Tell me the good, the bad, the ugly of NY Life Clear Income fixed annuity.

[Floridatennisplayer]

I am 61 and a half. With my Fidelity planner looking at the singe premium NY Life Clear Income Fixd annuity as an income supplement and investment protection. Will start the withdrawals at age 65 when I plan to retire. My SS Income then will be $40,000. My expenses should run about $55,000. The annuity would represent about 25% of my current IRA savings and fill the gap.

Thoughts?

 

[nun]

I am 61 and a half. With my Fidelity planner looking at the singe premium NY Life Clear Income Fixd annuity as an income supplement and investment protection. Will start the withdrawals at age 65 when I plan to retire. My SS Income then will be $40,000. My expenses should run about $55,000. The annuity would represent about 25% of my current IRA savings and fill the gap.

Thoughts?

What's the "Guaranteed Interest Rate" and the payout rate?
I bet you could do almost as well using a 5 year CD ladder.

 

[rodi]

I'm also curious about the interest rate.

Does it have any inflation adjustment?

SPIAs are a good tool... but not so great in the current low interest environment.

 

[gcgang]

Idk NY Clear. Knowing insurance cos, it's probably not clear.

Your plan is solid, using retirement assets to guarantee a retirement income.

I'd suggest two things:
1). Compare with no load deferred income annuities.
2). Consider parking funds in CDs until you're 65, then buy the annuity. If interest rates go up, you may have higher income.

 

[Independent]

First rule: if you don't understand it, don't buy it. This product is not "clear" to me.

If you understand it, you can compare it to the much simpler option of buying an SPIA when/if you want a non-inflation protected lifetime income.

I looked at this description from NY Life https://www.google.com/url?sa=t&rct...38VQDH6Es2e6sS87Pdp8KQ&bvm=bv.133700528,d.amc

I don't see anything there that would make me want to jump on this.

You can get SPIA quotes here: https://www.immediateannuities.com/b/index-10.html?gclid=CM2wi5T6pc8CFdMvgQodDnoAUw
I see NYL showing up in some of their quotes.
They appear to have contracts where you pay now but defer your income start date, if that's the attraction of the NYL "Clear Income" product.

 

[nun]

The "bells and whistles" on many annuities are there to distract the customer and disguise the real costs of the product

 

[jeffmete]

40k SS is pretty high for a single person?


Sent from my iPhone using Early Retirement Forum
Jeff

 

[Floridatennisplayer]

I'm married

Sent from my SM-N900V using Early Retirement Forum mobile app

 

[OverThinkMuch]

The good: one survey said retirees on fixed incomes were happier than those relying on stock market returns. And if you don't compare alternatives, you're probably happy with it.

The bad: you haven't listed the interest rate in either post. The agent probably avoided discussing it. Compare it to alternatives, it might not look so good.

The ugly: company goes under? So do your payments. And I'll speculate that the commission would be interesting / ugly to know - how much does the person selling you this get as a result of you buying it?

 

[Floridatennisplayer]

I turned over the paperwork to an accounting friend to analyze it for me. I'll get it back next week.

 

[pb4uski]

One thing you should find out is if you want your money back in 1,3 or 5 years how much you would get back. The surrender charge after 5 years is 5%. The crediting rate is probably about 2.5% or so at best but there is a GLWB rider fee of .75%, so net you only earn about 1.75% (or less)

So if you put in $100,000 now and want out in 5 year then you would get about $103,608 or less [($100,000 * (1+2.5%-0.75%)^5)*(1-5%)]... less than a 1% per year net return.

If you put in $100,000 now, wait 5 years and then annuitize you'll receive $6,700/year for life. [($100,000*(1+5%)^5)*5.25%].

OTOH, if you bought a 5 year NYL deferred life annuity through immediateannuities.com with a $100,000 deposit today in 5 years you would receive $622/month or $7,464/year for the rest of your life so IF you're going to buy an annuity the more simple deferred annuity is the better deal.

Deferred Income Annuity
Single Life & Period Certain Options
Income Starts in 5 Years Est. Monthly Income

Life Only (No Death Benefit) (info)
$690

Foresters Life (Rated: A)
$690 /est. mo. income

New York Life (Rated: A++)
$622 /est. mo. income

MetLife (Rated: A+)
$624 /est. mo. income

Lincoln Nat'l Life (Rated: A+)
$587 /est. mo. income

https://www.newyorklife.com/nyl-internet/file-types/Clear-Income-Fact-Sheet.pdf
https://www.newyorklife.com/nyl-internet/file-types/Guaranteed-Lifetime-Withdrawal-Benefit.pdf

 

[pb4uski]

....The ugly: company goes under? So do your payments. And I'll speculate that the commission would be interesting / ugly to know - how much does the person selling you this get as a result of you buying it?

NYL is one of the strongest companies in the country... probably in the top 5 or at worst top 10.

 

[Floridatennisplayer]

I would never buy an annuity expecting to cash out. That's like buying a 5 year cd and cashing out after a couple of years.

My goals for an annuity are simple. Long term income to supplement other resources. Protecting a portion of my overall portfolio from a big market drop.

 

[pb4uski]

If you want long term income then your best bet is to use that money to delay starting SS until you are 70... you'll get a better payout rate than you would buying an annuity and the payments will increase with inflation.

 

[Independent]

If you want long term income then your best bet is to use that money to delay starting SS until you are 70... you'll get a better payout rate than you would buying an annuity and the payments will increase with inflation.

+1

If you're focused on maximizing regular income, deferring SS is usually more cost effective than any private annuity. Your Fidelity planner should have told you that.

