longevity rates that we will get through SS - not just one point of consideration based upon a current point in time...
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Old 05-22-2011, 07:39 AM   #9
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Originally Posted by rescueme View Post
I often hear that folks will not consider purchasing an SPIA until rates go up, or they have achieved an age that insures a higher payment (which is really not anything but a return of your own money due to a shorter payout period, due to age, and has nothing to do with current interest rates).

However, may I suggest that there are reasons why you may want to consider a portion of your portfolio being converted, even when it is a low interest (and low inflation rate) period?

......

It can make sense... but I would use a ladder approach for a nominal SPIA given the feds actions and the historically low interest rate level. I suppose rates could go lower. But the historic mean and median rates of 10 year treasuries is higher than current rates.

http://www.multpl.com/interest-rate/

That is where a ladder might show its strength .... get an average rate.

Now if one is looking at a CPI COLA adjusted annuity... things might be a little different. I have not priced one... but if interest rates reflect inflation expectations... the cost of the CPI COLA might be lower.

Anyone done an analysis of CPI adjusted Cola Annuities in the current environment?
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Old 05-22-2011, 07:50 AM   #10
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It can make sense... but I would use a ladder approach for a nominal SPIA given the feds actions and the historically low interest rate level.
I would agree.

Based upon our initial use of "the product", I can see where we will possibly make additional purchases in the future, if our needs indicate such action.

I did want to add that even in a low-interest/return period, our "exposure" is limited; that is that we only "converted" 10% of the then value of our joint portfolio into an SPIA - with the remaining 90% to "run the market" (which BTW, has returned us back to a total value that exceeds our joint portfolio value before we purchased the SPIA; nothing accounts for luck...)
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Old 05-22-2011, 08:34 AM   #11
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I'm very happy with my 5% CD from Pen Fed which I set up for 10 years this January. If I'm dead or alive at the end DW or my kids will get the money.
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Old 05-22-2011, 08:36 AM   #12
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I'm very happy with my 5% CD from Pen Fed which I set up for 10 years this January. If I'm dead or alive at the end DW or my kids will get the money.
And how do you draw current income to cover your expenses in retirement from this CD (including return of principal)?

CD's have their place (as well as SPIA's ); that's why I commented on "interest rates are not everything", when considering an SPIA.

One is not interchangable with the other, in the same manner of use.
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Old 05-22-2011, 10:22 AM   #13
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Thank you for all the information.

I have a lot mor research to do before I decide to buy an SPIA. Any other information would be greatly appreciated
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Old 05-22-2011, 10:46 AM   #14
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I'm waiting until either

1) the stock market goes on a tear and the fed increases interest rates again and again. (Spoken from an Index investor )

or

2) I get several years older
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Old 05-22-2011, 11:50 AM   #15
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Do any of you have any thoughts on when the rates will start going up? And upon what do you base your premise?
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Old 05-22-2011, 01:56 PM   #16
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And how do you draw current income to cover your expenses in retirement from this CD (including return of principal)?

CD's have their place (as well as SPIA's ); that's why I commented on "interest rates are not everything", when considering an SPIA.

One is not interchangable with the other, in the same manner of use.
What? I have them send me a check each month.
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Old 05-22-2011, 03:55 PM   #17
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The last time I checked, a fixed immediate annuity (joint) for me at age 55 would pay only 5%. My FIDO planner suggested I use one or more SPIA's to cover my essential living expenses since I am now ER. Are the payouts on SPIA's that much different based on age? Because the WSJ says that a 65 year old would now get a 7.6% payout.
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Old 05-22-2011, 05:06 PM   #18
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Do any of you have any thoughts on when the rates will start going up? And upon what do you base your premise?
According to Harold Camping's calculations, rates will rise by 1.25% every six months, beginning Nov 14, 2011.

And you can take that to the bank.
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Old 05-22-2011, 06:08 PM   #19
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According to Harold Camping's calculations, rates will rise by 1.25% every six months, beginning Nov 14, 2011.
But only at 6pm.
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Old 05-22-2011, 06:59 PM   #20
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I'm sort of interested in annuitizing my savings at some point, but the problem I'm having with the calculators and articles I've seen is that they are essentially qualitative, and oriented to specific insurance products. But they don't say what the various products are actually worth, so I can get a sense of what future interest rate is being assumed and how much profit the insurance company expects to make off me. After all, for a given life span and a given interest rate, the value of an annuity paying a given amount per period is mechanically calculable. Are there any online calculators that give you this information?
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