Which is the better financial profile?

[rs0460a]

Rs, was your SPIA inflation adjusted, e.g., tied to CPI? If not, what was your thought process on that?

No, my SPIA is not tied to inflation. In my situation, my goal was to provide me with immediate "guaranteed" income (beyond my retirement portfolio) up to the point of SS (in 10 years).

In addition (as you have already found) the purchase of the SPIA increased the "survivorability" of my retirement plan/portfolio.

It winds up being a tool to fix a "situation". Is it for everybody? Of course not, but in our case it works well.

- Ron

 

[cashflo2u2]

I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .

 

[youbet]

I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .

I believe your assumption is incorrect. I'll take you up on that bet as long as you assume the burden of proof.

 

[packrat44]

I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .

I believe your assumption is incorrect. I'll take you up on that bet as long as you assume the burden of proof.

I'll take some of that bet also.

For quite some time I have thought I would put my DW into a SPIA with about 10% of our portfolio about the time she turns 70. Since I do not have surviorship on my Government pensions, it would offer some stability for her.

 

[cashflo2u2]

I believe your assumption is incorrect. I'll take you up on that bet as long as you assume the burden of proof.

Not necessarily. You and the pakrat could be the 1%.

 

[jIMOh]

I think the second option is better. I have not read all the posts yet (I am halfway thru page 1). I assume I can allocate the 2% SWR portfolio more aggressively and live off the yield. So the 12% reduction in value can probably be overcome with a little time.

If going for a 2% SWR, I would be investing with a dividend centric philosophy
If going for a 3% SWR I would allocate between stocks and bonds, and the stock positions would also be dividend heavy.

IMO any SWR 3% or under can be sustained with dividends. Anything higher than 3% and more than likely shares will need to be sold at some point to generate income.

 

[W2R]

I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .

Probably not 99%.

I think quite a few people here are concerned that those who don't know enough to run FireCalc or anything else, might buy an immediate, fixed, lifetime annuity before learning enough about investing to know if that is a wise decision. I think the only reason they aren't worried about them buying something else while in the learning process, is that buying an immediate, fixed lifetime annuity is an irreversible decision.

I am still considering an immediate, fixed, lifetime annuity although now, due to my changed financial situation, it doesn't seem prudent in my case any more. I still run the numbers every now and then to reassure myself, but I doubt I'll ever buy one. Maybe I will change my mind once I am 85 or so.

 

[rs0460a]

I am still considering an immediate, fixed, lifetime annuity although now, due to my changed financial situation, it doesn't seem prudent in my case any more.

Exactly! The problem with comments on "annuities" (IMHO) are that people make statements on the "suitability" of the product, without understanding (or investigating) the product as related to "their situation".

A couple of examples:
- Some folks do not segragate SPIA's from deferred annuities. While I would not consider a deferred annuity, in some situations, for some folks (who are still wor*ing and have exhausted their annual contributions) it may make sense.

- Some folks don't understand that you don't necessarily "loose if you die". These are often the folks who want to ensure they have an estate to pass on to the "next generation". I understand this concern, however there are SPIA's that address this concern. As a disclaimer, my/DW's remainder estate is going to charity, so even though I ensured that our SPIA would have "value" for at least its 28+ year term, it was not a major consideration in our decision to "buy" the product.

It's sort of like buying a car. Does everybody purchase the same car? Of course not. Some buy new, some used. Some foreign, some domestic. Some luxury, some not. Some fuel efficient, some not.

If you are still working, in construction, and need to have a heavy-duty vehicle, you will probably buy a HD pickup/SUV.

If you work in an office, some miles away from where you live, you may want a sub-compact.

If you are retired (like me ) and drive limited mileage, you may want a luxury SUV (like my Caddy ).

Everybody dosen't need the same vehicle. Everybody dosen't an annuity (any type).

It all depends what works best in your situation and to meet your end-goals.

Regards,

- Ron