Longevity annuity... QLACs

[LARS]

Something to consider if rates ever increase...

Retirement: How a Qualified Longevity Annuity Contract Can Make Your Money Last


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[Big_Hitter]

is any insurer offering that product?

 

[Gill]

is any insurer offering that product?

Yes, absolutely. Check Vanguard's Website or immediateannuities.com.
Bruce

 

[ETFs_Rule]

No. Stay away from annuities.

 

[alaska55]

ETFs_rules you are a broken record. You know it all. SPIA can be right for certain people.

 

[mathjak107]

yep , you know once someone lumps all annuity products together with one comment their knowledge on the subject is pretty thin .

you can't possibly read the study's and research on the use of spia's and your own investing and just shoot comments from the hip like that .

 

[Gill]

I love his conclusion, "Stocks and bonds together are not risky". Oh, really? That 12 minute tape is one of the most biased, sensationalized and weak arguments against annuities ever presented. He doesn't even address the caveat that says most people should not invest more than about 25-50% of their portfolio in SPIA's. Also, he lumps all forms of annuities together.
Bruce

 

[ETFs_Rule]

ETFs_rules you are a broken record. You know it all. SPIA can be right for certain people.

Right for who? People who want to gradually start living in poverty by the time they get to be about 83.

you know once someone lumps all annuity products together with one comment their knowledge on the subject is pretty thin.

Empty talk.

 

[ETFs_Rule]

I love his conclusion, "Stocks and bonds together are not risky". Oh, really? That 12 minute tape is one of the most biased, sensationalized and weak arguments against annuities ever presented. He doesn't even address the caveat that says most people should not invest more than about 25-50% of their portfolio in SPIA's. Also, he lumps all forms of annuities together.
Bruce

Have you ever studied the performance history of bonds and stocks or are you an insurance salesman? You guys always spread fear by talking about stocks alone. Bonds and stocks balance each other out. When stocks fall money runs to the safety of bonds. Money has to go somewhere.
That's like saying that football teams should have 25% - 50% BAD players. Nonsense.
What annuities do you like? Indexed? Total rubbish. Variable? Junk. SPIA's? Get ready for poverty.

 

[Independent]

Have you ever studied the performance history of bonds and stocks or are you an insurance salesman? You guys always spread fear by talking about stocks alone. Bonds and stocks balance each other out. When stocks fall money runs to the safety of bonds. Money has to go somewhere.
That's like saying that football teams should have 25% - 50% BAD players. Nonsense.
What annuities do you like? Indexed? Total rubbish. Variable? Junk. SPIA's? Get ready for poverty.

Who are "you guys"? In this poll, only 19% of the respondents have more than 75% stocks.

 

[aja8888]

Let's see....buy at 65, wait until 85 to collect....(from the article):

"For example, a 65-year-old man who invests $50,000 in an immediate annuity would begin collecting roughly $285 a month starting now for the rest of his life. But if that 65-year-old invests the same $50,000 in a QLAC and delays taking payments until age 85, he would receive almost $2,250 a month for the rest of his life."

Life begins at 85? Where? In a nursing home (certainly not on the golf course)?

 

[Independent]

Let's see....buy at 65, wait until 85 to collect....(from the article):

"For example, a 65-year-old man who invests $50,000 in an immediate annuity would begin collecting roughly $285 a month starting now for the rest of his life. But if that 65-year-old invests the same $50,000 in a QLAC and delays taking payments until age 85, he would receive almost $2,250 a month for the rest of his life."

Life begins at 85? Where? In a nursing home (certainly not on the golf course)?

You're correct, that's a bad example. Using the same numbers, I can do this instead:

A 65-year old man who pays $150,000 for an SPIA would get about $10,260 each year for the rest of his life.
But, if that 65-year old man pays $19,000 for a deferred no-surrender-value annuity, he would get about $10,260 per year starting at age 85 and continuing for the rest of his life.
That would leave him with $131,000 to provide income for 20 years, if he lives that long.
Or to provide a lump sum (some portion of the $131,000) for medical or personal care if he develops serious health problems and dies long before 20 years.
Or, to provide an inheritance for his kids if he dies suddenly before 20 years.

I'm not saying the deferred annuity is necessarily better, just that this example shows the trade-offs more clearly.

