About to Pull the Trigger on Lifetime Annuity - Would appreciate opinions

[cyber888]

I'm retiring next year at 59.5 (2023) and was thinking of getting a Lifetime annuity starting at 62.5 yrs old, because I don't have a pension and would expect some income stability to meet our monthly expenses.

Our monthly expenses this year (2022) is about $4000-$4100/mo including everything - housing, utility, food, travel, health insurance. (Just me and DW, no kids). And I expect when we get to the year 2026 (when I turn 62 yrs old), our monthly expenses will be around $4,800/mo with inflation. This $4,800/month includes about $12,000-$13,000 yearly travel expenses, which can be cut.

Was planning to get Social Security at 62 in 2026. Me and DW SS would be around approx. $3,600+/month with both our social security income. So, we have a shortfall of around $1,200/month which I might say is mostly our "travel budget", and so I thought of getting an annuity, and yes, I know that annuities does not adjust with inflation in the future - but as we age, we also may not travel that much into the future.

I called Tiaa-cref and also went to their website to confirm it, and I'm attaching the screenshots. Was going to put in $155K into a Lifetime annuity w/ a 10 year guarantee that if we pass away before 10 years, we can assign it to a beneficiary. The $155K will generate $1,306/month ($981 guaranteed + other amounts - these are premiums since I've been with Tiaa-cref for more than 23 years). In contrast, the $155K will only get me $787/month in ImmediateAnnuities.com.

So, our SS income of $3600/mo + Lifetime annuity of 1300/mo = $4,900/month in income.

So, with the annuity, we do not need to dip into my 401K savings until I need to buy big items like a new car or home repair.

What do you guys think ... $155K = $1,306/monthly income ? Good deal ?

 

[ivinsfan]

Well let's think about this for a second. SS is an annuity in that if you "age" it between 62 and 70 it continues to grow. Also the last one standing idea mean you wouldn't have a optimum survivors payment for your spouse. You don't mention your wifes age in 2026.


So you are cashing in SS early and then going to pay money for an annuity. Is this something you really want to do?


I vote no but it's your vote that counts. So I would say the annuity is not a "good" deal in my way of thinking.
You might consider sharing you and the spouses SS numbers at 62 FRA and 70

 

[almost there]

$1306 on 155k lifetime? Sign me up!

 

[cyber888]

So you are cashing in SS early and then going to pay money for an annuity. Is this something you really want to do?

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My wife is 75 years old on 2026, so SS is not early for her. But she cannot get SS without me getting SS. She's 13 years older than me. SS is very late for her, and early for me. I'm 62 in 2026, and she's 75 in 2026.

 

[ivinsfan]

$1306 on 155k lifetime? Sign me up!

Wait one because the quotes say the guaranteed amount is actually 981 dollars a month kind of a big difference. I also have to wonder what 981 dollars a month will get you in 20 years.

 

[ivinsfan]

My wife is 75 years old on 2026, so SS is not early for her. But she cannot get SS without me getting SS. She's 13 years older than me. SS is very late for her, and early for me

OK so it makes sense to go at 62...

 

[cyber888]

Wait one because the quotes say the guaranteed amount is actually 981 dollars a month kind of a big difference. I also have to wonder what 981 dollars a month will get you in 20 years.

There is a loyalty premium of $320+ because I'm a long-term customer.

And as I mentioned, this $1300/month annuity is mostly for our travel expenses. In 20 years, it probably wont matter, because we probably won't be traveling that much when we turn 80 years old

And not touching my lumpsum 401K, because of the annuity - that will probably grow faster to compensate for not taking anything from my 401k

 

[TheWizard]

I've had lifetime payout annuities with TIAA since 2013.
They are the best insurance company for this sort of thing, assuming you are in decently good health at the outset.
https://www.tiaa.org/public/about-tiaa/news-press/press-releases/2021/12-16

A few other points:
1) I took my annuities with a ten year guarantee for a small reduction in monthly payment. I'm starting my tenth year now.
2) I recommend delaying SS until age 70, partly to give you more space for Roth conversions during that time.
3) I also recommend annuitizing a portion of your TIAA accumulation in TIAA Real Estate Account (TREA) with monthly updates. TREA payout increased something like 16% last year, nicely outpacing inflation...

