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Who has no regrets about their fixed immediate annuity?
Old 09-20-2018, 10:59 AM   #1
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Who has no regrets about their fixed immediate annuity?

I know that many people (except those selling them) are opposed to annuities. In this instance, I am talking about a simple fixed immediate annuity. The standard response I hear is ďyou can achieve anything that an annuity can with other investment vehicles at lower fees and more flexibility.Ē And, I get it. Is there anyone out there that purchased a fixed immediate annuity in retirement and is quite happy that they did? If you are, may I ask the reason why you are glad you bought it? As I am sure you gathered, my wife and I are considering one and are looking for positive feedback.
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Old 09-20-2018, 11:16 AM   #2
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Old 09-20-2018, 11:31 AM   #3
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Can't give you positive feedback.
I'm trying to figure out the gobbledegook (I have a BSEE with minors in math and computer science, so I speak it fluently) in my dad's annuity yesterday. Absolute BS. The crook who sold it to him should be shot.
Figuring in the surrender charges and returning the "bonus" they "gave" him (but they want back) it looks like it would still make sense to roll it into 5 year CDs... break even point is only 3.12 years. (If I apply the "bonus" to the surrender charge, the break even point is tomorrow).

There might be a good annuity out there, but I haven't seen one yet.
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Old 09-20-2018, 11:37 AM   #4
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I have a product that's similar from the 10,000 foot view. It's notes with UHaul.

The risk with these notes is that if the company were to go bankrupt, I could/would lose my investment. As I'm fairly confident in their continued existence, I'm quite content with my investment and their predetermined payments/returns.

The biggest downside is that the interest is fully taxed like regular income.

My other main bucket of investments (real estate) is so variable that I wanted to have something 'fixed' as well.
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Old 09-20-2018, 11:47 AM   #5
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I have a product that's similar from the 10,000 foot view. It's notes with UHaul.
I have looked at the U-Haul notes a number of times over the past year. They are solid in that they are completely asset-backed, whether it be by real estate, trailers, or dollies. U-Haul is also a very strong company. One "feature" which makes them different from normal fixed income vehicles is that the note is amortized in the same way a borrower pays back a mortgage. Each payment includes part principal as well as interest on the remaining balance. Some folks may not like that, but I think there's nothing wrong with that.

My main concern about jumping in has been the spread to other no risk fixed income instruments. I don't see enough of a premium being paid to make it worth doing at this time - they need to raise their rates on new notes. That being said, the fact that the payments amortize is a benefit in that it returns the principal over time, freeing it up to be reinvested at higher rates, whether with U-Haul or elsewhere.

In any case, it is an alternative which I'd put on par with a very highly rated corporate note/bond.
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Old 09-20-2018, 12:25 PM   #6
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I know that many people (except those selling them) are opposed to annuities. In this instance, I am talking about a simple fixed immediate annuity. The standard response I hear is “you can achieve anything that an annuity can with other investment vehicles at lower fees and more flexibility.” And, I get it. Is there anyone out there that purchased a fixed immediate annuity in retirement and is quite happy that they did? If you are, may I ask the reason why you are glad you bought it? As I am sure you gathered, my wife and I are considering one and are looking for positive feedback.
I bought 100K worth in 2007 that paid 4 percent on original principal and increases annually by 4 percent. I had been considering an amount between 100K-300K and after many of the negative comments here let that influence me to stay on the low end. As an alternative fixed investment it was the best one I could have made. I had thought inflation would be very muted from 2007 on so that a 4 % step up would do much better than the inflation annuities which typically had a limit of 10 percent on an annual year anyway. It has worked out far better than I ever could have imagined. Interest rates have dropped since then though and are now going up, so it is not as ideal a time to implement the same strategy 11 years later that I did back then. The advantage of the annuity is if I pass before my wife she does not have to administer a plan she is not financially capable of doing.
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Old 09-20-2018, 01:13 PM   #7
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I am somewhat interested in increasing my guaranteed income by using an annuity for a portion of my retirement savings. I've come to rely on the seller of the product (e.g. Fidelity, Vanguard) or should I say distributor to protect me from the riskier and more exotic products.

