Looking for comparative info on annuities

[TNBigfoot]

OK, so after several years of building spreadsheets and using on-line planners to model retirement scenarios...I'm getting closer to pulling the trigger. For a second opinion, I hired a planner on a fee only basis for a review and am happy with the outcome.

In modeling the income plan, I was presented with examples of fixed immediate and fixed index annuities for income the first ten years.

I always like to comparison shop and am looking for the forums input on any good resources to model/explore other sources of annuities for window shopping.

Thx in advance

 

[pb4uski]

I'm not sure it is worth the bother when you can easily build your own.

According to immediateannuities.com a $100,000 premium in a 10 year certain SPIA would pay $918/month... an internal rate of return of 1.95%.

You can just build an CD ladder that will do just as well and will have access to that money at anytime if for some reason you need it... with the SPIA it is locked up. With a CD ladder, if rates increase you can cash out accepting the early withdrawal penalties and redeposit at higher rates. i would not bother with a SPIA.

And index annuities are worse.. high fees and all sorts of gotchas.

 

[Independent]

+1

 

[TNBigfoot]

+1

 

[COcheesehead]

+1000

 

[nun]

Yep + as well.

Commercial annuities are a really bad deal right now. You are better off using a CD ladder or a stable value fund if you have one in a 401k.

 

[DrRoy]

You could also do a ladder with investment grade bonds and trade some risk for higher return.

 

[Gill]

OP, don't let the above comments turn you off from a possible immediate annuity. There is no other arrangement that can guarantee you a return for life, and it is impossible to structure a similar arrangement on your own. I spent my career deeply involved in personal finance for clients and I am happily enjoying the returns from a number of immediate annuities.
Gill

 

[mickeyd]

Another annoying aspect of commercial annuities is the fact that you are never comparing apples with apples since there are so many things that are different in each one.

 

[2017ish]

OP, don't let the above comments turn you off from a possible immediate annuity. There is no other arrangement that can guarantee you a return for life, and it is impossible to structure a similar arrangement on your own. I spent my career deeply involved in personal finance for clients and I am happily enjoying the returns from a number of immediate annuities.
Gill

My reading is that OP was talking about fixed term annuities ("for income the first 10 years").

In that particular instance, I would hesitate to grab a simple immediate annuity over a CD ladder.

OTOH, if a lifetime simple annuity, I generally agree with you (depending upon terms, and age, etc.). We'll be looking closely at that option in a decade or so, when anticipatory mortality credits make the payout more attractive.

Either way--NO to an index annuity, as detailed by pb4uski.

 

[samclem]

I spent my career deeply involved in personal finance for clients and I am happily enjoying the returns from a number of immediate annuities.

Ones you sold to clients?

There's no getting around the observation that this is, from an historical perspective, a terrible time to buy annuities based on their paltry returns. If I were tempted at all by the allure of an annuity, I'd probably put my funds in something else that is safe and wait for interest rates to return to something near their historically normal level. An immediate annuity with inflation protection can be a good way for a retiree to meet their baseline "must have" monthly spending requirements if the can't get there another way (SS, a secure pension, etc), especially if their portfolio is small relative to these needs (i.e. 4% won't meet them), they have no desire to pass the money on to heirs, and they are okay with the loss of spending flexibility.

Fixed annuity yields tend to mirror those of Treasuries. Those who bought annuities 10-20 years ago are probably quite happy with their returns in today's low fixed-return environment. But those buying annuities today with a fixed return are much less likely to be happy when rates return to historic norms.

 

[jazz4cash]

I think maybe the OP is gone but to answer the question directly search for "annuity steakhouse".

 

[pb4uski]

OP, don't let the above comments turn you off from a possible immediate annuity. There is no other arrangement that can guarantee you a return for life, and it is impossible to structure a similar arrangement on your own. I spent my career deeply involved in personal finance for clients and I am happily enjoying the returns from a number of immediate annuities.
Gill

From what the OP wrote it sounds like he is looking for an annuity certain and not a life contingent annuity.

 

[Gill]

Ones you sold to clients?

