Kimo
Recycles dryer sheets
PS. when they raised the fee they also lowered the payout to 4.0 at the earlier age when you apply. I am glad I did it when I did or I would have had to wait years to age to get this return.
Actually, it makes me sleep easier....Okay, deep breath, here goes... When I decided to retire I wanted a failsafe in place so that no matter what the bond, stock and real estate market did, I would have something guaranteed. After looking around I found that SS (I know, nothing guaranteed but go with me for the sake of the conversation) and the Annuity would provide me enough income to live and not eat dog food. Why does it makes me sleep easier? If the markets fall 50% my income stays the same. I will not be up at night thinking, should I sell now...should I wait to see if it comes back....I no longer need to have the thought in the back of my head, what am I going to do if there is another 08-09 because this time I will not be working to replenish the portfolio. I do know what I give up by holding Wellington this way, it is why I also hold it in my taxable account. It doesn't matter, the peace of mind having my failsafe is worth it.
Actually, it makes me sleep easier....Okay, deep breath, here goes... When I decided to retire I wanted a failsafe in place so that no matter what the bond, stock and real estate market did, I would have something guaranteed. After looking around I found that SS (I know, nothing guaranteed but go with me for the sake of the conversation) and the Annuity would provide me enough income to live and not eat dog food. Why does it makes me sleep easier? If the markets fall 50% my income stays the same. I will not be up at night thinking, should I sell now...should I wait to see if it comes back....I no longer need to have the thought in the back of my head, what am I going to do if there is another 08-09 because this time I will not be working to replenish the portfolio. I do know what I give up by holding Wellington this way, it is why I also hold it in my taxable account. It doesn't matter, the peace of mind having my failsafe is worth it.
Everyone is wired a little differently. As long as you understand the full costs, there is nothing wrong with giving up some returns and paying a third party for income insurance if that's what it takes to help you sleep. As we discuss ad nauseam on this forum, it is that underlined part that usually creates the problem with annuities.
I can't see how getting a 4.5% payout on a fund that averages 8% is a good deal. That is unsettling to me and would cause me to lose sleep. You are giving away not only almost half the return but also your original investment.
I hope I'm wrong on this for your sake.
I fall in with Kimo (as I have mentioned before) that for a portion of my bucket that has no heirs, it is the insurance, not investment, of the annuity (for me it will likely be a SPIA) that will give me some peace of mind.
The 4.5% is the guaranteed minimum withdrawal rate. IOW, if things went to hell in a handbasket and stocks tanked and did not come back and these 4.5% withdrawals depleted the account then Monumental Life would be on the hook to continue making Kimo's 4.5% annuity benefit payments. Kimo pays 0.95% on top of the typical Wellington expense ratio for this guarantee from Monumental Life.
The 4.5% is the guaranteed minimum withdrawal rate. IOW, if things went to hell in a handbasket and stocks tanked and did not come back and these 4.5% withdrawals depleted the account then Monumental Life would be on the hook to continue making Kimo's 4.5% annuity benefit payments. Kimo pays 0.95% on top of the typical Wellington expense ratio for this guarantee from Monumental Life.
OTOH, if Wellington continues to clip along at 8% or more then the account grows.
So at the end of the day, Kimo has made an informed decision that the guarantee is worth giving up .95% a year. Nothing wrong with that IMO even though it isn't something I plan to do.
Ok thanks for the additional information. Giving up .95% for the guarantee is at least more reasonable (at least at the beginning). The account should grow so at some point you may consider dropping the insurance coverage (since the 4.5% guarantee is probably based on the original balance and the fee is based on the current balance).
So does the 4.5% (and the 0.95% cost) increase as long as the balance increases and then lock in if the balance decreases? Sort of a high-water mark concept? Are these measurements done on the policy anniversary or more frequently?
We see our rental real estate as a variable annuity...
When I owned some, I saw it as a self-employed business. Might as well buy a laundromat or a self-serve car wash--less interpersonal drama, less potential legal hassles, no potential for a big rent check not coming in, and just one easily-accessible location to fret about. I don't know if DW would appreciate it if I bought her a laundromat, car wash, or rental unit in lieu of another, more "passive" source of income for her old-age.We see our rental real estate as a variable annuity...