Annuity options

[cloud9nd]

Hello,

I was looking at the possibility of putting money into an annuity based on a calc I saw.

It would be non qualified, for sure. Used for retirement payments.

My issue is this, and maybe I'm dreaming...

1. I can't find one, or at least nothing 20 years term and do I need an advisor or broker for one? (20 years fits for my situation)

2. Does it have to be life insurance related?

3. Is there anything I can find where I roll my money into it and receive monthly / weekly payments with interest paid back all together for 20 years ?

4. No advisor needed to buy it and no charges for it. Just income tax on the interest?

It seems like it's possible based on some info, but no luck finding anything by Google.

Any help or input is appreciated. Thanks.

 

[RetiredHappy]

1. immediateannuities.com You should be able to get all estimates and quotes on the website, including 20 years term. I bought 2 through them after running quotes on the site. However, the some states levy something like a 3% tax on non-qualified funds, which makes it not viable.

2. It is not life insurance related.

3. You may be thinking of deferred income annuities?

4. With non-qualified money, you pay tax on the amount above what you have paid in. The broker who sells the annuity to you gets a commission which is already accounted for in the payout, so you don't see the fee. It is typically a one-off 7% commission.

 

[cloud9nd]

1. immediateannuities.com You should be able to get all estimates and quotes on the website, including 20 years term. I bought 2 through them after running quotes on the site. However, the some states levy something like a 3% tax on non-qualified funds, which make it not viable.

2. It is not life insurance related.

3. You may be thinking of deferred income annuities?

4. With non-qualified money, you pay tax on the amount above what you have paid in. The broker who sells the annuity to you gets a commission which is already accounted for in the payout, so you don't see the fee. It is typically a one-off 7% commission.

That's getting me in a direction at least, thanks for that info!

Definitely immediate income, but man the fees and stuff. Ugh.

Is the 7% based on initial deposit or final amount after interest?

I was really hoping for something as simple as a CD but pays you out either by payments or rime with interest figured in the payments.

 

[RetiredHappy]

Deleted. Poor internet caused duplication.

 

[RetiredHappy]

That's getting me in a direction at least, thanks for that info!

Definitely immediate income, but man the fees and stuff. Ugh.

Is the 7% based on initial deposit or final amount after interest?

I was really hoping for something as simple as a CD but pays you out either by payments or rime with interest figured in the payments.

You don't even see it. Broker has to disclose the fees, it is paid to the broker directly by the insurer based on the the initial amount.

Annuities pay out monthly.

 

[Sunset]

Why do you want an annuity ?

Understand when they say an annuity pays X%, often they are using "special math" to make it sound a lot higher rate than it really is.

What calc did you see ?

 

[pb4uski]

That's getting me in a direction at least, thanks for that info!

Definitely immediate income, but man the fees and stuff. Ugh.

Is the 7% based on initial deposit or final amount after interest?

I was really hoping for something as simple as a CD but pays you out either by payments or rime with interest figured in the payments.

What you are seeking is a period-certain annuity for 20 years. They are very simple, you pay $x and the life insurer pays you $y per month for the next 20 years. If you die in the meantime the remaining payments go to your designated beneficiary or beneficiaries.

immediateannuities.com is a place to start.

The 7% is a payout rate and should not be confused with an interest rate. 7% would mean that a year's worth of payments divided by your initial single premium is 7%. Some of that is interest on your money and some is return of your money.

A 7% payout rate would mean that you are getting paid 3.57% interest rate over the 20 years.

=RATE(20*12,7/12,-100)*12 = 3.57%

 

[pb4uski]

Below is the amortization schedule for a 20-year period certain annuity bought for $120,000 in January 2024 paying $700/month (a 7% payout rate/3.57% interest rate).

