Poll: How Much Income Are You Planning From Purchased Annuities?

[Gill]

No plans. The fees drive me crazy.

Would it surprise you to know there are no fees? What you see is what you get.
Gill

 

[REWahoo]

Would it surprise you to know there are no fees? What you see is what you get.
Gill

You haven't looked closely enough.

Please post links to these "no fee" annuity contracts so we can see the entire agreement, including all the fine print.

No insurance company is going to provide anyone an annuity unless they stand to make a profit from the transaction. They may obscure the fees by using different terminology or mask the costs with complex language and convoluted terms, but the fees are in there.

 

[RunningBum]

Undecided, like some of the other respondents here. If interest rates get high, and my health remains good, there's a good chance I'll annuitize some or a lot of my portfolio. Too many variables and probably too far in the future for me to give an answer now.


A lot of people talk about not getting an SPIA until they are much older. Why is that, if you are already retired? If interest rates are high, wouldn't it make sense to lock in at that point, even if you are 55 instead of 75? Is there a concern with predicting the longevity of the insurer, or other reasons?

 

[Fedup]

I think it depends on your ability to manage investments. I know I would buy some for my husband because he doesn't care to invest.

 

[MrFlish]

Seems timely with some of the fear of bonds threads circulating again...

I'm not sure I've seen the "fear" threads you mention. Can you post some examples to help me understand the concerns better...

 

[RunningBum]

...

A lot of people talk about not getting an SPIA until they are much older. Why is that, if you are already retired? If interest rates are high, wouldn't it make sense to lock in at that point, even if you are 55 instead of 75? Is there a concern with predicting the longevity of the insurer, or other reasons?

I guess this is a pretty good answer to my question.
https://whitecoatinvestor.com/spia-the-good-annuity/

There is a chart that shows, if you outlive your life expectancy, (the main reason for getting an annuity) the returns get better if you wait to invest as them as you get older.

The article also says that some (like Swedroe) suggests 70 or later is the best time to buy, but the author says there's nothing wrong with buying earlier as needed, but probably not all at once. And diversify among multiple highly rated insurers.

Disagreement with this? As I at least implied in my first post, I'm not looking at annuities now (age 55) with rates so low, but if they do rise enough, is there any reason not to start buying rather than waiting until 70 or later?

 

[Gill]

You haven't looked closely enough.

Please post links to these "no fee" annuity contracts so we can see the entire agreement, including all the fine print.

No insurance company is going to provide anyone an annuity unless they stand to make a profit from the transaction. They may obscure the fees by using different terminology or mask the costs with complex language and convoluted terms, but the fees are in there.

I don't think you understand immediate annuities. Of course the insurance company expects to make a profit. However, when you are quoted a $10,000 annual distribution on a $100,000 investment that is what you get. There are no fees of any sort involved. Naturally, in computing the payout the company seeks to make a profit.
Gill

 

[REWahoo]

Naturally, in computing the payout the company seeks to make a profit.
Gill

IOW, the fees are there, hidden where you can't see them.

 

[Gill]

IOW, the fees are there, hidden where you can't see them.

Of course they are. Insurance companies are not charities. The point is when you get a quote on an SPIA you can take it or leave it. There is no mystery involved or any later surprise fees. If they say they will pay you $10,000 a year for life, that's what you will get.
Gill

 

[2017ish]

We need a forum terminology rule. "Annuity" can only be used to refer to SPIA and SPDA products. "P.O.C. Insurance Product sold by charlatans" is to be used to refer to other things sold as annuities.



(I won't hold my breath)

 

[Midpack]

Seems timely with some of the fear of bonds threads circulating again...

I'm not sure I've seen the "fear" threads you mention. Can you post some examples to help me understand the concerns better...

There have been many dozens of (dire) "bond warning" threads since 2009, just one of the latest http://www.early-retirement.org/for...r-is-not-safe-in-a-low-yield-world-86798.html. The threads detail the concerns, but very few offer real alternatives ** - so what's the upshot? Anyone can just point out risks without solutions. Put all your $ in cash if you can't tolerate any volatility or risk (other than inflation eating you alive) and you can sustain yourself (it takes about twice the nest egg if you want to go all cash instruments).

** the three most often cited:
- cash hasn't kept up so you've given away some returns for about 8 years,
- dividend stock funds are not equivalents at all, essentially a change in AA higher return/risk, and
- SPIA's, though evidently 86% here haven't bought/aren't actually buying them?

 

[samclem]

Of course they are. Insurance companies are not charities. The point is when you get a quote on an SPIA you can take it or leave it. There is no mystery involved or any later surprise fees. If they say they will pay you $10,000 a year for life, that's what you will get.
Gill

If things change and you need your money back next year, can you get it all back? If you don't get it all back what do they call the difference? Not a "fee," "charge," etc?

 

[Gill]

If things change and you need your money back next year, can you get it all back? If you don't get it all back what do they call the difference? Not a "fee," "charge," etc?

