Are you happy with your annuity?

[Independent]

As often happens in these "annuity" threads, I see comments on two very different financial arrangements.

1. A guaranteed income stream that lasts exactly as long as the owner lives.

2. A competitor for CDs or mutual funds, with a different tax status. The buyer has no intention of "annuitizing" it, that is, converting it into (1).

Each has it's own pros and cons, but it would be useful if people identified their comments by type.

 

[Running_Man]

The question was about immediate fixed annuities and many of the answers are falling on the pitfalls of long term variable annuities. Totally different financial instrument.

In 2007 I purchased a 4 percent payout, rising 4 percent annually fixed income immediate annuity covering the lives of myself and my wife, was thinking of investing 300K but only put 100K into it, I must admit the amount of negative talk on the annuity and how "low" the interest rate at an implied compound 6% per year led me to hesitate and reduce my investment.

It has been one of the best investments I have ever made and only regret is in not putting in the 300K. It is a check that comes in that my wife can deal with where she would never be able to deal with the remainder of my financial portfolio, so it certainly simplified investing for her in case of my demise in a profitable manner.

In the present environment you could get only a 2 percent annual increase with a 4% payout on an annuity in the 60-65 year old bracket. Predicting interest rates is hard. A portion invested in annuities if it gives the comfort to invest remainder for the long term is not a bad thing.

 

[alaska55]

Before you purchase an annuity find out exactly what all the fees are:

Annual fees including sub account fees, M&E expenses, any riders. Also ask of there are surrender penalties

My mom had one and we found out the annual fees were over 4%..absolutely criminal...

What kind of annuity are you talking about? The OP was talking about a fixed immediate annuity from vanguard, they have a one time upfront 3% commission and that's it.

 

[atmsmshr]

OP-

My suggestion is to consider using an ‘annuity hurdle’ concept to make this decision. I know of two methods (see links) you can use to help.

1. Fullmer Annuitization Hurdle- http://www.schulmerichandassoc.com/Modern_Portfolio_Decumulation.pdf

2. Otar’s ‘Zone’ Concept- http://retirementoptimizer.com/articles/Article105.pdf

Also, here’s an old thread (there are many here) discussing the annuity question and it may be helpful to you.

http://www.early-retirement.org/forums/f28/another-wade-pfau-spia-article-67868.html

Thank you for sharing these references