rescueme
Thinks s/he gets paid by the post
Exactly what I (we) did ...I think I would buy SPIA annuities to cover the basics if I didn't have the pensions.
Exactly what I (we) did ...I think I would buy SPIA annuities to cover the basics if I didn't have the pensions.
At the time of my retirement (age 59), we annuitized 10% of the value of our joint retirement portfolio value through an SPIA, to provide me with a base income, that was not influenced by the varience of the market.
Almost five years later in retirement, I would say (for us) it was one of the "smart" financial decisions in our lives.
For us, it was the fact that I retired early (at least earlier than most) without a pension, and with the decision to delay SS till age 70 - an eleven year span.
This allows me to delay SS till age 70, thus maximize my DW's survivor benefits, allow me to accumulate an increase in SS by 8%/year (in addition to any COLA's during that period) from ages 66-69, and be able to claim against DW's benefit at age 66 at a 50% rate (we're the same age). BTW, that will be a "superior annuity", COLA adjusted, and our current SPIA? Just added as additional income stream.
I'll be the first to say that an annuity is not for everybody; you need to have a reason (well thought out) to persue such an action. Part of the decision was made by running different scernieos through the use of various (free) forcast models, such as FireCalc, RIP (Fidelity), and FE (Vanguard) to see if the option would be applicable to your personal situation. In our case (only), the addition of the SPIA greatly increased the return, and the viability of our personal plan.
BTW we have no regrets, and will seriously consider additional SPIA income streams as we age...
You do realize that the distributions from a single payment immediate annuity include a return of your original investment. So the 8% is not annual earnings - it's a combination of earnings/gains plus partial return of your own money. I suspect investment return is more like 3% these days, frozen forever even if the market rises.Sorry, I don't get it. Remember I don't work in finance so please be patient with me... If I enter "Female", 65 years, $100,000 (as an example) on this website Immediate Annuities - Instant Annuity Quote Calculator. I get $674 (about 8%) Guaranteed Income for a 15-Year Period Certain Only. Are you saying that your SIL got 0.08%, or did she get 8% ? Is it net or gross ? Is it paid monthly?
$100K, @ $674 monthly for 15 years gives 2.68% annual rate of return according to my HP 10B (before tax).Sorry, I don't get it. Remember I don't work in finance so please be patient with me... If I enter "Female", 65 years, $100,000 (as an example) on this website Immediate Annuities - Instant Annuity Quote Calculator. I get $674 (about 8%) Guaranteed Income for a 15-Year Period Certain Only. Are you saying that your SIL got 0.08%, or did she get 8% ? Is it net or gross ? Is it paid monthly?
I would agree.Now is one of the worst times to sign up for an annuity, if you can possibly avoid or delay.
I'm glad your annuity is working out well for you. But I'll point out that your annuity was only one of a number of paths you could have chosen to fund the years while you delayed SS.
$100K, @ $674 monthly for 15 years gives 2.68% annual rate of return according to my HP 10B (before tax).
So would I (since YB's on my ignore list) ...YB-
I'd be interested in seeing your list of other paths given a situation similar to Rescue's ( and many of the rest of us).
You do realize that the distributions from a single payment immediate annuity include a return of your original investment. So the 8% is not annual earnings - it's a combination of earnings/gains plus partial return of your own money. I suspect investment return is more like 3% these days, frozen forever even if the market rises.
IMHO, your plan makes sense.I plan to look at annuities for small percentages of my portfolio (5-10% per annuity) every 5 years starting at age 60. So at age 60, if the rates are good, I might annuitize 5%. At age 65, another 5%, age 70 add 10%, etc. As I age, I would like to have less and less of my portfolio subject to poor financial judgement and/or scammers.
So there are no poor financial judgements and/or scammers associated with annuities?I plan to look at annuities for small percentages of my portfolio (5-10% per annuity) every 5 years starting at age 60. So at age 60, if the rates are good, I might annuitize 5%. At age 65, another 5%, age 70 add 10%, etc. As I age, I would like to have less and less of my portfolio subject to poor financial judgement and/or scammers.
$100K, @ $674 monthly for 15 years gives 2.68% annual rate of return according to my HP 10B (before tax).
YB-
I'd be interested in seeing your list of other paths given a situation similar to Rescue's ( and many of the rest of us).
There are risks involved with everything in life.So there are no poor financial judgements and/or scammers associated with annuities?
Your post:Yes, I got this, thank you Rich.
...suggests otherwise. You are comparing annuity distributions (earnings plus return of principle) with returns of 3% (CD interest alone).Thanks Michael. When I enter 62 year old Male, and, for example, Deposit $100,000 in Indiana in the same website http://www.immediateannuities.com/ I get $549 per month for Single Life Income with No Payments to Beneficiaries ("SL"). Do we agree this is equivalent to 6.5% a year? 6.5% looks better to me than my 3% average on CDs or munis... especially when I have no heir to worry about.
I don't have a specific number in mind. There's no way I would buy an SPIA with current interest rates, but if rates are more favorable when I retire I'd probably be willing to consider it with up to (maybe) 1/3 of retirement assets (or as much as needed to generate the extra regular income I thought I needed, whichever is less).Would be interested to know what percentage of your assets have you annuitized / do you plan to annuitize. Sorry, I don't know how to create a survey on this website.
If all goes well and according to my plans, I won't annuitize at all. I have no pension, and Soc Sec doesn't figure prominently in our plans.
However, this is how I plan to assess whether to annuitize if ever http://www.schulmerichandassoc.com/Modern_Portfolio_Decumulation.pdf. I can't recommend this 12-page article too strongly as a conceptual determinant basis to evaluate when/if to buy an annuity (and I've mentioned it on this forum several times before). It's not unlike Otar's Unveiling the Retirement Myth approach to annuitization for those who have read that, except almost 500 pages shorter!!!
And BTW, annuities are presently very expensive from an interest rate POV. Now is one of the worst times to sign up for an annuity, if you can possibly avoid or delay. Some people just can't sleep at night if they don't have predictable monthly checks coming in, for them an annuity might be the best approach, but not now if it can be avoided.
I think I would buy SPIA annuities to cover the basics if I didn't have the pensions.
I plan to look at annuities for small percentages of my portfolio (5-10% per annuity) every 5 years starting at age 60. So at age 60, if the rates are good, I might annuitize 5%. At age 65, another 5%, age 70 add 10%, etc. As I age, I would like to have less and less of my portfolio subject to poor financial judgement and/or scammers.