 

[Richard4444]

And, FWIW, I have found that when pricing SPIAs, Vanguard offers the best payout of all the competitive insurance companies. I believe they charge 2% commission rather than the standard 3%, so the extra 1% is nice since it is for your lifetime.
Of course, check on your own at the time of purchase.

Rich

 

[pb4uski]

+1

If you're focused on maximizing regular income, deferring SS is usually more cost effective than any private annuity. Your Fidelity planner should have told you that.

However, deferring SS is a negative for the planner if they are paid based on AUM so they would probably not suggest that even if they were smart enough to recognize it.

 

[mathjak107]

no annuity should ever be considered without delaying ss first . you cannot buy any annuity product that gives you what ss does for the dollars you give up delaying .

short term annuity products are really cd's from an insurance company . they have no mortality credits since everyone gets paid out . that makes them very different than lifetime annuity's where those who die pay for those who live .

 

[haha]

I am 61 and a half. With my Fidelity planner looking at the singe premium NY Life Clear Income Fixd annuity as an income supplement and investment protection. Will start the withdrawals at age 65 when I plan to retire. My SS Income then will be $40,000. My expenses should run about $55,000. The annuity would represent about 25% of my current IRA savings and fill the gap.

Thoughts?

IMO this idea onlky makes sense if one is sure that inflation will never return.

Since it is absolutely impossible to be sure of this, an annuity should be a non-starter for anyone who needs the money.Buying annuities in 2016 will one day show up in books.

Ha

 

[VFK57]

IMO this idea onlky makes sense if one is sure that inflation will never return.

Since it is absolutely impossible to be sure of this, an annuity should be a non-starter for anyone who needs the money.Buying annuities in 2016 will one day show up in books.

Ha

Agree. I think that higher than the Feds target inflation is around the corner. Some economists point out on China's Yuan entering the world reserve currency status on Oct 1, 2016 as the cause. Reduction in other reserve currencies demand for trade by the world community will cause flow of unneeded Euros, US$, Yens etc back to original countries causing higher than normal inflation.

 

[nun]

The crediting rate for this NYL annuity would be good to know. In an example they use 2.1% for the first 7 years and then 1% thereafter.....naturally this is given in small print. A single life policy for a 65 year old pays out 5.25%, that seems low although the literature makes no distinction between male and female, and 4.75% for a couple. There are also the fees to consider of 0.75%. So I do not like this annuity based on the literature.

To get your $15k at age 65 let's assume you buy a deferred annuity at age 60 with $285k and with 2% interest it will be $315k in 5 years. The joint lifetime annuity will pay 4.75%, which is $15k. Now what about just buying a CD ladder with your $285k. At 2% interest that will also be $315k when you start taking $15k out at age 65. With just 2% interest (ie a 5 year CD today) you can take that $15k out for 27 years and I think there's a strong probability that you will be able to buy new CDs with higher rates sometime in the future. There's a 33% chance of either you or your wife outliving the CD income at 2% interest, but a 67% of there still being money in the CD accounts to pass on to your heirs. If you want the longevity insurance of an annuity at those odds then at least look for one with slightly better terms.

As a comparison the current crediting rate for the TIAA-Traditional deferred annuity is 3.75%. Unfortunately, it's only available to people with TIAA retirement accounts as it's terms are better than most. I own one of these and it's growing at 4.8% this year with a guaranteed minimum of 3%. I use it as a sort of 10 year CD in my portfolio as it has a 10 year payout term. I plan NOT to annuitize that account and will just take the interest as income and leave the accumulation to my heirs.

TIAA-CREF - Retirement Annuity (RA)

 

[nun]

I made a mistake in the previous post. The Income Base is used to calculate the annuity income and that is your initial premium compounded by 5% each year. It's different from the amount of money you can access at surrender which is the Accumulated Value. Unfortunately you only have 3.5 years to compound at that rate.

So you will have 3.5 years of compounding at 5% meaning your initial premium will be $265000 to get to the $315k at 65 needed to generate $15k for a couple at 4.75% payout. The 2% CD will now support a $15k payout starting at 65 until age 90.

 

[pb4uski]

nun, in post #11 I provided some calcs on what would happen if he bought $100k and deferred 5 years and either surrendered or annuitized assuming a 2.5% crediting rate. Not a great deal IMO.

 

[nun]

nun, in post #11 I provided some calcs on what would happen if he bought $100k and deferred 5 years and either surrendered or annuitized assuming a 2.5% crediting rate. Not a great deal IMO.

Yes I saw that. The good thing in the NYL annuity is the 5% annual increase in the amount used to calculate the income. But the OP only has 3.5 years of that. The bad is the joint life 4.75% payout rate quoted in the NYL literature.....also the 0.75% fee is a kick in the gut.


So if you put in $100,000 now, wait 3.5 years and then get a joint life annuity the OP will receive $5634/year for life. [($100,000*(1+0.05)^3.5)*4.75%].

If the OP buys a 3.5 year NYL joint life deferred life annuity through immediateannuities.com with a $100,000 deposit today in 3.5 years they would receive 5844/year. So again the simple deferred annuity wins.

Still, I'd rather defer SS for the longevity insurance and use a CD/short bond ladder for income and keep access to principal and have the chance to take advantage of interest rate rises rather than buying either of the annuities.

 

[pb4uski]

....Still, I'd rather defer SS for the longevity insurance and use a CD/short bond ladder for income and keep access to principal and have the chance to take advantage of interest rate rises rather than buying either of the annuities.

+1