Fidelity Retirement Planner keeps advising Annuities

[Al18]

I’ve been running the Fidelity planner for many years, and never saw a recommendation for an annuity. Probably because my investments have always been balanced about 60/40 stocks/fixed income.

 

[VanWinkle]

Kind of almost a long term MYGA type security.

I wouldn't compare the two in that way, as you still control your own money with a MYGA. An Income annuity is giving up the control of your money to an insurance company. I can see a use for Income annuities, but not in the same breath as a MYGA.

 

[DEC-1982]

We keep 2 years of expenses in money market to avoid possible selling equities at a wrong time although it is a drag on the portfolio.

It may more be the fault of the Fidelity Planning Software &
I am curious if others on the forum who follow the Fidelity Planner Software have come across any such scenarios.

Likewise, we keep plenty of cash; it helps me sleep better.

I wonder if FIDO recommends annuities for me and I just don't see it (that is, it doesn't register in my mind).

 

[DJRR]

Likewise, we keep plenty of cash; it helps me sleep better.

I wonder if FIDO recommends annuities for me and I just don't see it (that is, it doesn't register in my mind).

If you use their retirement planner the retirement income section prompts you to explore annuities and bond ladders:

Fidelity believes...​

Generally, essential expenses (including health insurance) should be covered by reliable sources of lifetime income, such as Social Security, pensions and certain types of annuities.

Explore changes that could improve your outlook​

Have you considered how more predictable income could impact your plan?​

It's a good idea to have predictable income sources that can cover most or all of your essential expenses. Explore an income strategy that could help.
Income strategy evaluator

Consider updates to your plan​

Explore annuities​

Adding an annuity to your plan could help supplement your retirement income. A Fidelity advisor can show you how annuities might fit into your plan.
About annuitiestrue

Learn about bond ladders​

Adding a bond ladder to your plan could help provide more consistent income in retirement while potentially helping you manage the risk of changing interest rates and stock market volatility.
About bond ladderstrue

 

[NXR7]

My wife was a beneficiary of an annuity last year from her deceased relative. To our shock, inherited annuities do not get a stepped-up cost basis so we ended up paying taxes on what she inherited.

 

[deserat]

FWIW, the VPW approach (Bogleheads Variable Percentage Withdrawal) recommends use of a SPIA or some insurance/annuity instrument at age 80 that is sized to cover basic living costs. I've found that if you have a pension or SS (or combination) that does that, the SPIA may not be necessary. The purpose of the annuity is to take some of the pressure off the portfolio performance consistency and requirement. I also use the VPW recommendation as the absolute max withdrawal recommendation, meaning I withdraw much less. Fidelity and Vanguard and Schwab, etc, are in the business of making money. They make more with annuity products. Also, as several have said here, they may have an algorithm that based on your situation has recommendation of an annuity (asset allocation, risk situation, time range for portfolio performance to meet your needs, etc). Cui bono would be my first question regarding their recommendation, then a look at my situation and risk temperature for my AA and lifestyle costs, withdrawal requirements/frequency.

 

[Dtail]

My wife was a beneficiary of an annuity last year from her deceased relative. To our shock, inherited annuities do not get a stepped-up cost basis so we ended up paying taxes on what she inherited.

Are you sure the annuity was not in a tax deferred type of account, which would give you 10 years for distribution?

 

[COcheesehead]

I am curious about this post too. I run the planner all the time, where is this recommendation coming up? I have never seen anything like that.

 

[kgtest]

A certain amount of annuity or pension income, in addition to SS, helps insulate your situation from overdependence on portfolio withdrawals.
But I don't know anything about Fidelity's retirement planner...

About the planner. It suggested I be holding bonds right now at 43. Like 30% of my portfolio in bonds, lol.

Clearly it doesn't understand me.

 

[toddwelti]

I was recommended a modest annuity (15% of total IRA) from a Fidelity advisor, in person. In my case it was recommended just as a general buffer to mitigate potential sequence of returns and also as a risk balance against the Bitcoin ETC that I also have (around 8%). I also looked at the prospectus and website (Nationwide) and don't understand exactly the fees etc. I guess I must call Nationwide and get an in depth explanation!

 

[COcheesehead]

About the planner. It suggested I be holding bonds right now at 43. Like 30% of my portfolio in bonds, lol.

Clearly it doesn't understand me.

Thats based on your input. Update your data for different results.

 

[ncbill]

I was recommended a modest annuity (15% of total IRA) from a Fidelity advisor, in person. In my case it was recommended just as a general buffer to mitigate potential sequence of returns and also as a risk balance against the Bitcoin ETC that I also have (around 8%). I also looked at the prospectus and website (Nationwide) and don't understand exactly the fees etc. I guess I must call Nationwide and get an in depth explanation!

For SORR consider instead the "once used, never refilled" cash bucket approach mentioned here.

 

[LadyIJ]

I’ve been running the Fidelity planner for many years, and never saw a recommendation for an annuity. Probably because my investments have always been balanced about 60/40 stocks/fixed income.

Right - me too. Never advises me to buy one, but I wouldn’t be adverse to adding SPIA at all once I’m 75 as a portion of my portfolio.

 

[imnontrad]

A SPIA (Single Premium Immediate Annuity) may be a good deal. But IMHO all the others are designed to generate commissions, not help the buyer.