 

[Pbkmaine]

Why not just wait until 70 to collect Social Security? That way you get a 24% increase in payment with COLA.

 

[hnzw_rui]

Why not just wait until 70 to collect Social Security? That way you get a 24% increase in payment with COLA.

Calculating the numbers, SS does seem to be the cheapest longevity insurance you can buy (assuming you're SS eligible).

 

[Gill]

It must be nice to be in the entertainment business and live in a world where everything is black or white. Love those one word answers.

Bruce


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[bmcgonig]

You're correct, that's a bad example. Using the same numbers, I can do this instead:



A 65-year old man who pays $150,000 for an SPIA would get about $10,260 each year for the rest of his life.

But, if that 65-year old man pays $19,000 for a deferred no-surrender-value annuity, he would get about $10,260 per year starting at age 85 and continuing for the rest of his life.

That would leave him with $131,000 to provide income for 20 years, if he lives that long.

Or to provide a lump sum (some portion of the $131,000) for medical or personal care if he develops serious health problems and dies long before 20 years.

Or, to provide an inheritance for his kids if he dies suddenly before 20 years.



I'm not saying the deferred annuity is necessarily better, just that this example shows the trade-offs more clearly.

That 10260 at 85 doesn't account for inflation in the intervening 20 years. Maybe you have to double the 19k for 3% inflation?

If you are thinking of buying an SPIA or a deferred SPIA then the QLAC does offer what can be a nice benefit of excluding up to 135k (I think) of your IRA from RMDs which is the real benefit of a QLAC.

I never understood the rejoinder that says "I have SS therefore don't need annuity" If your SS is large enough to cover your basic expenses great. Some others can't say that. That's where the SPIA or DPIA comes in. One big insolvable in retirement planning is how long you are going to live so u don't run out of money. A SPIA or DPIA allows you to put that aside to a great degree. Yes. For a price. But some like that choice.


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[aja8888]

That 10260 at 85 doesn't account for inflation in the intervening 20 years. Maybe you have to double the 19k for 3% inflation?

If you are thinking of buying an SPIA or a deferred SPIA then the QLAC does offer what can be a nice benefit of excluding up to 135k (I think) of your IRA from RMDs which is the real benefit of a QLAC.

I never understood the rejoinder that says "I have SS therefore don't need annuity" If your SS is large enough to cover your basic expenses great. Some others can't say that. That's where the SPIA or DPIA comes in. One big insolvable in retirement planning is how long you are going to live so u don't run out of money. A SPIA or DPIA allows you to put that aside to a great degree. Yes. For a price. But some like that choice.

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Look at this life expectancy table and tell me why anybody at 65 would count on dumping a huge sum in this annuity and be planning on getting benefits starting at 85:

USA Life Expectancy Male

Maybe I've been to too many funerals of family and friends who never made it to 85. I'd rather have total control the funds for the 20 years between 65 and 85.

 

[bmcgonig]

Look at this life expectancy table and tell me why anybody at 65 would count on dumping a huge sum in this annuity and be planning on getting benefits starting at 85:



USA Life Expectancy Male



Maybe I've been to too many funerals of family and friends who never made it to 85. I'd rather have total control the funds for the 20 years between 65 and 85.

According to this

https://rslic.metlife.com/lic/corpLongevity.do?target=calculate

A healthy 65 yr old man who exercises regularly has a 50% chance of living past 85. He has a 25 % chance of living past 91. That's why people buy annuities. Insurance against that.


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[ETFs_Rule]

Who are "you guys"? In this poll, only 19% of the respondents have more than 75% stocks.

You insurance salesmen.

 

[Independent]

That 10260 at 85 doesn't account for inflation in the intervening 20 years. Maybe you have to double the 19k for 3% inflation?

If you are thinking of buying an SPIA or a deferred SPIA then the QLAC does offer what can be a nice benefit of excluding up to 135k (I think) of your IRA from RMDs which is the real benefit of a QLAC.

I never understood the rejoinder that says "I have SS therefore don't need annuity" If your SS is large enough to cover your basic expenses great. Some others can't say that. That's where the SPIA or DPIA comes in. One big insolvable in retirement planning is how long you are going to live so u don't run out of money. A SPIA or DPIA allows you to put that aside to a great degree. Yes. For a price. But some like that choice.

