Am I smart to get a Gteed Lifetime Annuity with Cash Refund option now that I'm single?

Skipro33, so are you saying that if I put the majority of the $610K left in the IRA after the annuity into FXAIX (or similar), I can IMMEDIATELY start taking out ANOTHER $3600/month (on top of my SS and the annuity income) and the money will still last until I'm 86? Wow. If I can do that, seems I don't even need the annuity. What am I missing? (And what drawdown calculators are your using, please? I haven't seen one of those.)
What you are missing is your investment diversity. You've found a way to secure a guaranteed income plus around $2K disposable income monthly with some money left over to use for growth. FXAIX or other equity index funds are a roller coaster. I can gain and lose 100's of thousands of dollars in a very short period of time. It's not an investment for income. But according to the historical growth of FXAIX or any S&P index fund, you should be able to count on the outcome from a drawdown calculator with some assurance it will provide. Have you ever played with a drawdown calculator? Just google the term and look at a few. Plug in your numbers; money available to invest, expected growth annually, expected inflation, and if the drawdown is adjusted for inflation. The ones I tried, I used 7% growth and 3% inflation with the inflation built into the draws and came up with those numbers I posted.

In my personal situation, my guaranteed income is my pension and my and wife's social security. My investments can now be geared towards equity income and growth to balance out those incomes, so that's much like your situation. Now, as far as 7% per year growth, it swings pretty drastically. For example, since the bottom of the market in March of 2020, my IRA, now almost all in with FXAIX, has grown 130%. That's an average of 23% per year. The 4 years prior to 2020, my account grew 30%, or roughly 9% a year. I'm too lazy to go back another 4 years, sorry. But for my short window and my relatively short lifetime, I can reasonably expect to draw down what their calculator claims by expecting a 7% return on this investment. Sooner or later, I'll be forced to do so when RMD kicks in in another 5 years. My plan for my IRA dollars is to fund long term health expenses for me and wife. We'd rather hire someone to care for us in our home than to be relegated to a retirement home, or care facility. We designed and built our home with that in mind to include a complete studio apartment upstairs with its own entry and parking area. Whether that becomes vesable or not remains to be seen, but that's the plan anyways.

I like this drawdown calculator because it provides a table that shows the entire drawdown period:

Here's the table using $610,000, 7% growth and 3% inflation over 20 years.
drawdown1.jpg



Here's the same table but taking out to 25 years;
drawdown2.jpg
 
Last edited:
Time to change your financial adviser......as in yesterday.
 
I am another for the 4% withdraw on your existing. What I think you are missing is, can you live on SS plus ~$1,500 per month from the annuity? I ask that because the annuity will lose purchasing power over the years. In somewhere over 20 years, that is what your purchasing power might be. Using the 4% rule, typically you start with 4% and then increase it by the COL every year. That can make a big difference in your later years.
 
... So you're saying this isn't a terrible move for me, to buy this annuity?
Not terrible, but like many others here, I don't have an annuity (other than a prior employer pension where I had no other choice and SS which I am deferring until 70). With an annuity you lose control over that money once it is paid to the insurance company.

IMO, the "best" annuity that you can buy is simply defer SS but it sounds like you have already started SS (though I guess technically you could suspend and then reclaim at 70).

I would suggest that you consider a DIY annuity using a money market fund and Treasury ladder. You could put $24k in a money market fund and buy 10 $24k Treasuries maturing each year over the next 10 years... aka 10 rung Treasury ladder. That will use $264k of your $890k (rather than $335k for an annuity).

Then pull $2k a month from the $24k money market fund over the next year. When the first Treasury matures put the proceeds and interest in the money market fund and increase your monthly withdrawal to the new balance divided by 12 and buy a new 10 year Treasury from your other funds and add that to the end of the ladder. Repeat each year.

The benefit is that you can prudently increase your "pension" due to interest on the ladder. Also, if you ever need those funds, then you can just sell the Treasuries if you have to... you can't do that with an annuity. Downside is that you don't have the longevity protection of the annuity but your retirement is so well funded that isn't a concern.
 
Reading your posts it looks like you’ve been through a lot this year.

This might not be the best time to make an irreversible decision of this magnitude. Maybe take some time to breath.

Best of luck with whatever you decide.
 
