50, just retired, $1m cash

DrgLrd said:
Not, I assumed you mean if I deferred SS until age 70 the total yearly payouts would be more than what they would be if I don't defer (around $5000).
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Yes, I'll use an example. I'll assume that your primary insurance amount, the SS benefit that you will receive at your full retirement age is $4,000 and your full retirement age is 67. If you waint until 70, your benefit would be $4,960 (plus COLA adjustment which I'll ignore in the interest of simplicity).

So if you forgo 3 years of payments at $4,000/month that is $144,000 you will receive an additional $960/month for life. That $960/month is $11,520/year and is a 8% payout rate. According to immediateannuities.com, the payout rate for a SPIA for a 70 yo male in NY is 7.24%, so not only does SS have a better payout rate it also has the humongous cherry on top of it is a COLA adjusted benefit whereas the 7.24% is a fixed benefit.

Deferring SS is the best annuity value available.
 
pb4uski said:
Yes, I'll use an example. I'll assume that your primary insurance amount, the SS benefit that you will receive at your full retirement age is $4,000 and your full retirement age is 67. If you waint until 70, your benefit would be $4,960 (plus COLA adjustment which I'll ignore in the interest of simplicity).

So if you forgo 3 years of payments at $4,000/month that is $144,000 you will receive an additional $960/month for life. That $960/month is $11,520/year and is a 8% payout rate. According to immediateannuities.com, the payout rate for a SPIA for a 70 yo male in NY is 7.24%, so not only does SS have a better payout rate it also has the humongous cherry on top of it is a COLA adjusted benefit whereas the 7.24% is a fixed benefit.

Deferring SS is the best annuity value available.
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pb4uski, I believe you have read his amounts wrong. Not 4k/month. 4k/year.
 
Yes, you are correct, I forgot that his numbers are small because he has lived outside the US for so long.... but the same principle applies, just all the numbers would be divided by 12.
 
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Sunset said:
OP - Often folks first here ask "Do I have enough money to retire ?". Maybe you did and I missed it ? Did I also miss how much money you need to have each year for spending and taxes ?.
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I'm 50, retired now, monthly expenses around $2k to $2.5

SS is practically irrelevant, these are actual rounded numbers:
$3000 at 62, $4000 at 67, and $5000 per year at 70. No pension or retirement plan. $1m cash.

Need income for life.

I was fine getting 2% FDIC, but now that rates are low I need alternatives. Annuities seem like the best option. SPIA fixed income for life. Doesn't cover inflation, but there are options that do; deferred annuity, Index annuity, etc. First I need the security of lifetime income, then I can take what remains, say 20 or 30% and invest for potential growth. And what I'm looking for is how to do this, or if someone has done it.
 
DrgLrd said:
...I was fine getting 2% FDIC...
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While I think that 100% CDs is too conservative and future inflation, even if it is relatively low will still be a significant risk to your retirement plans... 2% FDIC is possible.. there are numerous 5-year CD offerings available today at more than 2%.

$2,500/month * 12 months * 45 years = $1,350,000... so you'll need some growth beyond inflation.

According to FIRECalc, if you have $1m and a 45 year time horizon (95-50) and $5k a year of SS starting in 2042 and 0% equities the most that you can safely spend with 95% success is $22,065/year or $1,840/month.

Change that AA to 30/70 and your annual safe spending at 95% success increases to $33,022/year or $2,752/month.

So add a modest amount of equities to your AA and you should be fine assuming that your spending is realistically that low. Does that include periodic car replacements and other large, lumpy costs?
 

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DrgLrd said:
I'm 50, retired now, monthly expenses around $2k to $2.5

SS is practically irrelevant, these are actual rounded numbers:
$3000 at 62, $4000 at 67, and $5000 per year at 70. No pension or retirement plan. $1m cash.

Need income for life.

I was fine getting 2% FDIC, but now that rates are low I need alternatives. Annuities seem like the best option. SPIA fixed income for life. Doesn't cover inflation, but there are options that do; deferred annuity, Index annuity, etc. First I need the security of lifetime income, then I can take what remains, say 20 or 30% and invest for potential growth. And what I'm looking for is how to do this, or if someone has done it.
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Well, I just priced a $2,000 / mo SPIA w/ 3% COLA and the quote was $850k with quite a few options. So maybe go with that as your floor, and decide what to do with the $150k. That could be a bridge of $750 / mo to get you to SS @ 70.


It will be tight, though. You don't really have enough to retire yet.
 
corn18 said:
I just priced a $2,000 / mo SPIA w/ 3% COLA and the quote was $850k with quite a few options. So maybe go with that as your floor, and decide what to do with the $150k.
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Where? I'll take a look thanks.


Another option is 10 year SPIA now with a 10 year deferred fixed annuity. Or 20 years.
 
pb4uski said:
$2,500/month * 12 months * 45 years = $1,350,000... so you'll need some growth beyond inflation.