Yes, I think that anyone actually buying a "Longevity Annuity" should think about inflation. Of course, I also think that anyone buying a regular SPIA should think about inflation. The very low yields on TIPS make inflation-adjusted private annuities very scarce. But, the QLAC at least gives you the option of guessing an inflation rate and buying accordingly.

I kind of assumed that the buyer really wants income to cover current expenses. So RMDs would be kind of irrelevant.

If we want to think about RMDs, I think buying an SPIA for $150,000 takes $150,000 out of your RMD base. But, it also generates $10,260 of taxable income (in this example). So no real tax savings.

Buying the QLAC for $19,000 takes $19,000 out of your RMD base. So that generates slightly lower RMDs in the near term. Offset, of course, by the additional taxable income in later years.

 

[Independent]

You insurance salesmen.

I'm pretty sure that sales of all kinds are prohibited on this forum.

If you can find a post where somebody is trying to earn a commission by selling something to another member, you should report that poster to a moderator.

 

[alaska55]

Yes I know annities are not needed for everybody but for someone with modest IRA let's say 500k including non-qual money with SS of about 24k at FRA and does not want to work til 65. Its sort of hard to wait til 70 to collect SS(me). I also have very small pension of $260 month. At 60 I'm debating on using 25% of portfolio for a deferred annuity starting between 65 and 70. I'm very heathly I work out 4 or 5 time a week which includes running about 30 miles a week. So I worry about running out money. A couple of bad years in the market and I would be in trouble. By the way I'm single so that makes it a lot easier to figure out when to take SS and the 500k will last longer with only one person. Now if I only had a couple million I could forget about a annuity.

 

[Independent]

Yes I know annities are not needed for everybody but for someone with modest IRA let's say 500k including non-qual money with SS of about 24k at FRA and does not want to work til 65. Its sort of hard to wait til 70 to collect SS(me). I also have very small pension of $260 month. At 60 I'm debating on using 25% of portfolio for a deferred annuity starting between 65 and 70. I'm very heathly I work out 4 or 5 time a week which includes running about 30 miles a week. So I worry about running out money. A couple of bad years in the market and I would be in trouble. By the way I'm single so that makes it a lot easier to figure out when to take SS and the 500k will last longer with only one person. Now if I only had a couple million I could forget about a annuity.

I'd suggest crunching the numbers. When I looked at it, deferring SS provided a much better return than buying a private SPIA.

 

[BobbinChina]

I bought my QLAC and feel quite lucky to have had the chance to do so. Lots of goofy things being said in this forum. Like advising to choose Soc Sec at age 70....why in the world would this be set up as a "choice"? I'm waiting to age 70 to start that AND I bot the QLAC. That way I can more freely spend between age 68 (now) and age 85 knowing that my old age is already covered. Less to worry about you know. And then there is the failure, that many show, to think of the QLAC as insurance against longevity. I'm not upset if my house doesn't burn down after I bot insurance. AND there is yet another goofy idea from my perspective. We can all look at our heredity as a clue to our possible life span. With my 2 grandmothers dying in their 100's and a mother alive at age 95 and doing well, I just might have reason to consider long life a risk that I face. Yes there are actuarial tables and they have value but we can look at other factors too. And the fact that we can take IRA money to buy this product without taking a taxable distribution (added to the reduced RMD value) just really all works for me.

And if I die at age 84 and collect no proceeds from the QLAC then I'll have had all the money I needed to get to that age and I can't take it with me, so no harm done, right? This protects my children from the risk of having to support Mom in her really old age.

So I guess I'm saying thank the government for allowing this option and think for yourselves whether it works or not. If you are age 60 and have almost no retirement money then obviously it does not work for you. I did an excel sheet to figure out how how to put in the QLAC (based on desired payout) and I bought a policy with CPIU increases. Sounds pretty obvious to me.

 

[nun]

A 65 year old puts $50k into a 20 year deferred annuity and assuming he starts income at 85 and lives a further 6 years, to generate $27k a year for that last 6 years the IRR per year over the whole 26 years is about 5%. There is also the tax advantage. Of course a lot of the IRR will be mortality credits, but you're buying insurance and if you aren't ok that the potential of your early death will fund other people's retirement, then you shouldn't buy an annuity.