Wade Pfau on SPIAs

[Midpack]

If you have complete confidence in your AA/portfolio, and ability to maintain a 2.5%-3% WR from here on out, and don't desire to have that diversification "peace of mind" aspect (as well as potentially wanting to maximize the benefit for your estate), then I'd say a SPIA is probably not for you.

It's not a matter of confident in the long run either, no one can reliably predict that, see graph & link below re: how to determine when/if to annuitize.

For those who aren't anywhere near their annuitization hurdle, waiting is likely to be beneficial. It's unlikely waiting will be "a wash" with just buying an annuity now all else being equal, not with interest rates at historic lows - that's key right now.

http://www.schulmerichandassoc.com/Modern_Portfolio_Decumulation.pdf

 

[Nords]

It's not a matter of confident in the long run either, no one can reliably predict that, see graph & link below re: how to determine when/if to annuitize.

It's a little scary to contemplate an 85-year-old going out on their own to price annuities.

I guess the good news is that they get a great rate.

 

[jdw_fire]

No where near that simple for reasons that have been explained already. If you're 65 years old @ 6% WR, unfortunately you probably can't risk waiting to annuitiize at least somewhat.

If you'd like to explain the case for not waiting - for a 55 year old @ 2.5% WR with Soc Sec in the future and knowing interest rates will increase eventually (they are not going to decrease meaningfully next), it would be instructive.

it appears to me that you are back to the decision of buying an SPIA or not buying. as i said in an earlier post

getting out of the annuity isnt the point. you are getting into the annuity because you want to put the longevity risk off on someone else (the insurance company). this was only a discussion of timing (i.e. when to buy the annuity, not if); will delaying the purchase be more financially advantagous than buying immediately.

the discussion on BHs was not if (that was already decided) but when. your example has someone trying to decide if they are going to buy when they are only using a 2.5% WD rate, hence they have not yet decided to buy. the case was being made that once you have decided to buy an SPIA it doesnt really pay to wait for higher interest rates.

 

[Midpack]

it appears to me that you are back to the decision of buying an SPIA or not buying. as i said in an earlier post.

What? Not sure what that has to do with your earlier post (below) which is simply false as a general statement, and that's what I was replying to. Again, it can pay to wait if your WR is low enough (just one example, Otar's green zone if you're familiar), and that's without the additional incentive to wait due to current low interest rates.

i see you agree with the point that it is a "wash" and therefore it doesnt really pay to wait for higher interest rates to buy the SPIA.

Still waiting for you to reply to:

No where near that simple for reasons that have been explained already. If you're 65 years old @ 6% WR, unfortunately you probably can't risk waiting to annuitiize at least somewhat.

If you'd like to explain the case for not waiting - for a 55 year old @ 2.5% WR with Soc Sec in the future and knowing interest rates will increase eventually (they are not going to decrease meaningfully next), it would be instructive.

 

[Independent]

It's not a matter of confident in the long run either, no one can reliably predict that, see graph & link below re: how to determine when/if to annuitize.

For those who aren't anywhere near their annuitization hurdle, waiting is likely to be beneficial. It's unlikely waiting will be "a wash" with just buying an annuity now all else being equal, not with interest rates at historic lows - that's key right now.

http://www.schulmerichandassoc.com/Modern_Portfolio_Decumulation.pdf

Nice chart. I haven't seen it before, but this calculation is part of my retirement income spreadsheet.

I figure our assets don't have to last to 100 or 115 or whatever, just to the point where an annuity would take us (probably just one survivor) the rest of the way.

 

[Midpack]

Nice chart. I haven't seen it before, but this calculation is part of my retirement income spreadsheet.

I figure our assets don't have to last to 100 or 115 or whatever, just to the point where an annuity would take us (probably just one survivor) the rest of the way.

Our plan B as well...