 

[cyber888]

Thanks. I have maxed out my TIAA Real Estate to the $150K allocation this year. I can't believe my contract limits my transfer to $150K for the TIAA Real Estate. Yes, I might annuitized that at a later date, maybe when I turn 70 years old. Thanks for the heads up. That's a good suggestion.

I've had lifetime payout annuities with TIAA since 2013.
They are the best insurance company for this sort of thing, assuming you are in decently good health at the outset.
https://www.tiaa.org/public/about-tiaa/news-press/press-releases/2021/12-16

A few other points:
1) I took my annuities with a ten year guarantee for a small reduction in monthly payment. I'm starting my tenth year now.
2) I recommend delaying SS until age 70, partly to give you more space for Roth conversions during that time.
3) I also recommend annuitizing a portion of your TIAA accumulation in TIAA Real Estate Account (TREA) with monthly updates. TREA payout increased something like 16% last year, nicely outpacing inflation...

 

[TheWizard]

Here is the recent TIAA publication on the adjustments to their VAs, including TREA...

 

[almost there]

My example.... had a cash balance plan of 288k. Took the annunity 5.5 yrs ago. Pays $1518 monthly. So far, no regrets.

 

[TheWizard]

Thanks. I have maxed out my TIAA Real Estate to the $150K allocation this year. I can't believe my contract limits my transfer to $150K for the TIAA Real Estate. Yes, I might annuitized that at a later date, maybe when I turn 70 years old. Thanks for the heads up. That's a good suggestion.

Many of us have used Systematic Transfers to get beyond the $150k limit. I'm more than double that.
Talk/email with your WMA to get a Systematic Transfer started: $20k per week for three weeks in a row, for example...

 

[cyber888]

Did you get any increase in your annuity with the Loyalty Bonus and Additional premiums, aside from the Guaranteed amount

Thanks.

I've had lifetime payout annuities with TIAA since 2013.
They are the best insurance company for this sort of thing, assuming you are in decently good health at the outset.
https://www.tiaa.org/public/about-tiaa/news-press/press-releases/2021/12-16

A few other points:
1) I took my annuities with a ten year guarantee for a small reduction in monthly payment. I'm starting my tenth year now.
2) I recommend delaying SS until age 70, partly to give you more space for Roth conversions during that time.
3) I also recommend annuitizing a portion of your TIAA accumulation in TIAA Real Estate Account (TREA) with monthly updates. TREA payout increased something like 16% last year, nicely outpacing inflation...

 

[aja8888]

cyber888, in 20 years your wife will be 92?

I will bet that her desire to travel will not make it that long (unless she really is in great overall health). I am 78+ and in really good health and my DW is 76 and has many health issues (COPD, bone density issues, arthritis, etc) and she really stopped travelling with me two years ago.


During the last several years, I made trips alone and had to have a family member stay with her while I was gone.

 

[cyber888]

Many of us have used Systematic Transfers to get beyond the $150k limit. I'm more than double that.
Talk/email with your WMA to get a Systematic Transfer started: $20k per week for three weeks in a row, for example...

Will do .. will see how I can get around that. Thanks.

 

[TheWizard]

Did you get any increase in your annuity with the Loyalty Bonus and Additional premiums, aside from the Guaranteed amount

Thanks.

Yes, practically all Trad annuitants have. I don't recall my specific details from nine years ago.

But importantly, TIAA Traditional is not a "fixed" annuity, it's a "participating" annuity with occasional payout increases of a percent or two. Not enough to keep up with inflation, but better than strictly fixed. We did get a 5% increase for 2022.

In case you missed it:

https://www.tiaa.org/public/about-tiaa/news-press/press-releases/2021/12-16

 

[cyber888]

This is great. 5% increase is a nice boost.

Thanks. I did re-read it again, and it is indeed a 'participating' annuity, where annuity holders are awarded if Tiaa-cref did well financially.

Yes, practically all Trad annuitants have. I don't recall my specific details from nine years ago.