According to FIRECalc, if you have $1m and a 45 year time horizon (95-50) and $5k a year of SS starting in 2042 and 0% equities the most that you can safely spend with 95% success is $22,065/year or $1,840/month.

Change that AA to 30/70 and your annual safe spending at 95% success increases to $33,022/year or $2,752/month.

So add a modest amount of equities to your AA and you should be fine assuming that your spending is realistically that low. Does that include periodic car replacements and other large, lumpy costs?
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Yeah I live simple, the largest expense is food and rent for the fam.

Where does the lifetime annuity factor into all that?
 
DrgLrd said:
Before the investment advice, I have to decide between renting (forever?) or buying a house: https://www.early-retirement.org/forums/f28/house-renting-vs-buying-113097.html
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Buy a home, don't rent. If you rent, you are at a major mercy of inflation. Also, you can generally get emergent bank loans if needed with your home ownership as the collateral.



Annuities are not liked on the US retirement forums (particularly this one for early retirement) because of the preference for stocks that historically have had much higher returns.


Buy only fixed annuities (immediate and deferred are both okay). Variable annuities have high fees which will eat up all possible profits - trust me, nobody gets variable annuities any more, they are deadly to your long-term purchasing power. That includes indexed ones. Don't get them. Just don't. Also, buy from the US insurance companies only, stay away from European ones (they are deceptive and non-transparent).



The excellent website immediateannuities.com answers all your other questions about annuities.


If you get Longevity Insurance annuities that start at the age of 80 and 85, and if you don't mind leaving your premium to the insurance comp if you die before 80 (ie, the premium does not get refunded to your heirs), you can get a very large annuity payout starting at 80 or 85, with a relatively small premium paid at 50 (ie, that would be a fixed deferred life annuity, without death beneficiary). Then you can spend everything else that you have in the next 30 years (knowing that you will have a certain guaranteed income for the rest of your life starting at 80).



I rarely participate in this website because people here are generally heavy investors, ranging from condescending to hostile towards those who do not invest. But I can understand your situation.
 
Welcome! Congratulations on your accomplishment. It's not easy to save that much in liquid assets. Other than your current assets, do you have any other income yearly?
 
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rubytuesday said:
Buy only fixed annuities (immediate and deferred are both okay). Variable annuities have high fees which will eat up all possible profits - trust me, nobody gets variable annuities any more, they are deadly to your long-term purchasing power. That includes indexed ones. Don't get them. Just don't.
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What about fixed with CoLA? Or is it that considered variable?

rubytuesday said:
If you get Longevity Insurance annuities that start at the age of 80 and 85, and if you don't mind leaving your premium to the insurance comp if you die before 80 (ie, the premium does not get refunded to your heirs), you can get a very large annuity payout starting at 80 or 85, with a relatively small premium paid at 50 (ie, that would be a fixed deferred life annuity, without death beneficiary). Then you can spend everything else that you have in the next 30 years (knowing that you will have a certain guaranteed income for the rest of your life starting at 80).
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Can you suggest a complete strategy? I ask the same question here

For example: 1 lifetime fixed now, and 1 30 year deferred lifetime now. Anything else, like an additional 10 and 20 year deferred now?

I plan on doing as you advised, staying with fixed immediate and deferred, just really unsure if some or all should be lifetime or period certain and the best method to layer and/or stack them.
 
DrgLrd said:
What about fixed with CoLA? Or is it that considered variable?



Can you suggest a complete strategy? I ask the same question here

For example: 1 lifetime fixed now, and 1 30 year deferred lifetime now. Anything else, like an additional 10 and 20 year deferred now?

I plan on doing as you advised, staying with fixed immediate and deferred, just really unsure if some or all should be lifetime or period certain and the best method to layer and/or stack them.
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Fixed with cola is variable, I'd stay away from that. I started buying annuities when I was younger than you, so the exact thing that I did would not be applicable, but this is what I would do if I were you.


1. Buy a home. That would be the absolute priority.


2. I don't have kids or anyone else that absolutely must have my inheritance, so I would get a longevity annuity that starts paying out at 80, fixed amount, without death beneficiary.



3. Get a deferred time-limited fixed annuity that starts paying at 60, and pays out for 20 years. That one will automatically have a death beneficiary.



4. Whatever is left, I'd put in a high yield bank account (although there are no high yields now, but the highest you can find).



5. Out of #4, I would buy $10,000 worth of iBonds every year (that is the maximum you can buy).



You are still young, and if you find out you can't live off of what you have, you can still go back to work in your 50s. You won't be able to do that at 80, so I would defer annuities for later. If there is a severe inflation at any point, that destroys the purchasing power of your annuities, you have your home, and you can sell it at inflated price after the inflation is over (in which case you will have to rent, but I would not rent unless I am forced to, by having to sell the home to compensate for severe inflation).
 
rubytuesday said:
2. I don't have kids or anyone else that absolutely must have my inheritance, so I would get a longevity annuity that starts paying out at 80, fixed amount, without death beneficiary.

