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Who purchased an annuity and is glad they did?
12-10-2021, 06:07 AM
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#1
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Recycles dryer sheets
Join Date: Sep 2020
Location: Tampa, FL
Posts: 173
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Who purchased an annuity and is glad they did?
I don't intend this post to be a reshash of the pros and cons of annuities, in my particular case immediate fixed annuities. Most of the posts warning people against purchasing one were written by people who do not have one. My parents, for example, put about one third of their savings in an annuity and were quite happy. I realize the world has changed since then, but I still talk to people who are retired and happy with their purchase. Anyway, has anyone purchased an annuity and his happy and may I ask what percentage of your savings did you put towards the annuity.
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12-10-2021, 06:43 AM
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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 2016
Location: Colorado
Posts: 8,971
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When I was working I maxed out all my contributions to my 401k, IRA/Roth when eligible and was putting tens of thousands into a taxable account every year.I was in the highest tax bracket so I invested in what I believe Fidelity calls a deferred variable annuity. It acts like an IRA with about 30-40 investment options. They charge me .25% a year for the privilege which is cheap. It’s tax deferred and a biggie is no RMDs. I put $150k in 2015, it has more than doubled since then. It only represents a fraction of my assets, but I look at it as long term money and likely won’t touch it for years.
I can pull money out in chunks or when I turn 95 it automatically annuitizes the funds.
So I am happy with it. It gave me one more tax sheltered option with a bonus of no RMD down the road.
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12-10-2021, 07:07 AM
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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: Jun 2003
Location: Florida's First Coast
Posts: 7,723
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We Do not have one ourselves, but interested in people's actual annuity experiences, as OP said those who have one, are happy, and have not sold them. Personally, I think currently interest rates are too low to make them competitive.
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"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
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12-10-2021, 08:13 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Feb 2021
Location: Puget Sound
Posts: 3,258
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We have one, no it was not competitive, but we are happy with it nonetheless. DW was snakebit after the 08 debacle which led to the purchase, and now it will bridge the gap between our retirement and my SS at 70.
__________________
Class of 2023
OMY to 2024
Started pension April 1 2024
Operating Engineer for a commercial plumbing contractor
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12-10-2021, 08:21 AM
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#5
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Dryer sheet wannabe
Join Date: Sep 2021
Location: Trumansburg
Posts: 13
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In the early 2000's I was sold 3 variable annuities by an adviser I trusted at a time when I was focused on other things (my business, my family, etc.). i quickly realized these products are trashed by Bogleheads, people on this forum, Ken Fisher and generally anyone who was paying more attention than I was. Long story short, I now regard them as the best move I ever made financially. They provide us with enough guaranteed annual income that, along with our Social Security, we don't have to tap into any of our other investments allowing them to accrue in "legacy" accounts which will eventually pass to our children when we are gone. We don't worry about the ups and downs of the market, safe withdrawal rates, etc. and are comfortable with an asset allocation in those accounts with over 80% in stocks. Granted these annuity contracts were written long ago and there are no comparable deals now available. We got lucky through no fault of our own. But I sleep better than I ever have.
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12-10-2021, 08:28 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Jun 2021
Posts: 1,577
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I would not buy immediate fixed income annuity because the rates are too low to make sense. However, I bought 2 term deferred income annuities and could not have been happier. I used IRA money, bought at the age of 53 (Yr 2016), starts paying when I turn 60 with 10-year term on the first annuity, and the second will start when I turn 70 for 15 years. I price checked every day for 3 months when we decided to retire and could not buy the 2 term deferred annuities fast enough when I saw the numbers.
- Paid $218K on the 10-year, pays $2819.50 per month for 120 months, starting at age 60.
- Paid $210K on the 15-year, pays $3785.58 per month for 180 months, starting at age 70.
If I die before the annuities start paying, my beneficiaries get back what I had paid into. If an annuity starts paying and I die, my beneficiaries will continue to get payments for the term duration of the contract. For example if I die at 61, my beneficiaries will continue to be paid monthly until the end of that contract, i.e. 9 more years. The one that is supposed to start paying when I turn 70, will be refunded to my beneficiaries.