The thing I keep running into is that the term "annuity" is so generic that it covers an immense range of products. A "simple fixed immediate annuity" as you say sounds
like the type I would be interested in. I just had this conversation with BIL and he did his homework but still couldn't provide too many details of the product he purchased. When he said he was "fedup" with the market and the thought of losing 10% would keep him up at night, I realized a guaranteed income product was a good fit for him. I just hope he didn't go for anything exotic.
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Old 09-20-2018, 01:32 PM   #8
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I am somewhat interested in increasing my guaranteed income by using an annuity for a portion of my retirement savings. I've come to rely on the seller of the product (e.g. Fidelity, Vanguard) or should I say distributor to protect me from the riskier and more exotic products.

The thing I keep running into is that the term "annuity" is so generic that it covers an immense range of products. A "simple fixed immediate annuity" as you say sounds
like the type I would be interested in. I just had this conversation with BIL and he did his homework but still couldn't provide too many details of the product he purchased. When he said he was "fedup" with the market and the thought of losing 10% would keep him up at night, I realized a guaranteed income product was a good fit for him. I just hope he didn't go for anything exotic.
go to: immediateannuities.com -- it helps you comparison shop.
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Old 09-20-2018, 02:23 PM   #9
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I don't have one, but I'm considering one for when I do retire. I like the idea of a certain guaranteed amount of income that is enough to cover basic expenses. I realize I could probably get enough income from other investments, but the fee would be the price of insurance that would help me sleep at night no matter what the markets do. I also think that should I lose cognitive ability when I get older an annuity one way to protect myself from scams.


If i had kids I might worry more about preserving principal for them, but I'd only consider a fixed annuity for a portion of my 401(k) , so I'd still have other assets for my own financial flexibility or an inheritance. I've also thought of a QLAC as a sort of long term care insurance or inflation protetion.
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Old 09-20-2018, 02:43 PM   #10
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I worked in an IT shop for a fortune 500 annuity org. Nothing about the logic behind their products made me feel comfortable, in fact the name of the game seemed to be deception and confusion, with some clever marketing.


I laughed when none of my peer's were able to answer a question once...our boss was trying to do some math, and asked what the max 401k contribution limit was for the year...


Nobody, and I mean nobody, besides me (the contractor) knew the answer.
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Old 09-20-2018, 03:07 PM   #11
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I worked in the industry in finance for 25 years.... for a mid-size insurer for 12 years and then as a big 4 consultant with most of the big companies as clients. IMO, fixed annuities are an ok product but I think you can do just as well with a bond or CD ladder.

Life contingent products (like a SPIA for life) are ok if that is what you want.... if I were to buy one of those I would lean towards those with a refund feature in case I was hit by a beer truck the next day.

I wouldn't go near any variable or index annuity and if I did buy an annuity I would stick to well rated companies with good reputations... if you stay their then IMO credit risk is negligible.

The best deal in annuities is from the federal government.... delaying SS... payout rates are slightly better than fixed rate annuities at age 70 and there is a COLA on top of that... but no refund feature and some haircut risk.
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Old 09-20-2018, 03:11 PM   #12
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No regrets for me. Now, I wouldn't put 100% of my money in one but having a portion offers peace of mind. Yeah, I know might have better returns invested. But I'm at peace with my decision .
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Old 09-20-2018, 03:33 PM   #13
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go to: immediateannuities.com -- it helps you comparison shop.


+1. Great site. I comparison shopped there along with Fido and VG when I was evaluating lump sum vs annuity. It seems like the products that an individual would find on a site like that or very safe and practical but if you ask an annuity salesperson they always offer something with higher costs to cover their commission. Iím not saying itís wrong but it can be expensive.
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Old 09-20-2018, 05:45 PM   #14
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Download the book...Why I love annuities and so should you. Great read.

I bought a 400k NY Life Clear Income single premium annuity a few years ago. Itís a part of my total retirement income stream plan. I like simplicity. I donít want to be trying things on my own, switching around funds, cdís, bonds....ugh. The break even point to get my $400k back is age 82. My wifeís mother, aunt, and grandmother all lived to 99. So any dime we collect after age 82 is their money.