3. Get a deferred time-limited fixed annuity that starts paying at 60, and pays out for 20 years. That one will automatically have a death beneficiary.
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I have an heir so I'd add a death rider to the 80+ annuity. And those two are from 60 until death but what about from now 50 until 60?



Or is that time-frame for bank account and other investments, no 10 year annuity?
 
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Gary 1958 said:
Your million is shrinking fast if you don't have a home.
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Not exactly fast. Where I'm located, the rent is cheap, buying houses is not. The house I'm renting could sell for $500k easy, but the rent is less than $1k per month. I'm not interested in buying a house worth $500k so if we move, we're downgrading. Some of the reasons why it's not an easy decision to buy.

That being said, I do want to buy a house before buying these annuities. I just feel like it's an emotional decision more than a financial one.
 
To me OP, you have barely enough savings and without holdings in stocks, it seems to me that inflation will eat you alive.

For housing, I agree a $500K house would be a mistake, You may want to move to a cheap / low cost of living part of the country that has low cost houses.
 
Sunset said:
To me OP, you have barely enough savings and without holdings in stocks, it seems to me that inflation will eat you alive. For housing, I agree a $500K house would be a mistake, You may want to move to a cheap / low cost of living part of the country that has low cost houses.
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My savings have been fine for a decade, no need to move because rent is cheap here. I just need some guaranteed income like an annuity or three.
 
A couple things for consideration, not necessarily recommendation:

You aren't past the "first bend point" for Social Security. What that means is you would get an amazing return on paying some more SS FICA taxes. In the USA now the employment picture is the best it has been in my lifetime. You might consider earning some more money in wages to beef up your Social Security. You will get an extremely advantageous return on FICA taxes paid until you reach the first bend point - about $900/month in PIA. Far better return per dollar paid than a commercial annuity but the stickler is that FICA taxes only come from earned income.

I understand the desire to get guaranteed income that drives your investment choice towards annuities, but you are at a conflict in goals. It appears like you need both good returns on savings and also safety because TBH your overall financial picture is tight for someone 50 and living exclusively on portfolio. It would be better if you had some combination of more SS, and/or better returns on savings than are available from commercial annuities or were starting retirement from an older age. Or you can be satisfied with your plan. just be sure you understand what the limitations may be.
 
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bada bing said:
You aren't past the "first bend point" for Social Security. What that means is you would get an amazing return on paying some more SS FICA taxes. In the USA now the employment picture is the best it has been in my lifetime. You might consider earning some more money in wages to beef up your Social Security. You will get an extremely advantageous return on FICA taxes paid until you reach the first bend point - about $900/month in PIA. Far better return per dollar paid than a commercial annuity but the stickler is that FICA taxes only come from earned income.
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I have earned income from a K1, no idea how to pay FICA taxes on it though.
 
DrgLrd said:
My savings have been fine for a decade, no need to move because rent is cheap here. I just need some guaranteed income like an annuity or three.
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I'm in Asia and with a million here you'd be in great shape! These are a couple ideas:

- local bank deposits. You can get 6.5% apy here in a safe, large bank in local currency. Where are you, how are the rates there?
- real estate funds have some interesting options earning around 5-7% apy or higher that are obviously more risky than an annuity but could play a role in your retirement plan.
- some REITs pay decent distributions, have you looked into those?

On SSA:
- If you are in Asia you can contact the Manila office of the FBU which handles SSA. They can help determine benefits.
- I have an account on SSA.gov, it works fine here. Where did you get caught up? When they ask questions to verify your identity it helps to have your credit report ready, many of the questions come off of that. You can get your free credit report online.

Good luck!
 
VungTau said:
- local bank deposits. You can get 6.5% apy here in a safe, large bank in local currency. Where are you, how are the rates there?
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The problem with a local account is they're insured for only $10k



VungTau said:
-real estate funds have some interesting options earning around 5-7% apy or higher that are obviously more risky than an annuity but could play a role in your retirement plan. - some REITs pay decent distributions, have you looked into those?
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Any suggested funds, I will add them to my 'watch list'.


VungTau said:
-
- If you are in Asia you can contact the Manila office of the FBU which handles SSA. They can help determine benefits. - I have an account on SSA.gov, it works fine here. Where did you get caught up? When they ask questions to verify your identity it helps to have your credit report ready, many of the questions come off of that. You can get your free credit report online.
Good luck!
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Same county, it was the identity questions, I was on the phone with SSA and they got my info no problem, but the website wouldn't confirm. It's likely address or phone number, which it says you can skip on the website but you can't.
 
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