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Opinions on longevity annuities
02-21-2015, 06:30 PM
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#1
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Dryer sheet aficionado
Join Date: Feb 2015
Posts: 32
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Opinions on longevity annuities
Not finding much via search. Any opinions?
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02-21-2015, 06:55 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
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__________________
Numbers is hard
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02-21-2015, 07:42 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
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I'm "buying" a longevity annuity from the U.S. government by deferring taking SS until I am 70.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-21-2015, 09:54 PM
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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: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,010
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Quote:
Originally Posted by pb4uski
I'm "buying" a longevity annuity from the U.S. government by deferring taking SS until I am 70.
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+ 1
That's my plan, too.
Of course I'm an optimist
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02-21-2015, 11:56 PM
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#5
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Recycles dryer sheets
Join Date: Feb 2014
Posts: 215
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+2. Very few people like annuities, including me. The FA like them because of the commissions, ie, taking your money.
__________________
DH retired 2014.
Sold my business in '16 and retired 5-17!
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02-22-2015, 07:28 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2014
Posts: 7,326
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I'm a retired actuary (property-casualty, not life insurance) and annuities scare me. A plain ol' deferred annuity is the only type I'd consider buying (maybe purchase one at 65 that starts at 85 if I'm still around) but you have to part with a pretty big chunk of money to get an annuity that will have decent purchasing power in 20 years. I'm 62 now and agree with pb4uski- I'm deferring SS till age 70 and figure that if all my other assets run out (unlikely), that will still be there.
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02-22-2015, 08:07 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Longevity Insurance makes a lot of theoretical sense to me.
"Insurance" should cover low probability/high impact events.
Regular SPIAs mix high probability events (I'll need income for the first 20 years of retirement) with low probability events (I might be the one person in 10 who still needs income after __ years).
Longevity insurance tries to split these events apart. I manage my own income for the high probability first __ years. The insurance company helps me out for the low probability later ___ years.
The practical problem is inflation. I want real purchasing power in those later years, but they are so far off that I don't know what anything will cost. Before the financial meltdown, TIPS offered inflation protection plus a little bit more. So insurers could use TIPS to back an inflation protected longevity product.
Now, TIPS yields are so low that it's very hard to get a price that interests people. Presumably, those yields will go back up some day.
(Full disclosure - I used to work for a "diversified financial services corporation". While there, I pitched four ideas for retirement income products. This was one of them, and it didn't go anywhere with our management. Probably means I'm a lousy sales guy. )
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02-22-2015, 08:31 AM
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#8
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Dryer sheet aficionado
Join Date: Feb 2015
Posts: 32
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Thanks for the replies. I have a FA promoting these. I think I'll slow down a bit.
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02-22-2015, 08:53 AM
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#9
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Full time employment: Posting here.
Join Date: Nov 2009
Posts: 592
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Quote:
Originally Posted by LBrowning
Not finding much via search. Any opinions?
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Don't! (just my opinion)
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02-23-2015, 03:37 AM
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#10
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Dryer sheet aficionado
Join Date: Jun 2012
Location: Los Angeles, CA
Posts: 48
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Quote:
Originally Posted by LBrowning
Thanks for the replies. I have a FA promoting these. I think I'll slow down a bit.
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Never ever go to a non-fiduciary for money advice. They don't legally work for you. They're nothing more than salesmen pushing the products that make themselves the most commission money (at YOUR expense). Annuities are complex smoke and mirrors. They are usually sold with deceptive talking points like "the market is risky" (just diversify into bonds and it isn't) and they'll say look at the high interest payment rate (not the same as return on investment, especially when your surrender value / death benefit value is getting eaten away by high fees and what not).
What were the reasons why this salesmen said that an annuity is good for you I'm curious.
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02-23-2015, 04:17 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 3,222
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Longevity annuities are not the type of annuity that a financial salesman would be pushing if their main goal was do maximize the commission they would receive, variable or index annuities are much more profitable for the salesman. From what I've read because of recent law changes longevity annuities will likely become a common distribution (limited to 25%) offering within most IRA/401K types of plans.
