Here's some info on SPIA's (for whomever is writing about it):
Money Magazine, Retirement Guide. Income plan - Sep. 12, 2006
And of course Bob's work, referenced here:
Immediate Annuities in Retirement
Am I an expert (on SPIA's)? Nope. All I have to offer is that I have one, and it works in my (and my wife's) situation.
I'll repeat myself (again) but it seems like "youse guys" are looking for input on at least one type of annuity, so here it goes:
Age: me - 60, wife - 60
Retired: me - yes, wife ("still pondering") - planned for May of '07, but still not "emotionally ready" (even if financially so).
Concerned about retirement income? Not really. Currently have a 60/40 mix in our joint retirement portfolio.
Sources of income (current/future). Six sources:
- SS (she - 62, me - 70) - inflation indexed.
- VA disability (me - current) - inflation indexed.
- Defined Benefit "e.g. pension" (she - 65 - two separate, but small ones from former jobs) - not inflation indexed.
In a nutshell, we have/will have six sources of income coming "on-line" over the next 10 years. The largest, my SS is the last to start.
We all agree that a $1 today is worth more than a $1 tomorrow, a non-inflation indexed annuity (e.g. SPIA) is a poor vehicle for long-term income security, but it does have a place (as in our income plan) early-on in retirement. That's why the argument of loss of value over the long term means less to us. Remember, an SPIA is to ensure income when you are living, not when you are dead (as an insurance vehicle). Over the "long term", we still have our 90% remaining portfolio to hopefully beat inflation and build in the future.
How much did we invest? 10% of our joint retirement account value a/o June of '07. Due to the "fall" in the market, that "poor annuity" is doing better than the 90% (at the time) of the remainder of our investments.
BTW, you cannot put more than 50% of your retirement assets into an SPIA. That is part of the standard application process. The few folks that said "you can loose it all if you invest your entire portfolio value" are incorrect (but they are "passionate")
Another argument against any annuity is the statement "if you die, you lose your money". Yes you can, but there are ways around this "problem". My contract (after much review, and proposals from more than one company) has a guaranteed payout period. The total payments are equal to 2x what I paid. If I die before age 87, the payments continue to my wife till she turns 86.9. If we both pass before the 28 year period ends, the remainder payments (or lump sum - also stated in the contract) goes to our beneficiary.
As far as our estate, this happens to be a major sticking point in most folk's consideration of any annuity. That is, the idea that you can't "pass on" anything. In our case, that dosen't come into play, since our estate is going to charity.
Will we buy more (SPIA's) in the future? There is a good chance, as we age. I don't necessarily want to turn the reigns over to somebody else (no family to do it) and pay for it. You can see this same type of logic being used by Taylor on the Diehards Board. As he ages (currently in his 80's) he/wife are doing this.
As for my wife/me, our goal is to have enough income to live the life we currently do (which is good, thank you) without concerns for income for the rest of our lives. As I always say (to anybody that will listen) "I rather die with money, than live without it".....
Anyway, that's my "thoughts" on the subject to you Admins!
Have a good day...
- Ron