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The video is about deferred annuities, this thread is about immediate annuities.
They are different animals.
They are different animals.
... People often say that SS is their retirement annuity so for us ERs is there an argument for an SPIA to cover the years between ER and taking SS?
I have not put myself in the shoes of the youngster ERs to see from their viewpoint. But for me, with SS just a few years away, and myself sleeping on a lumpy mattress (36% cash), I see no need for any SPIA.
Although market gyrations are a great fear-induced sales tool for annuity salespersons, I'm no more prone to buy an annuity today than I was a week ago, a year ago or a decade ago.
with a military pension and SS in a couple of years, I see no good reason to buy a SPIA.
I have not put myself in the shoes of the youngster ERs to see from their viewpoint. But for me, with SS just a few years away, and myself sleeping on a lumpy mattress (36% cash), I see no need for any SPIA.
The video is about deferred annuities, this thread is about immediate annuities.
They are different animals.
We all have our own individual investing styles and philosophies, but I'd be interested to learn if the recent market correction has made anyone think about adding an SPIA
It's not strictly mattress money, but I-Bonds, stable value funds in 401k, etc... hence earning a bitty bit. In normal times, that money should be in bonds, but I do not trust the bond market right now. Risk/reward ratio is not to my liking.Wouldn't using some of that cash to buy an SPIA be better than leaving it in the mattress?
It's not strictly mattress money, but I-Bonds, stable value funds in 401k, etc... hence earning a bitty bit. In normal times, that money should be in bonds, but I do not trust the bond market right now. Risk/reward ratio is not to my liking.
The above said, I am sitting on real cash from reducing from 70% stock AA down to 60% AA just a few weeks ago. Do not know what to do with that money yet, but it may go back into stock if the market tanks. I normally run 70% stock AA and did go as high as 80%, or as low as 50%, if memory serves. Need to consult my diary.
It also has little in common with a bond ladder. The key advantage of a bond ladder is periodic turnover, which allows one to take advantage of a steep interest curve, and to roll over to higher rates if interest rates are trending up. Don't know what is the current ER.org consensus regarding direction of rates and expected shape of curve. It doesn't really matter, because so far ER.org consensus doesn't have a real good batting average on rates or curve shape . As I see it, a fixed annuity is a flat bet on steady or lower rates.I think of an SPIA as a bond ladder that you can't outlive.
So, it's not a replacement for equities.
I agree. I have a state pension and SS as well as my TIAA-Traditional so all my income needs are covered by things other than market investments so I won't be buying an SPIA either. But would those of us who have pensions swap them for an equivalent amount invested in the markets. People with pensions generally seem glad of them, but few people seem to want to buy SPIAs. Is it just that commercially available SPIAs aren't good value when compared with the small number of workplace pensions still left or military pensions?
In fairness, most government pensions probably have COLA - something that would be quite expensive if you buy an SPIA so the pension is already hedged for inflation.I agree. I have a state pension and SS as well as my TIAA-Traditional so all my income needs are covered by things other than market investments so I won't be buying an SPIA either. But would those of us who have pensions swap them for an equivalent amount invested in the markets. People with pensions generally seem glad of them, but few people seem to want to buy SPIAs. Is it just that commercially available SPIAs aren't good value when compared with the small number of workplace pensions still left or military pensions?
Here's another one that specifically mentions SPIAs.
I don't think everyone here would agree with that. An SPIA bought to protect against sequence of returns risk early in retirement will be very expensive due to the meager mortality credits for a younger person. If worried about the risk of poor stock market performance in the first years of retirement, I'd recommend that a retiree (especially an ER) start with a higher allocation to cash, a CD ladder, or a bond ladder to cover the first 5-10 years of expenses rather than use an SPIA for this purpose. They can then re-allocate to a higher % in equities gradually later once they are are out of the woods.I think everyone here knows the contents of the video and would buy an SPIA as insurance against living a long time or the possibility of a significant and prolonged market correction early in the drawdown phase.
You love SPIA's, that's fine. But your conclusion doesn't seem to jive with your poll at all!I think everyone here knows the contents of the video and would buy an SPIA as insurance against living a long time or the possibility of a significant and prolonged market correction early in the drawdown phase. They should also only use a portion of their portfolio. Having as base of income that does not depend on the markets is good planning IMHO. SPIAs are not great value as even if you lived forever your implied investment return will never be greater than the payout rate, but if you don't have a pension or enough SS they might be considered and thought of as insurance rather than an investment
I think everyone here knows the contents of the video and would buy an SPIA as insurance against living a long time or the possibility of a significant and prolonged market correction early in the drawdown phase. They should also only use a portion of their portfolio. Having as base of income that does not depend on the markets is good planning IMHO. SPIAs are not great value as even if you lived forever your implied investment return will never be greater than the payout rate, but if you don't have a pension or enough SS they might be considered and thought of as insurance rather than an investment
The title "Why Annuities are Like Heroin" should clue you in that you're not getting a balanced review of where SPIAs might be useful.Here's another one that specifically mentions SPIAs.
I think you've got a math error here.I found the following quick stats for our retirement system:
Ave. retirement age: 60
Ave. age of retirees receiving pension: 70
Ave. age of beneficiaries receiving pension: 75
So basically, on average the retirement system only pays 10 years of benefits before the employee croaks. Default spousal continuance is at 50%. A co-worker told me that in a retirement seminar he attended years back, the lecturer mentioned retirees died around 5 years into retirement on average.
The title "Why Annuities are Like Heroin" should clue you in that you're not getting a balanced review of where SPIAs might be useful.
Nobody here is going to suggest that people put 100% of their savings in non-COLA'd SPIAs. We all understand inflation and know how SWRs were developed.
The video's primary complaint about SPIAs (as close as I can tell) is that most are not inflation protected. But, the speaker has no problem with people putting 40% of their assets in non-COLA'd bonds. If I buy a 20 year bond today with a 3.5% coupon, I'm locking in 3.5% of my original purchase price for 20 years, with no inflation protection. And, I'll eventually get my purchase price back without any inflation adjustment.
He did not consider a portfolio that might be 60/40, where the 40 is split equally between bonds and a SPIA. He did not consider buying a CPI indexed SPIA. He did not discuss the insurance characteristics of a SPIA, or a deferred, zero-cash value annuity (aka longevity insurance). He didn't talk about the difference between buying at 60 vs. buying at 80.
All of those ideas get discussed here.
Well, to be fair, that's hard to discern from the way the poll is worded. 99% of the people here might be planning to buy an SPIA and the poll results could be just as they are now, provided the people didn't make their decision to buy them based on the recent market blip.Well, according to the poll results - you won't get too many takers here for your wonderful suggestions for other SPIA uses.