Annuity Tax/penalty Question

[rs0460a]

If you were only interested in an 11 year gap, then I can't see why anyone would actually purchase an annuity. I'm planning on having one in place to bridge to age 70 for SS.

I'm a bit confused - you say you are going to get an SPIA as "gap insurance" for SS at age 70. Yet that is the reason I got it? What's the difference?

That was my primary reason for the SPIA, however since I know (and planned) that the SPIA would have less purchasing period in the remaining guarantee period (for us, from age 71 to age 87) we were just looking at it as "extra fun income", not necessarily required (easy enough to plug into FIRECalc as a reduction in income at a specified plan - and we're still at a 100% sucess rate even without the annuity income after age 70).

- Ron

 

[Peter L]

An SPIA purpose is to produce a guaranteed stream of money for life or for life plus a period certain. Outliving you mortality table (LE) is not the issue because you can guarantee the stream for a number of years or elect a guaranteed cash refund amount. They don't go away when you die unless you choose that option.
The life expectancy (LE) for a 59 year old non smoker is 86. That's 27 years to his LE. By year ~14 the SPIA will produce slightly more than the original premium. At his LE ~ twice the original premium. At 100 ~ three times.

Use the annuity for the guarantee in part you portfolio. Address inflation and growth with the other part.

How do you ladder out CD's for 30 years?

 

[2B]

I'm a bit confused - you say you are going to get an SPIA as "gap insurance" for SS at age 70. Yet that is the reason I got it? What's the difference?

- Ron

I plan to self-annuitize with laddered CDs or corporates.

If you are really wanting to "go long" there are 30 year corporates and US bonds. After that, there are corporate preferreds that never mature. That somewhat goes against the original idea of a ladder but when you are looking out past 30 years you have fully entered the world of fortune telling.

If you have the guts, highly rated preferreds are paying around 8% which is a much higher payout than a 50-something will get as an annuity. If you ever want a pile of cash, the preferreds can be sold. The annuity can't.