Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-06-2017, 06:23 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 30,514
Quote:
Originally Posted by marko View Post
As a long time forum reader I must say that the relative positive responses to annuities is a bit of a surprise.
Seemed to me that in the past any mention of the "A" word brought a ton of negatives.

Or is it just because the OP is planning a late in life purchase?
Yes, I think it's the late in life part. Makes a big difference.

We will also be considering around 75 or so.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-06-2017, 06:46 AM   #22
Full time employment: Posting here.
 
Join Date: Oct 2015
Posts: 631
I think I have a fundamental problem with buying an annuity, but understand the appeal to many, but a little surprised as to how many have chimed in as it being part of their plan. To me, an annuity is like buying Whole Life vs. Term or being an educated DIY investor vs. having an advisor. You are paying a premium for something you can/you should be able to set up yourself. If you need ins, buy term. If you need/want an "annuity-like" structure than adjust your portfolio accordingly. If you are worried about being incapacitated to properly run your portfolio and don't have faith in a younger family member, I suppose at that point engage an advisor. I have to admit, I have not studied these annuities as of late, so my response is based on my previous understanding.
DawgMan is offline   Reply With Quote
Old 01-06-2017, 08:06 AM   #23
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Location: Nashville
Posts: 2,138
Quote:
Originally Posted by DawgMan View Post
...To me, an annuity is like buying Whole Life vs. Term or being an educated DIY investor vs. having an advisor. You are paying a premium for something you can/you should be able to set up yourself. If you need ins, buy term. If you need/want an "annuity-like" structure than adjust your portfolio accordingly. ...
You can't provide the mortality credits yourself; to me that is the essential part of the longevity insurance/protection that an simple annuity can provide, particularly when looking late in life as postulated by OP.

(We may or may not do it when we get to that point; assets may be sufficient to make it unnecessary, but we'll see.)
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Old 01-06-2017, 11:21 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,495
Quote:
Originally Posted by audreyh1 View Post
Yes, I think it's the late in life part. Makes a big difference.

We will also be considering around 75 or so.
+1
I agree with Otar's characterization of annuitization as "exporting risk". But in my case only as a Plan B at approx. age 75 if called for.
Options is offline   Reply With Quote
Old 01-06-2017, 12:18 PM   #25
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 4,031
Why wouldn't you buy a 30 year bond? You probably aren't going to outlive it. You can always sell it if you need a lump sum and the return is going to be close, depending on what you buy.
COcheesehead is offline   Reply With Quote
Old 01-06-2017, 12:42 PM   #26
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,867
Quote:
Originally Posted by COcheesehead View Post
Why wouldn't you buy a 30 year bond? You probably aren't going to outlive it. You can always sell it if you need a lump sum and the return is going to be close, depending on what you buy.
For me TIAA-Traditional deferred annuity and my house were going to be my "late stage" money to supplement social security if my DC money ran out. I was going to let TIAA-Traditional accumulate and use the 10 year payout option if I needed money and tap the home equity as a last resort.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 01-06-2017, 12:45 PM   #27
Recycles dryer sheets
 
Join Date: Nov 2011
Location: Beaver island, MI and St. Augustine, FL
Posts: 78
First, you don't have to pay big sales commissions. Look to Vanguard and TIAA first for a simple annuity that pays you and/ spouse for life.

Also, the annuity will pay more per year than you could get using a safe withdrawal rate from a conservative portfolio. This differential increases with age. So when you reach your late 70s it would be a good way to increase both income and safety at the same time. I will have at least half my assets in TIAA annuities by my late 70s, have 35% in annuities now and no regrets.
MikeTN is offline   Reply With Quote
Old 01-06-2017, 01:29 PM   #28
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,867
Quote:
Originally Posted by MikeTN View Post

Also, the annuity will pay more per year than you could get using a safe withdrawal rate from a conservative portfolio.
Initially that's true, but the annuity probably won't have any COI increases and after a few years it might well lag the SWR from a portfolio. The annuity does have longevity insurance going for it. I see annuities as useful if you want to guarantee a base income level, but once that's done I would not use them.

TIAA is a good place to get annuities and if you are buying them from within a retirement plan you will get some nice rates, but with all the same drawbacks that are often debated here.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 01-06-2017, 02:01 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
Quote:
Originally Posted by marko View Post
As a long time forum reader I must say that the relative positive responses to annuities is a bit of a surprise.
Seemed to me that in the past any mention of the "A" word brought a ton of negatives.

Or is it just because the OP is planning a late in life purchase?
No, it's just that people get bored. "She loves me, she loves me not..."