It is the same as a 20-year mortgage amortization schedule except you are receiving payments rather than making payments.

https://www.bankrate.com/mortgages/amortization-calculator/

Date	Principal	Interest	Remaining balance
2024
February	$343.28	$357.00	$119,656.72
March	$344.30	$355.98	$119,312.43
April	$345.32	$354.95	$118,967.11
May	$346.35	$353.93	$118,620.76
June	$347.38	$352.90	$118,273.38
July	$348.41	$351.86	$117,924.97
August	$349.45	$350.83	$117,575.52
September	$350.49	$349.79	$117,225.03
October	$351.53	$348.74	$116,873.50
November	$352.58	$347.70	$116,520.92
December	$353.63	$346.65	$116,167.29
2025
January	$354.68	$345.60	$115,812.62
February	$355.73	$344.54	$115,456.88
March	$356.79	$343.48	$115,100.09
April	$357.85	$342.42	$114,742.24
May	$358.92	$341.36	$114,383.32
June	$359.99	$340.29	$114,023.33
July	$361.06	$339.22	$113,662.28
August	$362.13	$338.15	$113,300.15
September	$363.21	$337.07	$112,936.94
October	$364.29	$335.99	$112,572.65
November	$365.37	$334.90	$112,207.28
December	$366.46	$333.82	$111,840.82
2026
January	$367.55	$332.73	$111,473.27
February	$368.64	$331.63	$111,104.63
March	$369.74	$330.54	$110,734.89
April	$370.84	$329.44	$110,364.05
May	$371.94	$328.33	$109,992.11
June	$373.05	$327.23	$109,619.06
July	$374.16	$326.12	$109,244.90
August	$375.27	$325.00	$108,869.62
September	$376.39	$323.89	$108,493.24
October	$377.51	$322.77	$108,115.73
November	$378.63	$321.64	$107,737.10
December	$379.76	$320.52	$107,357.34
2027
January	$380.89	$319.39	$106,976.45
February	$382.02	$318.25	$106,594.43
March	$383.16	$317.12	$106,211.27
April	$384.30	$315.98	$105,826.97
May	$385.44	$314.84	$105,441.53
June	$386.59	$313.69	$105,054.95
July	$387.74	$312.54	$104,667.21
August	$388.89	$311.38	$104,278.32
September	$390.05	$310.23	$103,888.27
October	$391.21	$309.07	$103,497.06
November	$392.37	$307.90	$103,104.69
December	$393.54	$306.74	$102,711.15
2028
January	$394.71	$305.57	$102,316.44
February	$395.88	$304.39	$101,920.56
March	$397.06	$303.21	$101,523.49
April	$398.24	$302.03	$101,125.25
May	$399.43	$300.85	$100,725.82
June	$400.62	$299.66	$100,325.21
July	$401.81	$298.47	$99,923.40
August	$403.00	$297.27	$99,520.39
September	$404.20	$296.07	$99,116.19
October	$405.41	$294.87	$98,710.79
November	$406.61	$293.66	$98,304.18
December	$407.82	$292.45	$97,896.35
2029
January	$409.03	$291.24	$97,487.32
February	$410.25	$290.02	$97,077.07
March	$411.47	$288.80	$96,665.60
April	$412.70	$287.58	$96,252.90
May	$413.92	$286.35	$95,838.98
June	$415.15	$285.12	$95,423.82
July	$416.39	$283.89	$95,007.43
August	$417.63	$282.65	$94,589.81
September	$418.87	$281.40	$94,170.93
October	$420.12	$280.16	$93,750.82
November	$421.37	$278.91	$93,329.45
December	$422.62	$277.66	$92,906.83
2030
January	$423.88	$276.40	$92,482.95
February	$425.14	$275.14	$92,057.81
March	$426.40	$273.87	$91,631.41
