Won the game, considering an annuity

[Emerson11]

Gosh, if you have capital equal to 90 times your annual spending, I'd suggest spending more time thinking about a legacy and/or ways to enjoy what you've earned. I wouldn't waste time worrying about the minutiae of security.

[Skitso999]

Double your money using indexes, then take out half and place it somewhere you consider safe. Sounds like you've done well so far. Why not do more of it, and have so much money it really won't matter if you have a big dip?

Annuities have way too much commission and expenses for my taste.

Alternative is, an annuity through Schwab, Fidelity, or some other LOW cost provider with LOW commissions.

[scrinch]

Quote:

Originally Posted by 4nursebee It seems like the bulk of people here are against the idea. It seems like nobody does this, hence others can't answer about regrets. Thank you for sharing your thoughts. A CD ladder would not provide the monthly "income". I appreciate the perspective of those older and wiser, including insurance folks. For our values, I don't see how alternatives suggested would offer peace of mind. Not sure what we will do. Might just stick with equities.

Sorry I'm late to the party here. I think in reading the responses by forum members and OP that what we have here is a lack of understanding about what aspect of an annuity you perceive would give you the "peace of mind." With an immediate annuity, an insurance company takes your capital, regularly increments it with a small interest rate, writes a check to you every month from this "annuity account" that feels to you like income, and then insures you against outliving this capital+interest after 30 years or so when your own "annuity account" has been paid back and the "balance" has gone to zero. The longevity insurance is paid for actuarially, by using leftover capital from those who die early to keep paying those who stubbornly refuse to do so.

Responses so far have pointed out that you can invest this same capital at higher return and at lower risk in FDIC-insured accounts. They have also pointed out that you can set it up with a bank or brokerage to send you the check each month from your own capital accounts that feels like regular income, just like an annuity payment. As for longevity insurance, you have plenty of money to self-insure...you're not likely to outlive your actuarial demise by more than 20 years or so. It sounds like you have enough money to cover another 70 years of expenses.

In reading your responses, it doesn't sound like any of these is the aspect that gives you peace of mind though. I suspect that what does give you that peace is taking the money out of your hands and making it someone else's responsibility to take care of the money and pay you, no matter what, until your dying day. If so, I understand that feeling...now it's not just me looking after our financial well-being, I've got an insurance company taking care of us too. In fact your annuity with the insurance company is probably about equally or slightly more at-risk compared to a self-managed FDIC-insured account, but the risk is very low for both of them. So I think the answer you're looking for is whether the lack of liquidity and lower interest rate inherent in an immediate annuity is sufficiently offset by the peace that comes from knowing that someone else is on the hook to pay your expenses as long as you live. It sounds like in your case it probably is. And you can certainly afford to forego the little additional interest that you would get from alternate investment in bank CD's (at least in the absence of sustained high inflation). I say go for it.

[rrs26ja]

Sounds like you did well for yourself. I also managed my own money for 30 years. After I retired my wife was concerned because she has no knowledge or interest in managing the money. We went with investment company whose focus is preservation of capital. Part of what they invested for us is in two different annuities. One is invested in SP 500 the other tracks the NASDAQ. The most we can lose is 10% no matter how bad the market does.

[pb4uski]

A good way to test that... call and tell them that you are thinking about cashing out and ask what you would receive if you did a full surrender and see if it is more than 90% of what you put in.

I hope it works out for you but you might be surprised.

[Rosedala]

Quote:

Originally Posted by 4nursebee what is an FDIC fixed asset and what does it yield? I'm not really concerned with anything! But, a guaranteed monthly check for the rest of our lives would improve our great peace of mind.

Have you thought of "Charity Gift Annuities"? Nothing more secure than these annuities and with generous interest percentages according to your ages...while helping your favorite charities. Google them to see the details. Good luck.

[BoodaGazelle]

Quick questions.
1. Re: 90X. Does that mean total NW (including RE) divided by annual spending? Mine is 56X. Does that mean I also "won the game"? (no children, can spend it all)
2. Re: FDIC insurance. Aren't many of the bad things that can happen at risk primarily *due* to the government? [hyper-inflation, asset stealing due to having "too much", etc.] How can FDIC insurance provide peace of mind against those things? All of our money except RE is in Fidelity, with approx. 50/50 allocation.. I am 64 and DW is 63. Plan on deferring SS at least a couple more years.

[Out-to-Lunch]

Quote:

Originally Posted by BoodaGazelle Quick questions. 1. Re: 90X. Does that mean total NW (including RE) divided by annual spending? Mine is 56X. Does that mean I also "won the game"? (no children, can spend it all)

IMHO, yes. You seem to have it made!

Quote:

2. Re: FDIC insurance. Aren't many of the bad things that can happen at risk primarily *due* to the government? [hyper-inflation, asset stealing due to having "too much", etc.] How can FDIC insurance provide peace of mind against those things?

Sorry, this seems like a non-sequitur?

[BoodaGazelle]

Quote:

Originally Posted by Out-to-Lunch IMHO, yes. You seem to have it made! Sorry, this seems like a non-sequitur?

I guess I always thought of FDIC insurance as just in case your local bank failed. Is that still the main reason people on ER would recommend putting ones assets in (say) CDs?

[scrinch]

Quote:

Originally Posted by BoodaGazelle I guess I always thought of FDIC insurance as just in case your local bank failed. Is that still the main reason people on ER would recommend putting ones assets in (say) CDs?

Potential alternative investments to CD's are stocks, bonds, real estate, metals, etc. Bank CD's are perceived to have lower risk of capital loss and more predictable gains than in those other investments. So that stability would be the rationale for investing in CD's. The FDIC insurance for the CD mitigates the risk of local bank failure, so is an aspect of a CD that makes it even safer than an uninsured bank deposit. But you're right, with a CD there is still the risk of hyperinflation, zombie apocalypse, and meteor strike even with FDIC insurance.

[BoodaGazelle]

I have lots of "zombie apocalypse" protection devices. :-)