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02-23-2015, 06:18 AM
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#12
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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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Quote:
Originally Posted by Sunset
+ 1
That's my plan, too.
Of course I'm an optimist
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"There comes a time when all optimists should be shot" -- Jára Cimrman, the greatest Czech of all time.
I've never seen much point in buying any form of annuity although I expect social security to eventually show up and I also have several small pensions that look a lot like a SPIA. I worked for them and can only choose to take them or not take them.
__________________
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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02-23-2015, 06:23 AM
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#13
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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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Quote:
Originally Posted by LBrowning
Thanks for the replies. I have a FA promoting these. I think I'll slow down a bit.
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I'm willing to bet that his version of a "longevity annuity" looks a lot like a typical variable annuity that you could get a "guaranteed" income in your retirement years.
__________________
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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02-23-2015, 06:30 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Annuities are dangerous because there are opportunities to hid fees and expenses in their complexity. However, they can be useful in a portfolio if you know exactly what you are buying and don't buy through a salesperson.
I have a deferred annuity with TIAA-CREF and it's currently growing at 4.7%.
Over it's lifetime the return has bee 6% a year. It's not very liquid as it's structured to be turned into a stream of income when I retire, but there is an option to do a "pay out annuity" that pays the account balance out over 10 years.....so I just think of it a a 10 year CD with 4.7% interest. If you are looking for an annuity go directly to an insurance company. TIAA-CREF are a good one to try, although you get the best deal if you already have a retirement plan with them.
__________________
“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
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02-23-2015, 08:40 AM
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#15
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Recycles dryer sheets
Join Date: Jun 2014
Posts: 337
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Quote:
Originally Posted by nun
Annuities are dangerous because there are opportunities to hid fees and expenses in their complexity. However, they can be useful in a portfolio if you know exactly what you are buying and don't buy through a salesperson.
I have a deferred annuity with TIAA-CREF and it's currently growing at 4.7%.
Over it's lifetime the return has bee 6% a year. It's not very liquid as it's structured to be turned into a stream of income when I retire, but there is an option to do a "pay out annuity" that pays the account balance out over 10 years.....so I just think of it a a 10 year CD with 4.7% interest. If you are looking for an annuity go directly to an insurance company. TIAA-CREF are a good one to try, although you get the best deal if you already have a retirement plan with them.
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1+ I don't know much about non-retirement annuities at TIAA, but my "TIAA Traditional" is the only typical annuity I would consider. And in reality, it isn't very typical. I too am credited with 4.6% overall/year and the payout rate, if I took it at 59.5 IIRC, is north of 7%
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02-23-2015, 08:53 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by nun
Annuities are dangerous because there are opportunities to hid fees and expenses in their complexity. However, they can be useful in a portfolio if you know exactly what you are buying and don't buy through a salesperson.
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That depends. Are we talking about a variable annuity with a GMWB? That's complex with plenty of moving parts.
OTOH, a plain SPIA is a simple product that's easy to comparison shop.
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02-23-2015, 09:34 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: May 2013
Location: Les Bois
Posts: 5,761
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they are such a new product I haven't seen but maybe one or two insurers that offer them
I also don't know how they are priced so it's tough to tell if they are a good "deal" or not. I'll probably end up buying one when the time comes. The last thing I want to do is outlive my $$$$.
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You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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02-23-2015, 09:45 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Quote:
Originally Posted by Independent
That depends. Are we talking about a variable annuity with a GMWB? That's complex with plenty of moving parts. OTOH, a plain SPIA is a simple product that's easy to comparison shop.
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Agreed SPIAs are the only annuity I would ever buy.
__________________
“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
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02-23-2015, 09:49 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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I'm pretty sure these longevity products will have to be run through the plan.
The ability to shelter 25% of the balance from MDIB is very appealing, at least to me.
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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02-23-2015, 09:49 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,660
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If you buy an annuity it puts a price on your head. Something to think about.👺
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