But importantly, TIAA Traditional is not a "fixed" annuity, it's a "participating" annuity with occasional payout increases of a percent or two. Not enough to keep up with inflation, but better than strictly fixed. We did get a 5% increase for 2022.

In case you missed it:

https://www.tiaa.org/public/about-tiaa/news-press/press-releases/2021/12-16

 

[pb4uski]

My wife is 75 years old on 2026, so SS is not early for her. But she cannot get SS without me getting SS. She's 13 years older than me. SS is very late for her, and early for me. I'm 62 in 2026, and she's 75 in 2026.

She doesn't qualify for SS based on her own work record?

Your 13 year age difference is unusual... have you run your situation through opensocialsecurity.com?

I'm not sure that you need a life annuity given that SS will cover your spending excluding travel... but what might be better is a period annuity or CD/UST ladder to provide income between now and SS.

 

[ERD50]

.... Was going to put in $155K into a Lifetime annuity ...

So, with the annuity, we do not need to dip into my 401K savings until I need to buy big items like a new car or home repair. ...

I didn't absorb every word - but these two phrases stuck out for me. Unless I'm missing something, they conflict one another, don't they?

If you didn't buy the annuity, wouldn't you have $155K to buy big items like a new car or home repair?

Sounds like magical thinking to me.

-ERD50

 

[pb4uski]

.... it is indeed a 'participating' annuity, where annuity holders are awarded if Tiaa-cref did well financially.

It's actually even more refined than TIAA as a whole... they will track the performance of a defined block of policies and if that block of policies does better than expected then they will increase dividends.

 

[cyber888]

I didn't absorb every word - but these two phrases stuck out for me. Unless I'm missing something, they conflict one another, don't they?

If you didn't buy the annuity, wouldn't you have $155K to buy big items like a new car or home repair?

Sounds like magical thinking to me.

-ERD50

To be clear, I cannot withdraw that $155K for anything unless I put in a systemic withdrawal program, so I can never use it to buy a $50k car or for home repair.

You need to understand that this $155K is already in a Tiaa-cref traditional account with guaranteed income of 4.25 - 4.75% now that cannot be withdrawn - it's locked for years and years. But if I annuitize it for a "Lifetime income", I will be making near 6% instead of 4%+. I guess only Tiaa-cref holders can understand how Tiaa traditional works. So, no, it's not magical thinking.

 

[cyber888]

cyber888, in 20 years your wife will be 92?

I will bet that her desire to travel will not make it that long (unless she really is in great overall health). I am 78+ and in really good health and my DW is 76 and has many health issues (COPD, bone density issues, arthritis, etc) and she really stopped travelling with me two years ago.


During the last several years, I made trips alone and had to have a family member stay with her while I was gone.

Yeah, I will be 80 and she will be 93 .. I guess no more travel there

 

[cyber888]

That's right. She has never worked, so she cannot qualify for SS on her own. Yes, I ran opensocialsecurity.com and she will get 50% of what I get at my full retirement age. She's 71 years old now

She doesn't qualify for SS based on her own work record?

Your 13 year age difference is unusual... have you run your situation through opensocialsecurity.com?

I'm not sure that you need a life annuity given that SS will cover your spending excluding travel... but what might be better is a period annuity or CD/UST ladder to provide income between now and SS.

 

[aja8888]

Yeah, I will be 80 and she will be 93 .. I guess no more travel there

It will be less, for sure and not too far away. The thing that most old folks worry about when travelling at an advanced age is accidents (falling, etc) and medical care, if needed.

My DW is on oxygen 100% of the time. Even short trips for us means bringing enough oxygen capacity for the trip and her walker and maybe her wheelchair.

Something to think about.

 

[cyber888]

Right. Falling down is dangerous at those age. I read Christopher Plumber, the actor, died because he fell down.

Sorry to hear about your DW needing oxygen. I guess those are the portable oxygen cannisters.

I guess no more international travel at those age, just nearby domestic travel 2-3 hours away at most.

It will be less, for sure and not too far away. The thing that most old folks worry about when travelling at an advanced age is accidents (falling, etc) and medical care, if needed.

My DW is on oxygen 100% of the time. Even short trips for us means bringing enough oxygen capacity for the trip and her walker and maybe her wheelchair.

Something to think about.