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View Poll Results: Has the recent market correction made you consider adding fixed annuities to your AA
Yes 4 5.00%
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Old 08-28-2015, 09:51 PM   #61
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Originally Posted by nun View Post
Sure, like I said I'm sure people here will manage their withdrawals sensibly. But I have always planned on retiring with a good floor of guaranteed income. Things worked out so that I actually don't need to make any withdrawals from my mutual funds for retirement income so I'm at the other end of the spectrum. There will probably be some people retiring with 401ks who will look at annuities again after the recent bit of turmoil mostly through fear. I think it's a good idea for them get income outside of the markets......unfortunately annuities aren't a good deal right now and many will compound market losses by buying poor annuities. My position on them is that I'd only buy a fixed annuity and then only with a reasonable interest rate. That is why I have some money in TIAA-Traditional which has some annuity type properties, but is yielding 4.5% interest and I can get at my principal and pass it on to my heirs. I use it as a stable value fund on steroids.

I remember I once posted a poll asking at what interest rate (not payout rate) people would buy an annuity.....of course that requires an assumption about your life span........and most people wouldn't even consider them with rates of as high as 8%, which seems silly to me if you are ing good health.
One issue with this discussion is the "participating" character of TIAA-Traditional. It is not like going out and buying a SPIA where your payout is then fixed forever. As you know, the TIAA pays a guaranteed amount and then additional amounts that vary based on when you put the money in. These additional amounts reportedly have been paid consistently since the 30's.

The bottom line really is that few people can avail themselves of TIAA-Traditional. So it is not really meaningful to most on this forum.
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Old 08-28-2015, 10:27 PM   #62
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Originally Posted by robertf57 View Post
One issue with this discussion is the "participating" character of TIAA-Traditional. It is not like going out and buying a SPIA where your payout is then fixed forever. As you know, the TIAA pays a guaranteed amount and then additional amounts that vary based on when you put the money in. These additional amounts reportedly have been paid consistently since the 30's.

The bottom line really is that few people can avail themselves of TIAA-Traditional. So it is not really meaningful to most on this forum.
TIAA-Traditional is a sort of deferred fixed annuity. True, it is only available to those with retirement accounts with TIAA-CREF. But it does demonstrate that the details of an annuity are important....most are very bad, some are useful. After all these posts I realize that my main point isn't that people should buy SPIAs, but that they should diversify from direct investing in stock and bond mutual funds for retirement income. The unfortunate thing is that few people do that and when they do many use annuities.....and most of them suck.
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Old 08-29-2015, 12:38 AM   #63
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Understood Nun and I am quite happy with my Trad and TREA. They are a big piece of my "fixed income" asset allocation.
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Old 08-29-2015, 07:40 AM   #64
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Unlikely that we'll ever buy a SPIA. Once SS and my pension are online they will cover ~60-65% of our expenses so our portfolio only has to cover the gap at a conservatively projected 3.6% WR but also with very conservative expenses that can be reduced if needed.
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Old 08-29-2015, 08:14 AM   #65
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while i have no interest in an spia now it is a possible option down the road . my wife would much prefer at least the non discretionary stuff covered in a monthly check . she would rather much have the investments for discretionary spending , inflation adjusting and heirs .
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Old 08-29-2015, 10:22 AM   #66
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Not sure I agree with that. I "bought" my pension annuity when I elected to forego the lump sum. Additionally, pensions are not "given" like gifts. They are earned, same as other components of one's compensation and benefits package.

Aside from the currently-low payout ratios for SPIAs (which is no small consideration), I see little substantive difference in the decision process compared to a non-COLA DB pension annuity with a lump sum option. COLA'd pensions OTOH have a clear advantage and deserve the reverence that is bestowed upon them.

I answered 'no' to the poll, but that's because we have pensions (1 COLA, 1 not). Without pensions, I would *perhaps* consider an SPIA, but not at today's rates, and certainly not in response to the recent correction and ongoing volatility. It would be for the same reason we originally elected the pension annuities, which is to create a balanced mix of guaranteed income and portfolio withdrawals as a hedge against a bad sequence of returns in early (pre-SS) retirement. We annuitized just enough assets to cover bare-bones, non-discretionary expenses. The way I see it, any end-of-life upside potential that I sacrificed for my kids, is a relatively minor tradeoff compared to a potentially catastrophic result early on. Having said that however, samclem's suggestions seem quite reasonable as an alternative to an SPIA being considered for this reason:
Very few companies still offer traditional DB pension plans anymore, more so in government positions. They either offer it (give it to you) or not - you cannot go to HR and tell them you want a DB pension plan. You could even choose to annuitize a 401K, but it's not a traditional company offered pension. As I understand it - pensions are offered by an employer (you cannot buy it), but you can buy an annuity.

You've always had to (earn) qualify for the DB pension plan. Used to be aro. 10 years to qualify for a DB pension. Back then, mine was actually non-contributory in a private company. It was a very disappointing payout when I qualified/left at the 10 year mark. A lot of people never stuck around that long (career moves, better pay, etc), or had the choice to stick around in some companies. The Federal Govt. had to step in and recommend guidelines for DB qualifications given the abuses that started to surface. Also started the end of DB pensions IMHO.

Employers also may or may not offer choices to the standard DB pension plan annuitized payout (ie. lump sum). If they do - then "you" can choose another option. My company did not originally offer lump sum. It was only after it was bought out the it was made available and I chose to take a lump sum payout option over the standard annuitized payout plan. Believe lump sum payout is possibly going the way of DB traditional pensions.

http://www.forbes.com/sites/ashleaeb...p-sum-payouts/
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Old 08-31-2015, 09:18 AM   #67
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I have purchased several SPIA's over the last five years and they certainly added to my comfort level watching the market drop last week.
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Old 08-31-2015, 03:18 PM   #68
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Pension vs annuity: Normally with a pension a company is trying to lowball the lump sum, their cost. The annuity looks more attractive to us. Try to buy an SPIA with the lump sums being offered. With an SPIA the insurance company wants the highest purchase price it can get out of you. That makes the SPIA annuity less attractive to us. Two very different situations when considering lump sum versus annuity.
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