I know all the ......but the market could go way up.......and I say the market could also go way down! This way, I sleep well at night. As I said, itís one part of my plan.
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Old 09-20-2018, 06:03 PM   #15
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... a simple fixed immediate annuity. ... my wife and I are considering one and are looking for positive feedback.
Just remember that there is no such thing as a fixed annuity. Inflation eats away its value beginning the day you buy it. 10 years of 2.5% cuts its buying power to 77%. 4% inflation, not impossible, you lose one third of the buying power. Oh, you were planning to live 20 years? You lose 40% at 2.5% and over half (56%) at 4%.

I'm not arguing pro or con, just pointing out that the secure-sounding word "fixed"can create a false sense of safety.

TIPS for me.
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Old 09-20-2018, 06:15 PM   #16
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Just remember that there is no such thing as a fixed annuity. Inflation eats away its value beginning the day you buy it. 10 years of 2.5% cuts its buying power to 77%. 4% inflation, not impossible, you lose one third of the buying power. Oh, you were planning to live 20 years? You lose 40% at 2.5% and over half (56%) at 4%.

I'm not arguing pro or con, just pointing out that the secure-sounding word "fixed"can create a false sense of safety.

TIPS for me.


The FIXED word isnít a trick. The monthly payments are a FIXED amount. Not misleading at all. So you are incorrect, there is a such thing as a Fixed annuity. Has nothing to do with inflation nor do any suggest that.
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Old 09-20-2018, 06:30 PM   #17
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Annuities are no more of a risk then a pension plan. Everything is gamble and IMO if you don't have the whole farm tied up in an annuity or a pension from the company you worked for should be fine.

I have a very small one (annuity) and a small % of my portfolio and I'm guaranteed never to go below 4% and the growth of it has been very nice at a 8% growth per year from inception. There is a cost to pay for both a pension and an annuity there is no questions about that.

I believe what fits YOU, you should do. Pensions don't fit everyone either a mix of tools in the bag is a good thing IMO.

Good luck
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Old 09-20-2018, 07:20 PM   #18
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Can't give you positive feedback.
I'm trying to figure out the gobbledegook (I have a BSEE with minors in math and computer science, so I speak it fluently) in my dad's annuity yesterday. Absolute BS. The crook who sold it to him should be shot.
Figuring in the surrender charges and returning the "bonus" they "gave" him (but they want back) it looks like it would still make sense to roll it into 5 year CDs... break even point is only 3.12 years. (If I apply the "bonus" to the surrender charge, the break even point is tomorrow).

There might be a good annuity out there, but I haven't seen one yet.
The OP said

"I am talking about a simple fixed immediate annuity."

You're talking about an entirely different animal. A simple SPIA would have no surrender charges because it has no surrender value.
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Old 09-20-2018, 07:34 PM   #19
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The best deal in annuities is from the federal government.... delaying SS... payout rates are slightly better than fixed rate annuities at age 70 and there is a COLA on top of that... but no refund feature and some haircut risk.
+1

I have nothing against simple immediate annuities. They are easy to understand and easy to comparison shop on the internet.

That said, deferring SS is a better financial deal in 2018. That provided all the annuity I wanted.

-----

When I was w*rking, I was employed by one of the first (maybe the first) company to market a CPI-indexed immediate annuity. I thought it was an excellent product. But, it needed TIPS coupons of 3% to have a chance in the market, and they went away a long time ago.
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Old 09-20-2018, 07:55 PM   #20
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Very happy with mine. ER'd at 52 and needed an income stream for expenses until a pension and SS kicked in and most of my savings were in tax deferred accounts. Could have done a 72t with my retirement account but liked the idea of a guaranteed steady stream coming in for life. Rates were higher when I started mine, would probably get about 20% less on a SPIA today at the same purchase amount and age. Should get my principle back when I turn 68. I used about 25% of my savings to fund the SPIA, I wouldn't recommend going much higher than that.
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