Of course you can't get it back on a pure SPIA. The contract is very simple, i.e., you give them $100,000 premium and they will pay you $10,000 a year for life. The agreement is irrevocable, just the same as you can't get your homeowner's insurance back if your home doesn't burn down. The insurance company is taking the risk you will live almost forever while you take the risk you will die a premature death. It is insurance, pure and simple. If you don't like the deal you don't have to buy it.
Gill

 

[Fedup]

$10,000 per year is pretty good, I ran some calculator and the the amount I get yearly about $6000 per year at most. IIRC

 

[Gill]

It's obvious you need to grow up. You're much too young to get $10,000 a year. My last purchase was $2,500+ a quarter or more than $10,000 a year. By the way, I'm not here to defend SPIA's or to convince others to buy them. This has been argued ad nauseum on this forum and Bogleheads for years. I'm just saying I have them and I like them.
Gill

 

[Fedup]

At what age do you get $10,000 per year? I might get some later, I know Janet Quinn Bryant recommends some in her book.

 

[Gill]

At what age do you get $10,000 per year? I might get some later, I know Janet Quinn Bryant recommends some in her book.

Never mind! Just kidding. At age 78 purchased back in January of this year from Lincoln National Life through Vanguard. Not sure if this rate is available today. Also, as I said in an earlier post, I always defer my first payment one year.
Gill

 

[Mdlerth]

Zero. Pension and SS will more than fill out the fixed component of my income needs.

Also, I have a different reason. This is probably the seed of a new thread so I won't belabor it, but I feel as if the Grim Reaper got called in to w*rk overtime. A big cluster of friends and family either recently deceased or is on the short, steep slope to eternity. Best friend checked out a month ago; DM & DF crumbling like a house of cards on a windy day; two brothers-in-law struggling to coax their last breaths into cancerous lungs; both sisters destined to follow a year later.

It is affecting my outlook on my own life expectancy. On this particular day I am dubious that I would live long enough to recoup the price of an annuity, especially one that doesn't start for a few years.

I know I should be making decisions based on data rather than emotion, but feelings are part of our wiring as humans. Sometimes it's hard to tell the difference between what we think and what we feel.

Whew! Glad to get that off my chest. Thank you for listening.

 

[Gill]

Zero. Pension and SS will more than fill out the fixed component of my income needs.

Then you are one of the fortunate few who don't need an SPIA. I have both a pension and SS, but they are inadequate to meet my income needs, thus the SPIA's.
Gill

 

[rodi]

I put "none planned".... but I'm not averse to the idea when/if it makes financial sense. At age 55 and in this low interest rate environment it doesn't make financial sense at the moment.

Just like how I'll handle a major downturn in the market.... by being flexible with my spending and being flexible in my outlook... and how I'm facing the "when to take SS" question (re-evaluating at various age points).... flexibility and being willing to consider options is my plan.

That said - DH's SS, our rental income, and my small non-cola'd pensions cover 50% of our annual spending now... with my SS still to come at some time in the future.

I don't see a point where I would annuitize 100% of my spending needs... but could see 10-25% being attractive.

 

[joeea]

I have a couple of annuities purchased from a friend who became a "financial adviser" when I was younger and stupider.

I've already rolled two of them over to IRAs. I'll be looking at doing the same for the others once they come out of their surrender period.

 

[Gill]

I have a couple of annuities purchased from a friend who became a "financial adviser" when I was younger and stupider.

I've already rolled two of them over to IRAs. I'll be looking at doing the same for the others once they come out of their surrender period.

You're talking about a completely different type of annuities. This thread is about SPIA's.
Gill

 

[Midpack]

I don't see a point where I would annuitize 100% of my spending needs... but could see 10-25% being attractive.

I can't find it now, but I read an article a while back that said most people don't purchase annuities much beyond 30% of their nest egg. Yes, there are undoubtedly exceptions.

 

[Fedup]

Never mind! Just kidding. At age 78 purchased back in January of this year from Lincoln National Life through Vanguard. Not sure if this rate is available today. Also, as I said in an earlier post, I always defer my first payment one year.
Gill

You must plan to live a long live. 78 is cutting it close for me. I don't know if I last until mid 80s. If I purchase it now, I have a good chance to use this benefit for 30 years.

 

[RunningBum]

Then you are one of the fortunate few who don't need an SPIA. I have both a pension and SS, but they are inadequate to meet my income needs, thus the SPIA's.
Gill

"Need" is a very strong word. You're implying that if you don't have enough income to cover expenses, you have to have an SPIA. There are plenty of us who are happy to use a total return strategy and sell off some of our investments to meet expenses. I'll buy SPIAs if and when it makes sense to me. I'm pretty sure I'll never "need" to buy them, but they may improve my financial situation if I do outlive my life expectancy.

The thread title and OP said nothing about this being only about SPIAs, btw.