Longevity Annuity - 13.6% rate of return at 83 years old

[cyber888]

With all the inflation scare, I went to my 401k company's annuity quote system, and just did a calculation for a lifetime annuity contract at age 83 in case I was still feeling very healthy into my 80s and planning for longevity. This is a single life annuity. And it gave a 13.6% rate of return.
So, if my basic spending now as a single person is at around $50,000/year and goes to $200,000/year at 110 years old, it seems to work.
How many of you have looked into a longevity annuity in your 80s ?

 

[aja8888]

With all the inflation scare, I went to my 401k company's annuity quote system, and just did a calculation for a lifetime annuity contract at age 83 in case I was still feeling very healthy into my 80s and planning for longevity. This is a single life annuity. And it gave a 13.6% rate of return.
So, if my basic spending now as a single person is at around $50,000/year and goes to $200,000/year at 110 years old, it seems to work.
How many of you have looked into a longevity annuity in your 80s ?

At 82, I have not, and some of my friends and some family members in my age group are dropping like dead flies. Sorry, not going there with an annuity at this age, good health, or not.

 

[junkanoo]

With all the inflation scare, I went to my 401k company's annuity quote system, and just did a calculation for a lifetime annuity contract at age 83 in case I was still feeling very healthy into my 80s and planning for longevity. This is a single life annuity. And it gave a 13.6% rate of return.
So, if my basic spending now as a single person is at around $50,000/year and goes to $200,000/year at 110 years old, it seems to work.
How many of you have looked into a longevity annuity in your 80s ?

So ... you're only asking those in their 80's to respond about this, because that's how it reads.

Even those that are the target audience may wish to know:

Is this an immediate annuity? What are the payments? When is the first 13.6% payout?

I'm not the go-to person on this, at all. But, I think the conventional wisdom is that most people who want to make this bet, do it in their early 60's.

 

[TheWizard]

With all the inflation scare, I went to my 401k company's annuity quote system, and just did a calculation for a lifetime annuity contract at age 83 in case I was still feeling very healthy into my 80s and planning for longevity. This is a single life annuity. And it gave a 13.6% rate of return...

A better term for this is 13.6% PAYOUT rate.
Annuitize $100,000 at age 83 and get $13,600 per year, paid monthly: $1133.33 per month.

If this annuity is in TIAA Traditional, then expect small increases in the $1133.33 some years, otherwise it remains fixed for the remainder of your life.

I'm 75 and annuitized a hefty amount at start of retirement, age 63. Because of that, I have excess retirement income, a negative withdrawal rate and an obviously growing portfolio.
Absolutely no plans to annuitize additional funds in the future...

 

[silvor]

A better term for this is 13.6% PAYOUT rate.
Annuitize $100,000 at age 83 and get $13,600 per year, paid monthly: $1133.33 per month.

This needs to be emphasized. My old man almost got suckered into putting all his money in an annuity because of the inflated “ guaranteed return“

 

[Mark1]

I kind of look at it this way. At 83, I would expect to live another 7 years on average. At 13.6% payout, I get all my money back after roughly 7 years w/o any interest. I guess the lack of interest is to cover the insurance company overhead. With no heirs, would the longevity insurance be worth it to me. Maybe, but probably not.
Actually, "the inflation scare" makes me less likely to do it, not more likely.

 

[cyber888]

So ... you're only asking those in their 80's to respond about this, because that's how it reads.

Even those that are the target audience may wish to know:

Is this an immediate annuity? What are the payments? When is the first 13.6% payout?

I'm not the go-to person on this, at all. But, I think the conventional wisdom is that most people who want to make this bet, do it in their early 60's.

No, it's for everyone - not just 80s. I'm turning 62 and I have an annuity with them since I was 59+ yrs old, and it is paying 7.13% per year - no fees nothings.

 

[cyber888]

A better term for this is 13.6% PAYOUT rate.
Annuitize $100,000 at age 83 and get $13,600 per year, paid monthly: $1133.33 per month.

If this annuity is in TIAA Traditional, then expect small increases in the $1133.33 some years, otherwise it remains fixed for the remainder of your life.

I'm 75 and annuitized a hefty amount at start of retirement, age 63. Because of that, I have excess retirement income, a negative withdrawal rate and an obviously growing portfolio.
Absolutely no plans to annuitize additional funds in the future...