The last time I checked, I would have to pay $750K for the 2 annuities to start paying out at 60 (next year) and 70 yr old respectively. I know stock market has gone up alot over the past 5 years, however the amount that I paid has increased even faster than if I had invested the money myself.
The annuities form a very small percentage of our investable assets. We look at it as a piece of the income pie - SS, annuities and RMD. Over the next 6 years, we will need to withdraw dividends from our taxable portfolio but after I turn 65, we will not need to touch our investments except my husband's RMDs. The 3 legged stool will be sufficient to support our expenses, which are pretty high.
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12-10-2021, 09:58 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2019
Posts: 3,672
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The problem I have is, just because the owners of a annuity are happy doesn't mean that if instead they had put that money in a Total Market Mutual Fund or an S&P fund that they could withdraw twice as much at 4% than they get from the annuity. That question needs answered before any wisdom can be gleaned whether an annuity can be called a wise decision.
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12-10-2021, 10:03 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2008
Posts: 13,146
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I'm Happy.
Happier I have one in times when the market tanks .
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Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
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12-10-2021, 10:17 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Oct 2019
Posts: 3,672
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Quote:
Originally Posted by easysurfer
I'm Happy.
Happier I have one in times when the market tanks .
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That's great!
Now how about some numbers.
What year did you get the annuity?
How much was invested?
How many years did you get nothing out?
How much per year does it payout?
Just want to say, I have never looked at an annuity, don't have a clue about payout, or anything else. As has been said, a lot of advice is given that they are bad. So let's analyze a specific case or three. As I'm sure time frame matters.
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12-10-2021, 11:39 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Feb 2021
Location: Puget Sound
Posts: 3,258
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we will have held ours for 10 years and it was not at all competitive with the market. 4% is about what it will yield. Once again though, it was about DW's feels, not market wisdom.
__________________
Class of 2023
OMY to 2024
Started pension April 1 2024
Operating Engineer for a commercial plumbing contractor
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12-10-2021, 11:45 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2007
Posts: 14,328
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Quote:
Originally Posted by FloridaJim57
...........Most of the posts warning people against purchasing one were written by people who do not have one............
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That would be me. I don't hit myself in the head with a hammer, either, so I don't know for sure if it hurts.
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12-10-2021, 12:14 PM
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#12
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Recycles dryer sheets
Join Date: Nov 2012
Location: Kearneysville
Posts: 244
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Quote:
Originally Posted by Time2
The problem I have is, just because the owners of a annuity are happy doesn't mean that if instead they had put that money in a Total Market Mutual Fund or an S&P fund that they could withdraw twice as much at 4% than they get from the annuity. That question needs answered before any wisdom can be gleaned whether an annuity can be called a wise decision.
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Folks buy an annuity so they KNOW what their fixed income stream will be. They are happy with it because they can rest easy, regardless of what the stock market does, knowing that they will have that income when they need/want it.
In other words, the annuity is more about peace of mind and financial stability than maximizing return, and if that is what you want to enjoy retirement than it might be well worth giving up some potential gains (1 in hand worth 2 in bush).
Thankfully, I will have a couple of smallish pensions that will fill that role, giving me about $60k annually at 62.
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12-10-2021, 12:22 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 17,914
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My old deferred annuities were beating inflation until this year. "Glad?" I guess I consider these instruments a valuable part of my portfolio. YMMV
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Ko'olau's Law -
Anything which can be used can be misused. Anything which can be misused will be.
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12-10-2021, 12:33 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2003
Location: Florida's First Coast
Posts: 7,723
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I guess I am having a little trouble with the fixed annuity math. Now I have not dug into it in great depth.
I did a little quote research and: For $100k joint life for a 68- and 63-year-old respectively it came to $413 a month. Now, $100k divided by 240 (20 years of months), the result is $416 a month. That is with no return calculated into the mix.