April	$427.67	$272.60	$91,203.74
May	$428.94	$271.33	$90,774.79
June	$430.22	$270.06	$90,344.57
July	$431.50	$268.78	$89,913.07
August	$432.78	$267.49	$89,480.29
September	$434.07	$266.20	$89,046.21
October	$435.36	$264.91	$88,610.85
November	$436.66	$263.62	$88,174.19
December	$437.96	$262.32	$87,736.23
2031
January	$439.26	$261.02	$87,296.97
February	$440.57	$259.71	$86,856.41
March	$441.88	$258.40	$86,414.53
April	$443.19	$257.08	$85,971.34
May	$444.51	$255.76	$85,526.82
June	$445.83	$254.44	$85,080.99
July	$447.16	$253.12	$84,633.83
August	$448.49	$251.79	$84,185.34
September	$449.82	$250.45	$83,735.52
October	$451.16	$249.11	$83,284.35
November	$452.50	$247.77	$82,831.85
December	$453.85	$246.42	$82,378.00
2032
January	$455.20	$245.07	$81,922.80
February	$456.56	$243.72	$81,466.24
March	$457.91	$242.36	$81,008.33
April	$459.28	$241.00	$80,549.05
May	$460.64	$239.63	$80,088.41
June	$462.01	$238.26	$79,626.40
July	$463.39	$236.89	$79,163.01
August	$464.77	$235.51	$78,698.24
September	$466.15	$234.13	$78,232.09
October	$467.54	$232.74	$77,764.56
November	$468.93	$231.35	$77,295.63
December	$470.32	$229.95	$76,825.31
2033
January	$471.72	$228.56	$76,353.59
February	$473.12	$227.15	$75,880.47
March	$474.53	$225.74	$75,405.94
April	$475.94	$224.33	$74,929.99
May	$477.36	$222.92	$74,452.63
June	$478.78	$221.50	$73,973.85
July	$480.20	$220.07	$73,493.65
August	$481.63	$218.64	$73,012.02
September	$483.07	$217.21	$72,528.95
October	$484.50	$215.77	$72,044.45
November	$485.94	$214.33	$71,558.51
December	$487.39	$212.89	$71,071.12
2034
January	$488.84	$211.44	$70,582.28
February	$490.29	$209.98	$70,091.99
March	$491.75	$208.52	$69,600.23
April	$493.22	$207.06	$69,107.02
May	$494.68	$205.59	$68,612.34
June	$496.15	$204.12	$68,116.18
July	$497.63	$202.65	$67,618.55
August	$499.11	$201.17	$67,119.44
September	$500.60	$199.68	$66,618.85
October	$502.08	$198.19	$66,116.76
November	$503.58	$196.70	$65,613.18
December	$505.08	$195.20	$65,108.11
2035
January	$506.58	$193.70	$64,601.53
February	$508.09	$192.19	$64,093.44
March	$509.60	$190.68	$63,583.84
April	$511.11	$189.16	$63,072.73
May	$512.63	$187.64	$62,560.09
June	$514.16	$186.12	$62,045.93
July	$515.69	$184.59	$61,530.24
August	$517.22	$183.05	$61,013.02
September	$518.76	$181.51	$60,494.26
October	$520.31	$179.97	$59,973.95
November	$521.85	$178.42	$59,452.10
December	$523.41	$176.87	$58,928.69
2036
January	$524.96	$175.31	$58,403.73
February	$526.52	$173.75	$57,877.21
March	$528.09	$172.18	$57,349.12
April	$529.66	$170.61	$56,819.45
May	$531.24	$169.04	$56,288.22
June	$532.82	$167.46	$55,755.40
July	$534.40	$165.87	$55,220.99
August	$535.99	$164.28	$54,685.00
September	$537.59	$162.69	$54,147.41
October	$539.19	$161.09	$53,608.23
November	$540.79	$159.48	$53,067.43
December	$542.40	$157.88	$52,525.03
2037
January	$544.01	$156.26	$51,981.02