IMO, the "best" annuity that you can buy is simply defer SS but it sounds like you have already started SS (though I guess technically you could suspend and then reclaim at 70).
+1
I agree that buying a private, non-inflation-adjusted annuity when OP hasn't made every effort to maximize SS makes no sense. As you said, the best would be not to have claimed SS - or if OP claimed within the last year, stop and pay the money back. But if it's been over a year, then suspending can still be helpful. I had to go look up the rules on this, but as I read it, once OP reaches FRA, the benefit could be suspended and then OP could earn deferred retirement credits until age 70.
 
Have not ready any replies, but here are my initial thoughts:
  • you need to question the motivation of your Fido guy; he/she is going to get a big commission if you do this
  • you should easily be able to get 2.7% monthly income (equivalent to the $2K the annuity would pay) from your IRA yourself
  • sell all nvidia stock immediately; it is insane to have so much of your savings in a single stock
 
That’s not smart financial advice.
My opinion:
1. Don’t the annuity. Inflation will eat away at your fixed payments over your life, and the broker probably earns a huge commission.
2. Diversify you stock holdings. I’m a small time investor in NVDA and realize there’s a good chance the stock price could drop 50% over the next 3 years. Instead of investing solely in NVDA, consider buying Fidelity Select Semiconductor fund FSELX, which holds 41 semiconductor stocks, of which NVDA is the largest holding at 25%.
3. Consider investing a portion of your cash in a SP500 index fund such as FXAIX. The SP500 returns over the past 30 years have averaged 10%.
4. Consider investing some of your cash in brokered CD’s and build a CD ladder. I think it takes 3 mouse clicks to buy a CD at Fidelity. Make sure you stay under the FDIC limit $250K per bank and only buy call protected CD’s.

Good luck.
 
I don’t know about NVDA dropping 50% a good chance? We most likely would need a good recession for that to happen. It’s definitely possible buts it’s not really an overpriced stock if you look at the growth rate and eps. If we are really in a 3-5 yr AI growth super cycle, it could also double again over the next couple yrs. Eventually growth rate will stall and price will consolidate. Agreed about not having so much tied into nvidia. If I consider how much it’s in my funds and etfs plus my 700 shares, I probably have 7-8% of portfolio just being that. Same with Apple. Been slowly pairing down . Rule of thumb is probably 5% being more than enough.
 
While I'm not suggesting that NVDA is Enron or WorldCom, people would have said the same of those tickers back in the day and it didn't play out well. Better to be less concentrated and more diversified, especially near to retirement since a default is harder to absorb.
 
Reading your posts it looks like you’ve been through a lot this year.

This might not be the best time to make an irreversible decision of this magnitude. Maybe take some time to breath.

Best of luck with whatever you decide.
Thank you for acknowledging that, Gravity. Between my mom & best friend being killed by a botched colonoscopy last year, and then having my husband ditch me after 27 years for A POLITICAL CULT, I'm lucky I'm still sane, to be honest. Then having the idiot walk away with half of my hard-earned, carefully-managed & planned money on top of everything--yeah. Lucky to still be here.

I'm cancelling today's appointment and taking some more thinking time.
 
Not terrible, but like many others here, I don't have an annuity (other than a prior employer pension where I had no other choice and SS which I am deferring until 70). With an annuity you lose control over that money once it is paid to the insurance company.

IMO, the "best" annuity that you can buy is simply defer SS but it sounds like you have already started SS (though I guess technically you could suspend and then reclaim at 70).

I would suggest that you consider a DIY annuity using a money market fund and Treasury ladder. You could put $24k in a money market fund and buy 10 $24k Treasuries maturing each year over the next 10 years... aka 10 rung Treasury ladder. That will use $264k of your $890k (rather than $335k for an annuity).

Then pull $2k a month from the $24k money market fund over the next year. When the first Treasury matures put the proceeds and interest in the money market fund and increase your monthly withdrawal to the new balance divided by 12 and buy a new 10 year Treasury from your other funds and add that to the end of the ladder. Repeat each year.

The benefit is that you can prudently increase your "pension" due to interest on the ladder. Also, if you ever need those funds, then you can just sell the Treasuries if you have to... you can't do that with an annuity. Downside is that you don't have the longevity protection of the annuity but your retirement is so well funded that isn't a concern.
Thank you very much for this detailed suggestion. It helps immensely to see details of how I could do this on my own.

