More on annuities: Annuity tables

[friar1610]

I own a Vanguard Variable Annuity which I have not yet annuitized and don't plan to for the foreseeable future. (My current thinking is that I will hold onto it and assuming I predecease my wife, ownership will revert to her and then she can annuitize it to replace pension income which will go to the grave with me.)

But I ran a few numbers recently from the Annuity Tables at the back of the annuity contract. These tables have factors which you multiply times the value of the annuity at the time of annuitization to arrive at the guaranteed monthly payment under a variety of scenarios (single life, joint and last survivor, designated period, etc.) I assume all annuity contracts have similar tables.

So my questions are two for anyone who knows more about annuities than I do:
- the tables say they are "Guaranteed Minimum Amount of Monthly payment for Each $1000 Applied. Are there ever cases where the insurance company pays more than the guaranteed minimum amount? (I'm thinking of cases where you happen to annuitize during a period when interest rates are extraordinarily high.)
- is there any way to to do a head-to-head comparison of the Annuity Tables for various annuities from different providers? For example, if I wanted to see if I would get a bigger monthly payout by transferring the annuity to TiAA-CREF, Fidelity or someone else, is that information readily available anywhere? Or do you have to have a copy of the annuity contract in hand to get access to the tables. (I tried to find them on the TIAA-CREF web site but was unsuccessful; maybe they're there and I just couldn't find them.)

In any event, if anyone has answers to those two questions it would be appreciated.

 

[pb4uski]

I believe that you would get higher of the insurer's then current payout rate for a SPIA with the benefit you are choosing or the guaranteed minimum amount. Or another way to think of it is that you would get the higher of the guaranteed minimum benefit or the benefit you would get if took the value as a lump sum and then turned around and bought a SPIA at the insurer's then current SPIA payout rates.

IIRC, in reality that the guaranteed minimum rate rarely comes into play, but the current low interest rate environment may have changed that.

No idea on how to get guaranteed minimum payouts from different annuity providers, but I suspect it is a non-issue as in most cases as the current SPIA rate generally trumps the guaranteed minimum rate.

 

[friar1610]

I believe that you would get higher of the insurer's then current payout rate for a SPIA with the benefit you are choosing or the guaranteed minimum amount. Or another way to think of it is that you would get the higher of the guaranteed minimum benefit or the benefit you would get if took the value as a lump sum and then turned around and bought a SPIA at the insurer's then current SPIA payout rates.

IIRC, in reality that the guaranteed minimum rate rarely comes into play, but the current low interest rate environment may have changed that.

No idea on how to get guaranteed minimum payouts from different annuity providers, but I suspect it is a non-issue as in most cases as the current SPIA rate generally trumps the guaranteed minimum rate.

I just need to be sure I understand one point. If I found an SPIA that had more favorable payout rates than would be available by annuitizing the VA, I could do a 1035 transfer from the VA to the SPIA. Then the SPIA would start paying out immediately at whatever rate they had guaranteed. Is that correct?

Thanks.

 

[pb4uski]

I just need to be sure I understand one point. If I found an SPIA that had more favorable payout rates than would be available by annuitizing the VA, I could do a 1035 transfer from the VA to the SPIA. Then the SPIA would start paying out immediately at whatever rate they had guaranteed. Is that correct?

Thanks.

I believe so. The thing to check is whether the value that would be available to you if you annuitize the VA is the same as what would be available if you did a 1035 exchange and then bought a SPIA. (ie, there are no surrender charges that apply to the 1035 and that the VA doesn't have different values for annuitizing vs surrendering). Assuming that they are the same then what you wrote would be true.

I would verify with the provider before proceeding.