February	$545.63	$154.64	$51,435.39
March	$547.26	$153.02	$50,888.13
April	$548.88	$151.39	$50,339.25
May	$550.52	$149.76	$49,788.73
June	$552.15	$148.12	$49,236.58
July	$553.80	$146.48	$48,682.78
August	$555.44	$144.83	$48,127.34
September	$557.10	$143.18	$47,570.24
October	$558.75	$141.52	$47,011.48
November	$560.42	$139.86	$46,451.07
December	$562.08	$138.19	$45,888.98
2038
January	$563.76	$136.52	$45,325.23
February	$565.43	$134.84	$44,759.80
March	$567.12	$133.16	$44,192.68
April	$568.80	$131.47	$43,623.88
May	$570.49	$129.78	$43,053.38
June	$572.19	$128.08	$42,481.19
July	$573.89	$126.38	$41,907.30
August	$575.60	$124.67	$41,331.69
September	$577.31	$122.96	$40,754.38
October	$579.03	$121.24	$40,175.35
November	$580.75	$119.52	$39,594.59
December	$582.48	$117.79	$39,012.11
2039
January	$584.21	$116.06	$38,427.90
February	$585.95	$114.32	$37,841.95
March	$587.70	$112.58	$37,254.25
April	$589.44	$110.83	$36,664.80
May	$591.20	$109.08	$36,073.61
June	$592.96	$107.32	$35,480.65
July	$594.72	$105.55	$34,885.93
August	$596.49	$103.79	$34,289.44
September	$598.26	$102.01	$33,691.17
October	$600.04	$100.23	$33,091.13
November	$601.83	$98.45	$32,489.30
December	$603.62	$96.66	$31,885.68
2040
January	$605.42	$94.86	$31,280.26
February	$607.22	$93.06	$30,673.05
March	$609.02	$91.25	$30,064.02
April	$610.84	$89.44	$29,453.19
May	$612.65	$87.62	$28,840.54
June	$614.48	$85.80	$28,226.06
July	$616.30	$83.97	$27,609.76
August	$618.14	$82.14	$26,991.62
September	$619.98	$80.30	$26,371.64
October	$621.82	$78.46	$25,749.82
November	$623.67	$76.61	$25,126.15
December	$625.53	$74.75	$24,500.63
2041
January	$627.39	$72.89	$23,873.24
February	$629.25	$71.02	$23,243.99
March	$631.12	$69.15	$22,612.86
April	$633.00	$67.27	$21,979.86
May	$634.89	$65.39	$21,344.98
June	$636.77	$63.50	$20,708.20
July	$638.67	$61.61	$20,069.53
August	$640.57	$59.71	$19,428.96
September	$642.47	$57.80	$18,786.49
October	$644.39	$55.89	$18,142.10
November	$646.30	$53.97	$17,495.80
December	$648.23	$52.05	$16,847.57
2042
January	$650.15	$50.12	$16,197.42
February	$652.09	$48.19	$15,545.33
March	$654.03	$46.25	$14,891.30
April	$655.97	$44.30	$14,235.33
May	$657.93	$42.35	$13,577.40
June	$659.88	$40.39	$12,917.52
July	$661.85	$38.43	$12,255.67
August	$663.82	$36.46	$11,591.86
September	$665.79	$34.49	$10,926.07
October	$667.77	$32.51	$10,258.30
November	$669.76	$30.52	$9,588.54
December	$671.75	$28.53	$8,916.79
2043
January	$673.75	$26.53	$8,243.04
February	$675.75	$24.52	$7,567.29
March	$677.76	$22.51	$6,889.53
April	$679.78	$20.50	$6,209.75
May	$681.80	$18.47	$5,527.94
June	$683.83	$16.45	$4,844.11
July	$685.86	$14.41	$4,158.25
August	$687.91	$12.37	$3,470.34
September	$689.95	$10.32	$2,780.39
October	$692.00	$8.27	$2,088.39
November	$694.06	$6.21	$1,394.33
December	$696.13	$4.15	$698.20
2044
January	$698.20	$2.08	$0.00