I did start SS at 62 just because it felt like "enough" and I wanted to get as much of that money as I could before I die. It's my paycheck. My ex ignored all my long-held dreams of traveling, etc, and just sat on the couch all the time watching TV once HE retired at 62 (thanks to me!!!), so I figured I would just travel occasionally with friends by taking a chunk of money out of my post-tax account when needed. That's all gone now. Life is very different and much scarier. *$@*&% him!!! (Sorry--you guys just have no idea ...)
 
Glad you are taking some time to think it over. There’s another type of annuity that doesn’t have the high fees and doesn’t lock you into a lifetime decision - a MYGA. A Mulitiyear Year Guaranteed Annuity is very similiar to a CD, but is issued by an insurance company. You can let the interest accrue, or many MYGA’s let you withdraw up to 5% per year. If you bought a $100k, 5 year MYGA with IRA funds, you could withdraw $5K per year (and pay taxes on the 5K), and after 5 years you would end up with slightly more than $100K left. More info at Stan The Annuity Man® | Brutally Honest Facts About Annuities

He has an informative YouTube channel also.
 
You might be overthinking things. I plugged into FIRECalc $964k starting portfolio, $27k SS and 50/50 AA and used the investigate tab to solve for safe spending at a 95% success rate. Result was $65,781... or in the first year $27,000 from SS and $38,781 from the portfolio which is $3,232/month.

I'm not suggesting that you withdraw that much, but you could withdraw that much. So you should be all set. I don't see a need for a payout annuity.
 
Buying an SPIA (immediate annuity) MAY make sense for peace of mind, allow you to spend/enjoy the money while living and not worry as much about the ups/downs of the market thus allowing you to stick to your asset allocation. The 355K would come from your fixed income allocation and not your stock/risk allocation thus increasing your %stock.

A fiduciary should definitely bring SPIA, MYGA and a FIA with income rider options into possible income planning when someone is looking for guaranteed income. Most people have annuity and like them, Social Security is an annuity, Pensions are annuities. Now there are other annuities that are not good for most people.

AUM financial planners will make more in commission from the 355K@ the usual 1% in perpetuity than a onetime 2% commission on the sale of a SPIA or MYGA (6-8% on FIA with income rider).

I have an annuity in the form of a Pension and will also have Social Security at 70 and if I didn't I would purchase one as it makes sleeping at night so much easier and you don't fret as much over spending an annuity when you know next month it will be replenish for rest of your life. In regards to inflation that are not too many investments that guarantee to keep up with inflation (TIPS) but all others may or may not. I can not predict what the investment future will be with certainty so it's nice to have one's basic expenses paid for with investments to help if an increase is needed down the road.
 
Buying an SPIA (immediate annuity) MAY make sense for peace of mind, allow you to spend/enjoy the money while living and not worry as much about the ups/downs of the market thus allowing you to stick to your asset allocation. The 355K would come from your fixed income allocation and not your stock/risk allocation thus increasing your %stock.

A fiduciary should definitely bring SPIA, MYGA and a FIA with income rider options into possible income planning when someone is looking for guaranteed income. Most people have annuity and like them, Social Security is an annuity, Pensions are annuities. Now there are other annuities that are not good for most people.

AUM financial planners will make more in commission from the 355K@ the usual 1% in perpetuity than a onetime 2% commission on the sale of a SPIA or MYGA (6-8% on FIA with income rider).

I have an annuity in the form of a Pension and will also have Social Security at 70 and if I didn't I would purchase one as it makes sleeping at night so much easier and you don't fret as much over spending an annuity when you know next month it will be replenish for rest of your life. In regards to inflation that are not too many investments that guarantee to keep up with inflation (TIPS) but all others may or may not. I can not predict what the investment future will be with certainty so it's nice to have one's basic expenses paid for with investments to help if an increase is needed down the road.
That's exactly what I did with my IRA. When we sold our business, I was only 53. I decided to build my 3rd leg of retirement income by creating an income stream through purchase of deferred fixed income annuities. It gave me peace of mind that I could stop working. Between SS, annuities, dividend income from my taxable accounts and my husband's RMD, we have the income to support our retirement. After purchasing the annuities, we still have 7 digits investment to grow with the stock market.
 
Back
Top Bottom