Yep, it is Tiaa Traditional. I plan to annuitize some more when I turn 65 yrs old, when I don't need the ACA healthcare.
Just saying, if Inflation goes sky high, I might do an annuity ladder at 73-74 then 83, if I'm still kicking then .. and we have a run-away inflation.

 

[cyber888]

So ... you're only asking those in their 80's to respond about this, because that's how it reads.

Even those that are the target audience may wish to know:

Is this an immediate annuity? What are the payments? When is the first 13.6% payout?

I'm not the go-to person on this, at all. But, I think the conventional wisdom is that most people who want to make this bet, do it in their early 60's.

It is an immediate annuity. I did an annuity with them when I was 59+ and they paid 7.13% with no fees and I'm going to turn 62 yrs old now. In one month after I called them, they started paying me the monthly annuity, and it's been almost 3 years now that they are paying me.

 

[pb4uski]

With all the inflation scare, I went to my 401k company's annuity quote system, and just did a calculation for a lifetime annuity contract at age 83 in case I was still feeling very healthy into my 80s and planning for longevity. This is a single life annuity. And it gave a 13.6% rate of return.
So, if my basic spending now as a single person is at around $50,000/year and goes to $200,000/year at 110 years old, it seems to work.
How many of you have looked into a longevity annuity in your 80s ?

Unless you know when you will die you can't calculate the rate of return on.a life annuity. Methinks that you are confusing the payout rate with the rate of return.

Part of the 13.6% is a return of your premium (principal) and not a return on your money. Or put another way, your return is negative until you have collected payments in excess of the single premium that you paid... In the case of a 13.6% payout rate it takes over 7 years just to get your money back.

 

[TheWizard]

Yep, it is Tiaa Traditional. I plan to annuitize some more when I turn 65 yrs old, when I don't need the ACA healthcare.
Just saying, if Inflation goes sky high, I might do an annuity ladder at 73-74 then 83, if I'm still kicking then .. and we have a run-away inflation.

I initially considered laddered annuitization with TIAA, every seven years or so, to combat inflation.
But my variable annuity payouts (TREA and CREF STOCK) outpaced inflation handily since 2013.

So it's worked out well...

 

[TickTock]

TheWizard and pb4uski covered rate of return vs. payout rate.

OP, If I'm reading you right, you're talking about a DIA or QLAC. To answer your question, DW and I are aware of these as a strategy but have not at this point looked seriously at it. (I'm 58; DW's age is classified.)

IMO, DIAs and QLACs are primarily a longevity insurance play - the more you're concerned with outliving your assets/not having enough income to support your desired lifestyle, the more appealing they are. Appropriate for some but definitely not one-size-fits-all.

 

[TheWizard]

TheWizard and pb4uski covered rate of return vs. payout rate.

OP, If I'm reading you right, you're talking about a DIA or QLAC. To answer your question, DW and I are aware of these as a strategy but have not at this point looked seriously at it. (I'm 58; DW's age is classified.)

IMO, DIAs and QLACs are primarily a longevity insurance play - the more you're concerned with outliving your assets/not having enough income to support your desired lifestyle, the more appealing they are. Appropriate for some but definitely not one-size-fits-all.

No.
He's not talking about a deferred annuity or a QLAC.
He's talking about doing an additional Immediate Annuity at a later date.

Until then, the tax-deferred money is liquid and can be withdrawn as Ordinary Income.
If he chooses to annuitize a portion of his accumulation for lifetime income, then he gets additional Ordinary Income well beyond SWR percentages.

Annuitizing isn't just for poor people.
I have significant annuity income and am in NIIT territory for taxes...

 

[TickTock]

No.
He's not talking about a deferred annuity or a QLAC.
He's talking about doing an additional Immediate Annuity at a later date.

Assuming you're correct, this doesn't change my answer. IF we're alive in our 80s we'll consider a SPIA. . .

 

[Finance Dave]

With all the inflation scare, I went to my 401k company's annuity quote system, and just did a calculation for a lifetime annuity contract at age 83 in case I was still feeling very healthy into my 80s and planning for longevity. This is a single life annuity. And it gave a 13.6% rate of return.
So, if my basic spending now as a single person is at around $50,000/year and goes to $200,000/year at 110 years old, it seems to work.
How many of you have looked into a longevity annuity in your 80s ?

Don't think we need one. SS is COLA'd and will represent (not taking it yet) about 75-80% of our spending needs. Also own a small amount of TIPS that would help offset inflation.