Funny, but far from it. If you've read my earlier posts you'd know I was EVP Of a major trust institution.
Gill

 

[nun]

I would not buy a fixed term annuity today and my string inclination would be to avoid life time annuities too as it just takes too long for the mortality credits to drag the IRR out of the basement. The insurance aspect of a lifetime annuity will always be a positive, but right now the negatives win......I say that having just rolled a lump sum into an employer pension, but that came with a COLA and a 7% IRR if I live an average lifespan. That's an lifetime annuity worth having.


Sent from my iPhone using Early Retirement Forum

 

[COcheesehead]

OP, don't let the above comments turn you off from a possible immediate annuity. There is no other arrangement that can guarantee you a return for life, and it is impossible to structure a similar arrangement on your own. I spent my career deeply involved in personal finance for clients and I am happily enjoying the returns from a number of immediate annuities.
Gill

Perhaps you are not aware of the new tools and products available and thus you think our advice is bad. There are, however, new tools within companies such as Fido to structure bond and cd ladders to create a check a month, quarter or almost however you want it with liquidity and flexibility that would be impossible with an annuity.

 

[Gill]

Perhaps you are not aware of the new tools and products available and thus you think our advice is bad. There are, however, new tools within companies such as Fido to structure bond and cd ladders to create a check a month, quarter or almost however you want it with liquidity and flexibility that would be impossible with an annuity.

Plain and simple, such vehicles don't offer the guarantee of a SPIA.
Gill

 

[COcheesehead]

Plain and simple, such vehicles don't offer the guarantee of a SPIA.
Gill

Nor the inflexibility or illiquidity and virtually commission free at a $1 bond at Fido.

 

[Gill]

Nor the inflexibility or illiquidity and virtually commission free at a $1 bond at Fido.

Sorry, I don't understand what you're saying.
Gill

 

[pb4uski]

Plain and simple, such vehicles don't offer the guarantee of a SPIA.
Gill

You do realize the OP seems to be looking for a 10 year period certain annuity and NOT lifetime payments, right? If so, please explain to me the advantages of a period certain annuity over a CD or bond ladder..

 

[TNBigfoot]

OK, here's some more detail on the income strategy I was presented:
For first 6 years fund a Money Mkt with ~$215k to supplement income
For yrs 7-12, fund a fixed annuity with $120k to supplement income
For yrs 12 on, fund a Fixed Index Annuity with $264k to generate $22k
for life

For the fixed annuity, IR is 2.6% and generates $146k total income over 10 yrs. On the other hand if I build a CD latter using FIDO tool, I would only build $136k over 10 yrs. I would have to invest $140k for the same ttl return. I know the CD ladder has the advantage of liquidity but the annuity is tax deferred. So how does the CD ladder Win? I do recognize we are in a low interest rate environment.

 

[Gill]

You do realize the OP seems to be looking for a 10 year period certain annuity and NOT lifetime payments, right? If so, please explain to me the advantages of a period certain annuity over a CD or bond ladder..

No, I didn't think that was clear from his post.
Gill

 

[Ready]

I would rather invest in a municipal bond fund for tax free returns than invest in an annuity where I have to lock up my money and live with the restrictions and fees. If interest rates go up, annuities might look a little more attractive. It seems unlikely that rates will go down, so I would wait and see where interest rates go before making any decisions.

 

[COcheesehead]

OK, here's some more detail on the income strategy I was presented:
For first 6 years fund a Money Mkt with ~$215k to supplement income
For yrs 7-12, fund a fixed annuity with $120k to supplement income
For yrs 12 on, fund a Fixed Index Annuity with $264k to generate $22k
for life

For the fixed annuity, IR is 2.6% and generates $146k total income over 10 yrs. On the other hand if I build a CD latter using FIDO tool, I would only build $136k over 10 yrs. I would have to invest $140k for the same ttl return. I know the CD ladder has the advantage of liquidity but the annuity is tax deferred. So how does the CD ladder Win? I do recognize we are in a low interest rate environment.

Did you try the same exercise with a bond ladder?
Also at the end of 10 years the money is yours. Not so with the annuity.

 

[TNBigfoot]

Haven't gotten to a bod ladder yet but will most certainly. For this portion of the income plan. I'm looking for safety and reducing sequence of return risk. So perhaps municipal or state issued bonds that are guaranteed would be appropriate.