Since DW and I don't have any pensions, we decided to setup our own. We purchased this annuity from Fidelity back in 2001/2 with 500k and changed it to a no death benefit guarantee which reduced annual expenses to 1.15% in 2005. The current value is 767k. In hindsight, I'm wondering if this was the correct thing to do. Probably would've been smarter to setup a bond ladder to provide income, but we didn't need it at the time. We were both working and with double income, we maxed out all of our tax deferred savings opportunities and even front loaded a 5yr max investment for our son's 529 plan when he was 2 (now 10 1/2). I was in a high tax bracket and the state allowed immediate 100% reduction of income, so I took it. I'm now 47, DW 46, we're both out of work and we don't plan on going back. I've asked this of several financial planners and wanted to get some feedback from this group.
1) Does it make sense to terminate this annuity, take the 10% penalty and tax on the 267k in gains? I'm told that's about 45% in taxes. The idea is to setup an income stream instead.
2) Or is it better to convert this into a fixed income annuity? My payout would be $3,044/mo, of which $2000 is taxable. Fidelity also gave me a COLA payout option - $2,200/mo of which $1,500 is taxable, this option would take 15 years to match the non COLA payout.
3) Since we're considered so young, the recommendation I got today is it's better to take the payout now since we'll keep getting paid until the latter one dies (it's a joint survivor payout option). I was also told waiting a couple of years wouldn't change the payout much. The rep also ran a scenario assuming I was 10 yrs older, my payout would only be 3,444/mo. Obvioulsy this doesn't take in to account that the value has grown. Does anyone know of a way to calculate the best age to annuitize in my situation?
Our current expenses are under 50k/yr, so the annuitization would cover most of our expenses. The remainder will be covered by income generated from interest,dividends,etc. We've got our old house on the market, the hope is when it sells, it will cover most if not all of our only outstanding debt on the new house...which happens to be 24k/yr.
Looking forward to your feedback!
1) Does it make sense to terminate this annuity, take the 10% penalty and tax on the 267k in gains? I'm told that's about 45% in taxes. The idea is to setup an income stream instead.
2) Or is it better to convert this into a fixed income annuity? My payout would be $3,044/mo, of which $2000 is taxable. Fidelity also gave me a COLA payout option - $2,200/mo of which $1,500 is taxable, this option would take 15 years to match the non COLA payout.
3) Since we're considered so young, the recommendation I got today is it's better to take the payout now since we'll keep getting paid until the latter one dies (it's a joint survivor payout option). I was also told waiting a couple of years wouldn't change the payout much. The rep also ran a scenario assuming I was 10 yrs older, my payout would only be 3,444/mo. Obvioulsy this doesn't take in to account that the value has grown. Does anyone know of a way to calculate the best age to annuitize in my situation?
Our current expenses are under 50k/yr, so the annuitization would cover most of our expenses. The remainder will be covered by income generated from interest,dividends,etc. We've got our old house on the market, the hope is when it sells, it will cover most if not all of our only outstanding debt on the new house...which happens to be 24k/yr.
Looking forward to your feedback!