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07-15-2008, 07:19 AM
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#1
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Recycles dryer sheets
Join Date: May 2008
Posts: 162
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Good Enough Annuity Rate
My retiring brother, illinois teacher, says he paid too much into his state retirement plan, 35K, He can take as lump, rollover to IRA, or take an annuity of $295 per month. The annuity sound too good to be true.
Should he jump on this annuity? 10% return
What question should he be asking and info does he need to be sure?
He is 60 in August and in fairly good health.
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07-15-2008, 07:25 AM
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#2
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Full time employment: Posting here.
Join Date: May 2008
Posts: 546
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What company is the annuity with? Besides that, it seems like a VERY good annuity ... about 12% of the amount per year. Throwing it out there (as I prepare for the flames), unless the life insurance company offering the annuity is a fly-by-night swindling dealership, the annuity looks hard to compete with.
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07-15-2008, 07:40 AM
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#3
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Recycles dryer sheets
Join Date: Apr 2008
Posts: 174
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my two centimes worth
Quote:
Originally Posted by cashbalancetrouble
My retiring brother, illinois teacher, says he paid too much into his state retirement plan, 35K, He can take as lump, rollover to IRA, or take an annuity of $295 per month. The annuity sound too good to be true.
Should he jump on this annuity? 10% return
What question should he be asking and info does he need to be sure?
He is 60 in August and in fairly good health.
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If that is from TIAA, that is a very good deal.
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07-15-2008, 07:51 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by MGYog
If that is from TIAA, that is a very good deal.
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Got to agree with that if the facts are true. Is the $295 for life, or a period certain payout, or both? It would be nice to know..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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07-15-2008, 08:01 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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Annuity companies never do anyone a favor. They won't make any money with lifetime payments for the amount stated. Something smells funny. Read the fine print.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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07-15-2008, 08:54 AM
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#6
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,767
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I'd jump on it.
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07-15-2008, 09:08 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,702
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I guess someone should ask the important questions: what sort of annuity is it? Does it pay for life or for a fixed term?
If its a VA or equity based annuity, then I can see how the original payment might be quoted on the basis given, yet not do quite as well on an ongoing basis.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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07-15-2008, 09:12 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by cute fuzzy bunny
I guess someone should ask the important questions: what sort of annuity is it? Does it pay for life or for a fixed term?
If its a VA or equity based annuity, then I can see how the original payment might be quoted on the basis given, yet not do quite as well on an ongoing basis.
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I'll bet it's a 10 year period certain, meaning the guy involved will get his principal back, and the insurer keeps the spread. Maybe a 12-year period certain, but that's about it...........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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07-15-2008, 09:15 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,702
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Thats what I was thinking.
On the other hand, an equity index to the s&p500, should the s&p recover, could provide a nice ride at least for a while...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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07-15-2008, 09:19 AM
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#10
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Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
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Quote:
Originally Posted by cashbalancetrouble
My retiring brother, illinois teacher, says he paid too much into his state retirement plan, 35K, He can take as lump, rollover to IRA, or take an annuity of $295 per month. The annuity sound too good to be true.
Should he jump on this annuity? 10% return
What question should he be asking and info does he need to be sure?
He is 60 in August and in fairly good health.
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Looks like a pension from The IL TRS, which includes a 3% yearly COLA.
If so, I'd compare it to COLA's immediate annuities from Principal Life and Vanguard.
- Alec
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07-15-2008, 09:20 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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07-15-2008, 09:23 AM
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#12
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Unlike (most) others responding to you, I actually have an annuity (SPIA), purchased last year upon my retirement at age 59.
Some have some responded with good questions. I'll let you have "my list" to consider:
- Is he married? Does the annuity income continue if he dies the day after he retires? (For example, my SPIA has guaranteed payments for a 28-year term, at 100% to me, or 100% to my wife if I pass within that period. If we both pass before the 28-year period, the remaining payments are paid to our estate, in either monthly or lump sum). However, if either/both live beyond the 28 year period, the payments continue at 100%.
- There is a good chance that if he is married (and the annuity is not term-specific) that his DW would collect at 50%, which is normal for a "pension type" annuity. Is this possible "reduction in income" in his retirement income projections?
- Does he want to leave a "legacy"? That is, if he died tomorrow (and the payments were not continued after his death) would the lump sum need/want to go to a "future generation"? In our case, our joint remainder estate is going to charity, so "saving" the lump sum was of minor concern to us.
- I'll assume that the annuity is not inflation adjusted. If it represents a minor part of his "entire retirement portfolio value" (as ours does) it may not be a point to consider, but if it is, he may be better off investing the lump sum into a good mix of funds (regardless of the current "flux" in the marketplace.)
Anyway, that's my input.
- Ron
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07-15-2008, 09:24 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by ats5g
Looks like a pension from The IL TRS, which includes a 3% yearly COLA.
If so, I'd compare it to COLA's immediate annuities from Principal Life and Vanguard.
- Alec
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I didn't see any period certain info or length of payment info. If it's his life only, not that good of a deal...........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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07-15-2008, 09:29 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2005
Posts: 2,032
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1. I find it so funny that all the self proclaimed annuity experts don't even understand that once annuitized a VA, EIA, and fixed annuity are all the same.
2. That isn't an unusual payout from the IL TRS.
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07-15-2008, 09:31 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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My employer's plan has a lump sum option. For an early retiree, the monthly benefit is clearly better.
What happens is that the regular monthly benefit for retirement at 60 has an "early retirement subsidy". That is, it's not actuarially equivalent to the benefit at 65. Then, when they calculate the lump sum, they use the age 65 benefit, not the age 60 benefit.
So the numbers (useing typical interest and longevity assumptions) clearly favor the monthly benefit.
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07-15-2008, 09:31 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Feb 2005
Posts: 2,032
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Quote:
Originally Posted by FinanceDude
I didn't see any period certain info or length of payment info. If it's his life only, not that good of a deal...........
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Immediate Annuities - Instant Annuity Quote Calculator. is quoting $48,440 for the same life only benefit.
Looks like a good deal to me.
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07-15-2008, 09:39 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by saluki9
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Jump on it...............
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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07-15-2008, 09:39 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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I guess we need a thread on "annuitization options"...........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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07-15-2008, 09:45 AM
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#19
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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I'd "participate", but I'm tired of getting beat up  ...
- Ron
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07-15-2008, 09:50 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,702
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That sounds terrible Ron. Why dont you point out some of the threads where you were beaten up and we'll make sure to correct the problem so that it doesnt happen again?
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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