 

[GhostofTomJoad]

Annuity. Yikes. The money stops being your own, and becomes THEIRS. The only conceivable way I'd use an annuity is a Deferred Charitable Annuity. I can get it right through my denomination.

 

[DrRoy]

Annuities are a good deal for the issuer and the seller.

 

[sengsational]

It seems to me, if the IRR is really 3 point something, you could build a bond ladder that would be much better. You live off the bond payments and occasionally not roll one so you get more than just the interest payments. You could even have a separate account that had an equal monthly transfer. Admittedly, this isn't a simple as an annuity, but a much better IRR and safer, because you don't need a single company to survive.

 

[LateToFIRE]

Annuity. Yikes. The money stops being your own, and becomes THEIRS. The only conceivable way I'd use an annuity is a Deferred Charitable Annuity. I can get it right through my denomination.

I could see where maybe someone doesn't want assets held in their name, for example someone who might be getting means-tested benefits like Medicaid, or someone looking to shelter assets from judgements. I've got some shady relatives who'd fall into this category.

 

[ShokWaveRider]

SPIAs (Not Variable) have no fees. Like MYGAs the insurance company pays the broker a set fee. As one gets older a SPIA becomes more viable. Do not listen to the anti-annuity crowd, we are considering a SPIA for some IRA funds. We have so much in them that I do not want to manage them any longer. Taking a portion and putting it into a lock and leave SPIA and just spending the income is very appealing and is becoming more interesting as I approach RMD age.

 

[pb4uski]

It seems to me, if the IRR is really 3 point something, you could build a bond ladder that would be much better. You live off the bond payments and occasionally not roll one so you get more than just the interest payments. You could even have a separate account that had an equal monthly transfer. Admittedly, this isn't a simple as an annuity, but a much better IRR and safer, because you don't need a single company to survive.

Yes, with some negligible work to build and maintain a ladder, one could easily beat 3.57% and increase your monthly payments more than a 7% payout.

 

[ShokWaveRider]

Yes, with some negligible work to build and maintain a ladder, one could easily beat 3.57% and increase your monthly payments more than a 7% payout.

See bolded, that is not what I want to do as I get older. lock and leave is a lot more appealing.

 

[pb4uski]

Annuity. Yikes. The money stops being your own, and becomes THEIRS. The only conceivable way I'd use an annuity is a Deferred Charitable Annuity. I can get it right through my denomination.

A bit of an over reaction. You trade a lump sum of $x paid out now for $y per month for 20 years... so you trade your money for the right to receive monthly payments for a stated period of time.

 

[cloud9nd]

I could see where maybe someone doesn't want assets held in their name, for example someone who might be getting means-tested benefits like Medicaid, or someone looking to shelter assets from judgements. I've got some shady relatives who'd fall into this category.

To be clear, there is no such case here.

It's nothing more than consolidation.

 

[cloud9nd]

What you are seeking is a period-certain annuity for 20 years. They are very simple, you pay $x and the life insurer pays you $y per month for the next 20 years. If you die in the meantime the remaining payments go to your designated beneficiary or beneficiaries.

immediateannuities.com is a place to start.

The 7% is a payout rate and should not be confused with an interest rate. 7% would mean that a year's worth of payments divided by your initial single premium is 7%. Some of that is interest on your money and some is return of your money.
A 7% payout rate would mean that you are getting paid 3.57% interest rate over the 20 years.

=RATE(20*12,7/12,-100)*12 = 3.57%

Thank you for this and the schedule.

I figure if I give someone a lump of money upfront and they give me an offered interest rate I can agree to over the period of 20 years, giving up my freedom of use and possible earnings they can make however much they want off it, so long as I'm satisfied.

I'll consider 5-6% for 20 years, but not paying commission etc.

I might be dreaming, but it seems fair. Maybe they used to do things that made more sense idk.

This is the calc I used.

Obviously very simple and inaccurate. Also exactly what I'd be looking for.

https://www.calculator.net/annuity-payout-calculator.html?cstartingprinciple=100%2C000&cinterestrate=6&cyearstopayout=20&camounttopayout=2%2C000&cpayfrequency=monthly&ctype=fixlength&x=Calculate#annuity-result

 

[Chuckanut]

I don’t have a real annuity, but I understand that they can be useful for some people. The trick is to keep the annuity as simple as possible and avoid the ones with ongoing fees that reward everybody but the purchaser.

There are people who if they inherited $500,000 today, would be hard pressed to tell you where it all went a decade from now. Money slips through their fingers like water. Hot water. Then there are others who need a secure base to feel confident enough to do riskier things like buy a total market index fund. There is a psychology to investing that cannot be overlooked in the real world.

