54 ry old looking to ER and wondering about annuities

[brewer12345]

Quote:

Originally Posted by ETFs_Rule Executive Life was one of the world's largest insurers. Insolvent. AIG was the world's largest insurer. Insolvent, but fortunately bailed out. Will there be a bail out next time something like this happens?

Executive Life was always a squiddly piece of crap. AIG was always basically a giant, dysfunctional family. Anyone discriminating would never have bought a policy from either. At least in the case of AIG, the insurance operating companies always remained solvent thanks to the vigilant NYS insurance department.

[bmcgonig]

Quote:

Originally Posted by ETFs_Rule But how realistic is it that over a long time period of 10 or more years an age appropriate bond / stock portfolio is going to under perform the true return of an annuity? Keep in mind that in the first X amount of years the annuity simply pays you back your original principal. The False Promises of Annuities and Annuity Calculators - Forbes

I googled annuities a few times and since then my webpages are inundated with "I hate annuities and you should too" ads from Fisher, who of course is in direct competition with annuities as he's a 1% man. And so is Marotta, the author of the article you quote here from Forbes. So it doesn't do much good to quote him here as he hates them because they cost him part of his 1%

I like them for part of my portfolio just in case this happens:

http://finance.yahoo.com/q/bc?s=%5EN...=on&z=l&q=l&c=

[WestLake]

I think I'd rather have a charitable remainder trust which must pay 5% or more - upon death the principle/balance goes to a good cause.

[Gill]

Quote:

Originally Posted by WestLake I think I'd rather have a charitable remainder trust which must pay 5% or more - upon death the principle (sic)/balance goes to a good cause.

There are no guarantees from a CRT. If the trust principal declines your 5% declines & if the principal is exhausted you get nothing.
Bruce

[ETFs_Rule]

Here's one more chart that I found which looks at how a 50% S&P 500 / 50% 10-year Treasury portfolio did versus the highest paying SPIA that Marotta found and which happened to pay 5.51% per year. True this is not a Japan bear market that we've been through but by US standards it's been some of these worst stretch of years. The senior citizen couple got their $5,513.80 per year, didn't lose their principal, and even gained about 13K.

[zinger1457]

I have an immediate annuity and I'm very happy with it but I did purchase it many years ago when interest rates were much higher, not sure I would with today's low rates. Immediate annuities also come with survivor and cost of living options if desired but it will lower the effective interest rate. To get the income the OP needs from an annuity he would have to purchase an annuity (without inflation protection) using almost all his assets and that would be a mistake. Even annuity salesman will tell you to put no more than 50% of your assets into an annuity. That is on the high side IMO, I wouldn't go more than 25%.

[Gill]

Quote:

Originally Posted by zinger1457 I have an immediate annuity and I'm very happy with it but I did purchase it many years ago when interest rates were much higher, not sure I would with today's low rates. Immediate annuities also come with survivor and cost of living options if desired but it will lower the effective interest rate. To get the income the OP needs from an annuity he would have to purchase an annuity (without inflation protection) using almost all his assets and that would be a mistake. Even annuity salesman will tell you to put no more than 50% of your assets into an annuity. That is on the high side IMO, I wouldn't go more than 25%.

SPIA's don't pay "interest".
Bruce

[ETFs_Rule]

Quote:

Originally Posted by bmcgonig I like them for part of my portfolio just in case this happens: ^N225 Basic Chart | Nikkei 225 Stock - Yahoo! Finance

Another thing to think about is how much will stocks be yielding if we were to experience another great depression type bear market? When stocks take a dive, dividend yields generally go up. Do you really need to worry about stocks dropping in value as long as you are getting your 5.5% to survive retirement. Here's what the S & P was paying back in the 30's: Jan 1, 1933 7.05%, Jan 1, 1932 9.52%, Jan 1, 1931 6.07%, Jan 1, 1930 4.47%
S&P 500 Dividend Yield by Year

[zinger1457]

Quote:

Originally Posted by MBMiner SPIA's don't pay "interest". Bruce

I didn't say they did but insurance companies do use an interest rate that's loosely based on current rates when calculating what your annuity payment will be.