A Floor with an Upside: The Best Strategy for Lifetime Income?

[MichaelB]

From an earlier thread I looked around for a published annuity rate that included inflation adjustment. This is the only one I found ELM Income Annuity

No idea how representative the rates are nor how secure the company is. My reaction was a joint annuity, with survivors benefits, and inflation protection, for a 60 year old couple, provides a yield of 3% compared with the S&P which yields 2%. The survivors benefit is reduced but the amount is not published so the real annuity yield is less. The S&P dividend has increased faster than inflation and is taxed (currently) at a lower rate. For a younger couple < age 60, a broader market dividend yield could be a better choice.

 

[Col. Klink]

Hello - have you looked at deferred annuities ? I bought my first one this year, as discussed in other threads. To me it looks like a very good deal.

I looked at the New York Life (deferred) "Guaranteed" Income Annuity a few months back. This is the product introduced last year in which you give them a lump sum of cash and a date at least five years in the future in which payments will begin. The spreadsheet that was provided to me by the sales guy indicated that the return of principal and interest would be like 6.8%. Doing a little math, it appeared that the real interest rate was about 3.2%. I did not pull the trigger because the sales guy was not candid about the fees being charged. However, now I notice that the product is available through Fidelity. Anyone have more experience with it? In theory, this does provide a means to buying a floor of income to supplement SS. I have no pension coming.

 

[W2R]

Apparently, even those Vanguard inflation protected annuities had (have?) a 10%/year cap on inflation protection. Here's a thread discussing them.

http://www.early-retirement.org/forums/f28/vanguard-inflation-indexed-annuities-18854.html

 

[haha]

Apparently, even those Vanguard inflation protected annuities had (have?) a 10%/year cap on inflation protection. Here's a thread discussing them.

http://www.early-retirement.org/forums/f28/vanguard-inflation-indexed-annuities-18854.html

Back at the time of this thread, I called Vanguard and got a quote or two. At least at that time, I had to speak to a rep, and she then followed up with me. The rates seemed reasonable and the 2 companies while not necessarily top drawer were likely OK. Nevertheless, few would have described this as an active, competitive market. At the time TIPS were available and what seem today to be fantastic yields, and there were some good stocks priced well around too, so I skipped the annuities and filed the topic away for my dotage.

I have not bothered to recheck, but I would imagine that if they still are offered, the terms would be horrendous, because of what has happened to interest rates, particularly TIPS.

Fixed annuities with low caps or just yearly bumps are IMO useless-essentially no better and in some ways worse than just buying a series of fixed annuities. My criticism is not of fixed annuities per se, but of this article setting up a very high hurdle-absolutely secure inflation protected income, and then trying to sell ordinary fixed annuities to fill the gap.

Ha