SPIA Quote

[clifp]

I'd also direct people to the TSP annuity calculator. The rates tend to be on the low side, but it is one of the few online annuity calculators that will give you a modified COLA annuity. I find that useful for comparing the annuity vs inflation protected FIRECalc runs.

Also I am guessing that TSP would be more likely to bail out an insurance company that went broke and reneged on their annuities.

 

[chinaco]

I'd also direct people to the TSP annuity calculator. The rates tend to be on the low side, but it is one of the few online annuity calculators that will give you a modified COLA annuity. I find that useful for comparing the annuity vs inflation protected FIRECalc runs.

Also I am guessing that TSP would be more likely to bail out an insurance company that went broke and reneged on their annuities.

Do you know if that is an actual quote (from an insurance company) or is it just an example using some interest rates?

 

[rescueme]

Are the payouts on SPIA's that much different based on age?

Yes.

Your "return" is calculated on the amount received with each payment, consisting of "interest", along with a portion of the preimum you originally paid.

The older you are when you start the SPIA, the less years (calculated on a normal lifespan) the insurance company has to pay you back.

Therefore, if you purchase an SPIA at age 75, your payments would be much higher than those of a much younger person (as I did at age 59, when I purchased my original SPIA). It's a bit like SS. The older you are when you claim, the higher the payments since you have a reduced lifespan to cover once you file for SS.

That's why a lot of folks say they will wait till they get older to purchase an SPIA - since they assume the payout is based upon some "magic formula". It isn't. It's just a smaller payout period that boosts the payment, without current interest rates having much to do to affect that return of preimum.

 

[rescueme]

What? I have them send me a check each month.

And also return a portion of your principal, as an SPIA does? (I doubt it).

So how much of your income is covered by your "monthly check"?

That's where a lot of folks confuse the two instruments. A CD is an investment vehicle (and can pay a higher rate, over the long term); an SPIA is an income vehicle, along with a small interest component.

 

[clifp]

Do you know if that is an actual quote (from an insurance company) or is it just an example using some interest rates?

Not being fortunate enough to have access to the TSP (Ya ok I know you have to work for Uncle Sam...) I am not positive. My guess it is just a quote but a pretty accurate one.

 

[rescueme]

Remember to always consider deferring SS as a way to purchase an annuity. The SS factors are usually more attractive than private SPIAs.

But together, they work wonders! (I know )...

BTW, I purchased an SPIA in order to delay my SS (from retirement at age 59 till my claim for SS at age 70 - an 11 year span).

SPIA payments after that? Dosen't matter what they are "worth" (due to inflation), which I will take care of when I "trade up" from the SPIA to SS. Monthly SPIA checks (for both DW/me, for the rest of our lives) after I claim SS are just "icing on the cake" ...

 

[73ss454]

And also return a portion of your principal, as an SPIA does? (I doubt it).

So how much of your income is covered by your "monthly check"?

That's where a lot of folks confuse the two instruments. A CD is an investment vehicle (and can pay a higher rate, over the long term); an SPIA is an income vehicle, along with a small interest component.

My CD's pay only interest and I have 3 of them with Pen Fed. and it provides 25% of my monthly spending. They are at 5, 6, and 6 1/4 % and pay about $1400 a month or so. Best thing is that when they end I get my money back.

Still can't wrap my pea brain around the SPIA.

 

[zinger1457]

Do you know if that is an actual quote (from an insurance company) or is it just an example using some interest rates?

The TSP annuity calculator uses the current interest rate that MetLife offers for an annuity for TSP members. The interest rate is adjusted at the beginning of the month. Vanguard use to have a nice annuity calculator that had different inflation rider options, it was linked through AIG's web site. Haven't seen their new annuity quote calculator, it now requires an account login.

 

[rescueme]

My CD's pay only interest and I have 3 of them with Pen Fed. and it provides 25% of my monthly spending. They are at 5, 6, and 6 1/4 % and pay about $1400 a month or so. Best thing is that when they end I get my money back.

Still can't wrap my pea brain around the SPIA.

Of course not. You're looking at your CD's as an investment, while I look at my SPIA as a "consumable" (e.g. portfolio withdrawl).

The focus is different and you cannot equate the two. Two instruments, with two goals...