Note: I do have a pseudo annuity called taking SS at 70. It was the best deal I could find in the area of a reliable income stream that is COLA’d.

 

[pb4uski]

Thank you for this and the schedule.

I figure if I give someone a lump of money upfront and they give me an offered interest rate I can agree to over the period of 20 years, giving up my freedom of use and possible earnings they can make however much they want off it, so long as I'm satisfied.

I'll consider 5-6% for 20 years, but not paying commission etc.

I might be dreaming, but it seems fair. Maybe they used to do things that made more sense idk.

This is the calc I used.

Obviously very simple and inaccurate. Also exactly what I'd be looking for.

https://www.calculator.net/annuity-...ly&ctype=fixlength&x=Calculate#annuity-result

Don't worry about commissions... they are included in the payout.

5-6% interest rate for 20 years is unrealistic unless you're willing to take some risk. The 1, 5 and 20 year Treasury are 4.88%, 4.06% and 4.52% so if you created 20 year Treasury ladder you would be in that 4-5% range.

If 5-6% is your target what you could do is put together a portfolio of 20 high quality investment grade bonds maturing each year over the next 20 years to provide the cash flow that you want. That would yield 5-6% at current rates.

 

[Sunset]

Thank you for this and the schedule.

I figure if I give someone a lump of money upfront and they give me an offered interest rate I can agree to over the period of 20 years, giving up my freedom of use and possible earnings they can make however much they want off it, so long as I'm satisfied.

I'll consider 5-6% for 20 years, but not paying commission etc.

I might be dreaming, but it seems fair. Maybe they used to do things that made more sense idk.

This is the calc I used.

Obviously very simple and inaccurate. Also exactly what I'd be looking for.

https://www.calculator.net/annuity-...ly&ctype=fixlength&x=Calculate#annuity-result

Problem I see with 5-6% you want, is you are earning a tiny amount of interest on the money, probably 3% or less , the rest monthly is just your own money coming back.

You could buy 20 & 30 year treasuries and they will pay well over 4% interest (no State tax either) and you keep the principal. Buy 50 of them at $2,000 each and you could cash two every year if needed.

 

[ShokWaveRider]

Problem I see with 5-6% you want, is you are earning a tiny amount of interest on the money, probably 3% or less , the rest monthly is just your own money coming back.

You could buy 20 & 30 year treasuries and they will pay well over 4% interest (no State tax either) and you keep the principal. Buy 50 of them at $2,000 each and you could cash two every year if needed.

Use this to calculate the interest.

https://iqcalculators.com/calculator/annuity-rate-of-return-calculator/

 

[GenXguy]

I'm considering an annuity to reduce my MAGI income for about 7 years to keep under an ACA MAGI income threshold. I thought if I could take $100,000 from maturing CDs, sold TIPS, and cash/MM funds and start a deferred annuity which starts paying back in about 8 years and pays over 5 years after I'm no longer using the ACA, this would accomplish what I needed.

Buying BRK.b which doesn't pay dividends was another thought.

 

[cloud9nd]

Don't worry about commissions... they are included in the payout.

5-6% interest rate for 20 years is unrealistic unless you're willing to take some risk. The 1, 5 and 20 year Treasury are 4.88%, 4.06% and 4.52% so if you created 20 year Treasury ladder you would be in that 4-5% range.

If 5-6% is your target what you could do is put together a portfolio of 20 high quality investment grade bonds maturing each year over the next 20 years to provide the cash flow that you want. That would yield 5-6% at current rates.

Amazing info!

Thank you, I'll have to look into these options.

 

[pb4uski]

Your broker's bond desk should be able to provide a list of bonds to buy... just tell them that you want a 20 year ladder of investment grade corporate bonds with $x maturing each year for the next 20 years.

You may be able to get 5-6% with "highly rated" corporate bonds (BBB+ or better by S&P)... if not, you can shift to investment grade (BBB- or better by S&P) and should easily get 5-6%.