I do understand they offer a certain degree of comfort to the beholder, but that appears to be the only real value. I do not predict my life expectance to be another 20 years, maybe if I am really lucky.
Not justifying anything here, just making an observation.
__________________
"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
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12-10-2021, 12:40 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Feb 2021
Location: Puget Sound
Posts: 3,258
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Ours is a MYGA, so it pays out a finite amount. We are planning a 6 year payout, and the same 100K will put a ~$1950 deposit in the bank every month until I take SS at 70. DW likes that flow thing.
__________________
Class of 2023
OMY to 2024
Started pension April 1 2024
Operating Engineer for a commercial plumbing contractor
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12-10-2021, 12:41 PM
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#16
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Recycles dryer sheets
Join Date: Sep 2021
Posts: 199
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I think part of the challenge in these discussions is the tendency to use too wide a paint brush to paint all the same. There can be important distinctions between immediate vs deferred, fixed or variable, myga, etc. So that context helps when someone relays their situation.
My limited experience is that they are often viewed positively in non-financial matters. For example, I think a common case is a couple in which 1 of the 2 just doesn't have the interest in finances. They may (likely do) have the mental capacity and/or even the aptitude. They simply don't want to spend time on it. And then there are cases of expected cognitive decline based on family history. Annuities can help the 'sleep well at factor' factor.
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12-10-2021, 01:05 PM
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#17
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,076
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DW has one that she put he late husbands insurance payment into. She rolled it over when it matured. The new salesman offered a 9% bonus if she rolled it into another annuity. I read the small print, and found the expenses were much higher. I put it into a spreadsheet, and after year 4, she would be losing money. I gave a copy to the salesman.
The thing is that DW is comfortable with it, so....
However, I got a Brother laser printer thrown into the deal,
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Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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12-10-2021, 01:10 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Aug 2012
Posts: 1,829
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Quote:
Originally Posted by ShokWaveRider
I guess I am having a little trouble with the fixed annuity math. Now I have not dug into it in great depth.
I did a little quote research and: For $100k joint life for a 68- and 63-year-old respectively it came to $413 a month. Now, $100k divided by 240 (20 years of months), the result is $416 a month. That is with no return calculated into the mix.
I do understand they offer a certain degree of comfort to the beholder, but that appears to be the only real value. I do not predict my life expectance to be another 20 years, maybe if I am really lucky.
Not justifying anything here, just making an observation.
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Yes. Therein lies the rub doesn't it. With effective annuity rates so low they are hard to justify. Also they typically have no COLA so your math shows that you could quite literally keep it under the mattress for the 20 years and spend it as you go. However what happens in years 20-30 or more. That is, I guess, the peace of mind factor that some mention. You are basically betting on longevity. I would rather do that with delaying SS. And I don't mean to bring up the ss timing decisions but I think it should be weighed against other forms of annuities.
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12-10-2021, 01:14 PM
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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: Mar 2005
Location: Chicago
Posts: 13,186
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Quote:
Originally Posted by Sniggle
Folks buy an annuity so they KNOW what their fixed income stream will be.
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Well sorta.......... Unless they have one of the very few cola'd annuities that were sold, they only know what their nominal income from the annuity will be. The real income is totally unknown and, as we're seeing now, real income over time is sometimes subject to significant erosion. Inflation risk is a big deal with non-cola'd annuities.
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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12-10-2021, 01:20 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,186
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Yes, please, let's not turn this thread into yet another "when to take SS" thread!
I believe OP is talking about purchased annuities that you buy from an insurance company, not SS or pensions.
While I don't own an annuity, I do believe some annuities, in some circumstances and with the right timing, could be useful. Because my DW is very definitely not into finances or managing money (beyond paying the bills and balancing the checkbook), I'd like to understand what type of annuity might be appropriate to shore up a minimum standard of living for her should I pass first. She's ineligible for my SS and gets none of her own, so that's not part of the equation.
Any suggestions as to what type and measured by what metrics would be appropriate for us?
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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