Actually, I can't understand why anyone would even consider an non-COLA annuity in the modern world with modern central banking. Our memories are so short, and our imaginations about things have not happened recently are deficient. But surprises will come, and they will mainly be surprises. Though I have recently come to think that the assumption that markets discount risk adequately is goofy. Suddenly equity markets and media are all surprised that Macy's, Sears, etc. etc. are staggering. Who couldn't predict this once he or she saw Amazon in action? This is not to say that Amazon is a good buy at whatever price. But other retail is certainly at risk for what Amazon and other online merchants can do to traditional retail.

Ha
haha is offline   Reply With Quote
Old 01-06-2017, 02:15 PM   #30
Recycles dryer sheets
 
Join Date: Jun 2010
Location: Southwest Florida
Posts: 450
Quote:
Originally Posted by marko View Post
As a long time forum reader I must say that the relative positive responses to annuities is a bit of a surprise.
Seemed to me that in the past any mention of the "A" word brought a ton of negatives.

Or is it just because the OP is planning a late in life purchase?
Yes, there are people who seem to oppose SPIA's. I've always felt it's at least in part because they don't fully understand them or have a reluctance to part with a lump sum of cash.

I spent my career in the personal finance end of things and have always favored SPIA's when used where needed and to the extent necessary. As I posted above, when I reached age 70 or thereabouts I purchased several contracts for myself, to the point of investing about 25% of my assets, and have been very pleased I did.
Bruce
Gill is offline   Reply With Quote
Old 01-06-2017, 02:34 PM   #31
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 45,265
I just checked on immediateannuities dot com. I found that if I buy a $100,000 SPIA at age 85, I would get $1117/month for the rest of my life, no matter how long that is.

If I invested it instead, and took 4%, I'd get $333/month from that $100K.

Inflation between age 85 and death is unlikely to be much of an issue because that isn't much time.

The advantage of investing it, is that I could leave it to my heirs. But, I am inclined to think "so what" since most of my money would not end up in the SPIA.
__________________
Happily retired since 2009, at age 61.
W2R is offline   Reply With Quote
Old 01-06-2017, 02:46 PM   #32
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 4,031
Quote:
Originally Posted by W2R View Post
I just checked on immediateannuities dot com. I found that if I buy a $100,000 SPIA at age 85, I would get $1117/month for the rest of my life, no matter how long that is.

If I invested it instead, and took 4%, I'd get $333/month from that $100K.

Inflation between age 85 and death is unlikely to be much of an issue because that isn't much time.

The advantage of investing it, is that I could leave it to my heirs. But, I am inclined to think "so what" since most of my money would not end up in the SPIA.
Investing it also gives you the opportunity to liquidate it if you run into needing cash for oh, I don't know, long term care or a new BMW
COcheesehead is offline   Reply With Quote
Old 01-06-2017, 03:30 PM   #33
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,867
Quote:
Originally Posted by W2R View Post
I just checked on immediateannuities dot com. I found that if I buy a $100,000 SPIA at age 85, I would get $1117/month for the rest of my life, no matter how long that is.

If I invested it instead, and took 4%, I'd get $333/month from that $100K.

Inflation between age 85 and death is unlikely to be much of an issue because that isn't much time.

The advantage of investing it, is that I could leave it to my heirs. But, I am inclined to think "so what" since most of my money would not end up in the SPIA.
But given your life expectancy at age 85 you could take out a lot more than 4%. If you got 2% return from cay a CD you could take out $1117/month for 7 years and theres only a 35% chance that you'd live that long. The 65% that die before age 92 are paying for those payouts. It really is about insurance, most people will lose out, a minority will live long enough to get into the black and the insurance company is the big winner.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 01-06-2017, 04:32 PM   #34
Full time employment: Posting here.
 
Join Date: Apr 2016
Location: warren
Posts: 853
Quote:
Originally Posted by nun View Post
But given your life expectancy at age 85 you could take out a lot more than 4%. If you got 2% return from cay a CD you could take out $1117/month for 7 years and theres only a 35% chance that you'd live that long. The 65% that die before age 92 are paying for those payouts. It really is about insurance, most people will lose out, a minority will live long enough to get into the black and the insurance company is the big winner.
If I die I don't care if I lose money compared to investing it, I'll be dead. To me, this is like the "When should I take SS to get the most money?" I say "Who cares?" I want to take SS when it will help me enjoy life the most. If taking it early will help me better enjoy life that's what I'll do. Who cares if when I'm stuck in the house at 90 I could have made a few extra bucks.
garyt is offline   Reply With Quote
Old 01-06-2017, 04:45 PM   #35
Full time employment: Posting here.
 
