Annuity planning questions

[TheWizard]

On the second part, you're wrong. The mortality credits are built into the pricing and are fixed at issue just like the benefits are fixed at issue... that is what the insurer is taking a risk on... that mortality will be as or better than assumed and for large groups of peope they are very, very good at estimating mortality. So if a bunch of insureds.. more than expected based on assumed mortality... die prematurely then that favorable mortality goes right to the insurer... in other words, if mortality differs from assumed mortality the remaining annuity owner's benefits don't change, so those early deaths don't ever benefit the remaining annuitants... if the remaining annuitants don't benefit then there is only one other party to the transaction and that is the insurer.

I sort of agree with you on this, but the point is, when you have thousands of annuitants who have been properly priced into an insurance company's annuity pool by their team of WELL PAID ACTUARIES, those early deaths have already been accounted for in their statistical planning, along with deaths of folks in their 90s.
So there's no big half million dollar bonus to the insurance company when someone dies within a year after annuitizing, since that probability was already factored into their rates.

And if one year seems to be to the benefit of the insurance company, then the following year could be the opposite, so they need to deal with that.

Now with TIAA, with which I annuitized a fair amount, we actually share in mortality experience which is "better" than expected, meaning more deaths in the year just past. We see this in our adjustments to our Variable Annuity payouts which slightly exceed the expected adjustment based on a strict 4% Assumed Investment Return.
TIAA splits the difference with its annuitants while most other insurance companies keep it as profit...

 

[pb4uski]

^^^ Think of it this way. I said:

... I wouldn't do that because if the day after you buy the $637k SPIA you get run over by a beer truck then your $637k goes "poof" into the pocket of the insurer.

I think that we would agree that if the OP got run over then next day that none of the other annuitants would see any change in benefits... so since it doesn't go to any of the annuitants then there is only one other place for the $637k to end up... in the pocket of the insurer.

Interesting that TIAA shares favorable mortality experience with annuitants... that is unusual... though there are some really old participating annuities that do something similar but I've been out of the business for so long that even those are almost all dead by now.

 

[pb4uski]

For clarification, which state guaranty fund provides protection? I am pretty sure it is the state where the annuitant lives and not the home state of the annuity provider. The instant quote services almost always ask where the annuitant lives.

The reason why they ask where you live is because insurers can only issue policies in states where they are licensed to do business, and not all insurers are licensed to do business in all 50 states, so in order to give you a quote they need to know what state you live in because cartain companies are unable to quote or write business in your state.

 

[RetiredHappy]

His thread of Renting vs. Buying, he indicated that he is outside of the USA.

 

[DrgLrd]

His thread of Renting vs. Buying, he indicated that he is outside of the USA.

I have a NY and a foreign residence. NY insures annuities up to 1 million, so that's covered, and I'd never get an annuity without a death rider for heirs, so that problem is solved too. Now I just need to find some good annuities.

If I knew the best strategy for the biggest payouts, it would be easier to find the plans. Examples

1: Buy an immediate lifetime plan now (or in a few months) and also now, buy three deferred lifetime annuities starting in 10, 15, and 20 years.

2: Buy an immediate lifetime plan now, and also buy now consecutive deferred period certain annuities; 60 to 70, 70 to 80, 80 to 90.

3. Buy one immediate 10 year plan, and then a mix of deferred lifetime and deferred period certain.

4. Buy one fixed lifetime plan and one 30 year CoLA plan.

An FA with years of experience may know that strategy 1 is always a better idea than 2, but I'm trying to get that info here, before I contact the salesmen.

 

[RetiredHappy]

I recommend that you play with the numbers on immediateannuities.com. The nice thing about the site is that it does not ask you for your contact information.

To be a NY resident, I think you need a physical address. Do you also have a home in NY? I didn't think so because of your earlier posts.

 

[DrgLrd]

To be a NY resident, I think you need a physical address.

I have one, also a mailbox service in NY and an address outside the US.

Seems like the only time you need the state address is when you buy the annuity, considering it isn't unlikely one would move out of state (or country) over a lifetime. I'm guessing it wouldn't be a big deal to change your address once you get the plan, and the state insurance wherever you bought it still applies.

 

[RetiredHappy]

---

 

[DrgLrd]

It is my understanding that the guaranty is based on policy holder's state of residence

When they purchased the plan, not, for example, their address 30 years later.

 

[RetiredHappy]

When they purchased the plan, not, for example, their address 30 years later.

I deleted my prior post after what I had further read.

- Guaranty goes by state of residence.
- If residence is outside of US, then it goes by where the insurance company resides.

 

[DrgLrd]

- If residence is outside of US, then it goes by where the insurance company resides.

Outside of the US when it's purchased? Or after?

 

[RetiredHappy]

Outside of the US when it's purchased? Or after?

Read number (5).

https://www.nolhga.com/policyholderinfo/main.cfm/location/questions

 

[DrgLrd]

Read number (5).

https://www.nolhga.com/policyholderinfo/main.cfm/location/questions

"Under the NAIC Model Act and the laws of most states, U.S. citizens living in foreign countries or U.S. territories, possessions, or protectorates without a guaranty association will be considered residents of the state of domicile of the insurer that issued the policy or contract."

Damn, proves the point that the insurance industry is even more regulated than the banking industry.

Makes things a little more complicated but way more convenient, thanks for the link.

 

[jazz4cash]

The reason why they ask where you live is because insurers can only issue policies in states where they are licensed to do business, and not all insurers are licensed to do business in all 50 states, so in order to give you a quote they need to know what state you live in because cartain companies are unable to quote or write business in your state.

I understand that but i bet some of the huge insures are licensed in all 50 states and they still ask. I guess an applicant could reside elsewhere but i assumed the annuity contracts are likely tweeked to satisfy local requirements.

 

[pb4uski]

...i assumed the annuity contracts are likely tweeked to satisfy local requirements.

I don't think so. When I was doing it we had once company licensed in 49 and it was the same contract for all. We had a sub that was licensed in NY and their contracts had some differences but most of those differences were for commission rates and other things that wasn't easily seen by the insured.

 

[cyber888]

Good. I'm looking at annuities with TIAA-Cref. They seem to pay higher.

The best lifetime immediate annuities are from TIAA, if you qualify for them.
I have several thousand dollars per month coming in from those annuities, starting in 2013.
My largest annuity stream is based on commercial real estate (TREA) and is adjusted monthly, mostly upward.

I also have an annuity income stream based on the broad stock market (CREF Stock) which is up considerably since 2013, though it has declined a bit the past two months.

And then I have a modest annuity income stream based on TIAA Traditional. This is a guaranteed "fixed" income stream which, nonetheless has small increases of a percent or two every few years due to strong reserves at TIAA.

Because I annuitized a bit too much back in 2013, and then claimed SS at age 70 two years ago, I now have a few thousand dollars of excess retirement income most months. So not only am I not withdrawing funds from my remaining seven-figure portfolio, I'm adding additional new money back into it (my taxable account).

It's a fun situation to be in...

 

[DrgLrd]

Good. I'm looking at annuities with TIAA-Cref. They seem to pay higher.

Only for teachers?