Join Date: Apr 2016
Location: warren
Posts: 853
One of the main points of my original post was that since we don't have kids we don't want to leave a huge inheritance when we die. If we invest the money we can never spend it all for fear of outliving our cash. So being more conservative people as most here are we'd end up leaving quite a bit on the table, because we'd never spend so much as to put us in jeopardy.
If we put the money in an annuity we know what we can spend and if we die early and don't get much bang for our buck, we're dead, who cares?
I'm enjoying the responses, both pro and con. This is an idea that just popped in my head not something I'm committed to doing.
I'm not thinking of this as a way to maximize my money. I agree investing would be the better way. I'm looking at a way to maximize my enjoyment of life, even if it costs me money at the very end.
garyt is offline   Reply With Quote
Old 01-06-2017, 05:40 PM   #36
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,867
Quote:
Originally Posted by garyt View Post
I'm not thinking of this as a way to maximize my money. I agree investing would be the better way. I'm looking at a way to maximize my enjoyment of life, even if it costs me money at the very end.
Investing does not necessarily maximize you money, it just gives you the change to do that....and also the chance to lose it.

I don't have children, but I do have nieces (and a couple of charities) that are in my will and I want to leave them a good amount of money. So to do that I have annutiized some of my DC money and that along with rent and SS checks from both the US and the UK more than cover my expenses. My attitude is I don't want to wait until I have to annuitize incase I leave it too late. I've been doing it in a way since I was 25 by saving for the rental property and keeping up my UK SS contributions.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 01-06-2017, 10:19 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: No fixed abode
Posts: 8,421
Quote:
Originally Posted by haha View Post
No, it's just that people get bored. "She loves me, she loves me not..."

Actually, I can't understand why anyone would even consider an non-COLA annuity in the modern world with modern central banking. Our memories are so short, and our imaginations about things have not happened recently are deficient. But surprises will come, and they will mainly be surprises. Though I have recently come to think that the assumption that markets discount risk adequately is goofy. Suddenly equity markets and media are all surprised that Macy's, Sears, etc. etc. are staggering. Who couldn't predict this once he or she saw Amazon in action? This is not to say that Amazon is a good buy at whatever price. But other retail is certainly at risk for what Amazon and other online merchants can do to traditional retail.

Ha
I'm basically with you on annuities. However, in this case the OP specified "late in life", which would probably mitigate the non-COLA aspect. I still would never do it, since I would like to leave money to heirs, and also because I'm a control freak, especially about money. I just don't see a situation other than mental incompetence where I would turn over control. And never to a stranger. But in the situation the OP describes, I might at least consider it before rejecting it.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 01-06-2017, 10:44 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 12,095
Quote:
Originally Posted by garyt View Post
One of the main points of my original post was that since we don't have kids we don't want to leave a huge inheritance when we die. If we invest the money we can never spend it all for fear of outliving our cash. So being more conservative people as most here are we'd end up leaving quite a bit on the table, because we'd never spend so much as to put us in jeopardy.
.......
For this same reason of being free to spend every single penny each month, I looked into an annuity for a 90 yr old.
With a simple 100K investment, he can spend $20,640 every year for the rest of his life. Right now he only feels free to spend $5,000 per year, because he could live to 115.
Sunset is offline   Reply With Quote
Old 01-07-2017, 12:30 AM   #39
Thinks s/he gets paid by the post
 
Join Date: Oct 2012
Location: Reno
Posts: 1,058
I've considered a delayed annuity that starts paying at 75-80, as insurance against long life (my grandparents lived into their 90s--Dad died at 85 but mainly because he had diabetes and Mom is going strong at 85).
Probably would buy it at 60-65, but I haven't really researched it, but have been hoping interest rates go up first.
RobLJ is offline   Reply With Quote
Old 01-07-2017, 08:33 AM   #40
Full time employment: Posting here.
Richard4444's Avatar
 
Join Date: Jul 2011
Location: South Florida
Posts: 520
FWIW, I purchased a SPIA through Vanguard in May, 2015. I compared the same SPIA with online annuity companies, and Vanguard kept 1% less of the commission than the online companies, so their payout was 1% more to me. Therefore, if you are considering an SPIA, I would recommend checking it with the same one at Vanguard to see if that is still the case.

Rich
Richard4444 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Single Life Annuity or Joint Survivor Annuity Chief322 FIRE and Money 19 09-27-2015 05:45 AM
Living decisions in late retirement JoeWras Life after FIRE 43 02-21-2013 06:41 PM
OPM retirement Sept late payment BillNOVA FIRE and Money 14 09-03-2012 10:20 PM
Annuity post to end all annuity posts... Midpack FIRE and Money 61 07-09-2008 07:29 AM
Rolling over annuity money to Variable Annuity?? bigcedargrandma Hi, I am... 4 03-20-2008 06:39 AM

» Quick Links

 
All times are GMT -6. The time now is 07:47 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.