Retirement Annuities--Should you Buy an Income Annuity (SPIA) in Retirement
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- Опубликовано: 5 окт 2021
- Should you use some or all of your retirement savings to buy an income annuity? That's the question we look at in this video. Called a Single Premium Immediate Annuity, these annuities don't come with all of the fees and complexities of other annuity products. Yet it can still be difficult to decide if you need one, when you should buy it, and how much you should invest.
In this video I'll share annuity calculators, an annuity formula and a number of resources that can help you decide whether an income annuity is right for you in retirement.
Resources in Video:
www.schwab.com/annuities/fixe...
digital.fidelity.com/prgw/dig...
www.morningstar.com/articles/...
www.wsj.com/articles/the-case...
www.whitecoatinvestor.com/spi...
rationalreminder.ca/podcast/59
rationalreminder.ca/podcast/165
www.aiplanner.com/
www.gordoni.com/lifetime_port...
www.kitces.com/blog/calculati...
poseidon01.ssrn.com/delivery....
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ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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I’m 36 and I have about ($190k) liquid in savings which I plan to put towards becoming a homeowner, but based on the current high prices on real estate, do you suggest I hold from buying and look at stocks instead?
Yes, housing crash is coming. If you're thinking about investments to earn huge income while maintaining the ability to access your money and safety, so you don't get caught in a market decline, a financial planner can come in handy
True, a lot of folks downplay the role of advisors, until being burnt by their own emotions, no offense intended. Amid covid-19 pandemic crash, I needed a good strategy to grow my portfolio, thus I consulted the service of a true market strategist that helped to rejuvenate my $700k portfolio, boosting its return over 240% as of today.
A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
That does make a lot of sense, unlike us, you seem to have the Market figured out. Who is this coach?
Sharon Lee Peoples is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Watching this a year later, so this is a late comment. The one important oversight in this was bringing Social Security claiming strategy into the mix. Delaying SS is generally the same thing as buying an additional inflation proofed annuity at far better than market rates. What this means is that for most circumstances, the very first move when "investing" in an annuity is to defer SS. It doesn't make financial sense for most circumstances to take SS early and then buy a commercial annuity. If you want/need more annuity payments than is provided by delaying SS to age 70, then consider buying some commercial SPIA. But defer SS first, it's a better deal for "investing" your annuity budget.
Excellent point and I hope more people read your comment. In decisions about both annuities and SS, you are gambling against your life expectancy.
i was looking for a comment similar to yours ... the "SOCIAL SECURITY ANNUITY" has a COLA ... sure seems like the way to go !!!
Awesome explanation I was thinking along the same lines. I am 59 y/o retired 10 years now with a non-covered pension. My wife is 60 y/o a nurse will be retired at 62 y/o. My SSA survival and spousal benefits offset to zero because of my state pension. If her breast cancer doesn't return maybe an annuity might look attractive.
Great point on Social Security! Delaying SS can indeed provide a solid foundation akin to an inflation-protected annuity. How do you weigh the decision between delaying SS and investing in commercial SPIAs for your retirement income strategy?
Enjoy your vids. Very informative plus unedited delivery adds so much. Thank you.
impressive list of resources in the episode notes -- thank you for putting together that list for us spectators
Hi Rob, Thank you for the deep dive! Just starting to plan for retirement, projecting to do it in the next 3 or so years. Annuties seem to be a fave with fee only financial planners these days and as a "beginner" in my retirement financial education, your post provided excellent information.
Thanks for another informative video. I've never really thought much about annuities, but as rates rise to more historical norms, they may be more interesting for many.
Was curious about annuities watched a few RUclips videos that still left me with questions, finally thought I should see if Rob has a video on this, and of course he did and now I understand. Excellent breakdown as always “Dr” Berger, thank you!
I replaced my bond investment with an income annuity for lifetime income for me and my spouse. If I need inflation, I will go to my stock portfolio. The mortality credits on the annuity is what makes them an extremely unique investment. We can never run out of money even if we use all of our principal and earnings in the annuity, and it is not tied to the volatility of the the stock market. Wade Pfau's research on the Efficient Frontier recommends using an annuity and stocks for sustainable retirement income.
Tremendous video. I am 75 trying to solve this problem about annuity. It’s a great help. Thank you 🙏🏻
Not sure if you read older videos comments but I have been thinking about annuities (close to retirement as such). I would love a brief follow up on this excellent video. You talked about annuities not being inflation adjusted but not about the 'admin' fees and that the monthly payout is calculated as reg. income tax and therefor how that may affect a retiree's decision whether or not to buy annuities. I much appreciate your insight.
Good balanced presentation. I think for retirees with a modest nest egg, an income annuity makes lots of sense for 'some' of their bond or safe money. The longevity value proposition is real. To guarantee some basic income while you watch your balance of the retirement fund grow brings some security. So for many, maybe 10% or 15% of their nest egg in an income annuity can make lots of sense. For married couples getting a joint payout is good. It is as you say, a longevity play. But for those w enough money...probably not necessary.
Excellent way of using Portfolio Visualizer to look at pros/cons of an SPIA. I am 69 and do a Boglehead type portfolio. Whether doing a $40k withdrawal or a fixed percent like 3%, makes no sense for me to get into an SPIA at this time. Will review again in a couple years. Thanks for this RUclips,
Thank you for the video. You seem very trustworthy and made your points very well. It helped me a lot.
This was a really helpful and well-articulated video on retirement annuities. Thank you for it!
Outstanding presentation, Rob! Very well researched and with reasonable assumptions. I've been thinking about an SPIA lately -- mostly due to the tanking stock market -- but after viewing your video, don't believe that I need it. As you touched on in your presentation, my interest in an annuity was driven, in part, from fear. Thank you very much for the video -- and for all of the great info you provide to everyone.
You should fear. Historical results do not predict the future. I believe that we need get our income need met first and leave our other savings invest in equity. 30 percent in annuity.
Thank you Sir. Just came across your vid. Excellent presentation, I have my Jackson annuity in joint survivorship that pays me 5% along with a corporate pension and SS. The goal is to cover all my living expenses with a buffer for inflation. Other monies can rest a while in a ‘safe place’ until this market sorts itself out.
I learned a lot from this video. Very carefully explained. Thank you.
Thankyou Rob, I know this video is a from a year ago.......You brought up alot of excellent points.....you're a very logical and thought provoking Gentleman....appreciate your insights.....just subscribed 😀
There’s a book called something like “when I get stupid”-it’s about protecting yourself from your future self. A stream of income that is protected from elder abuse, bad decisions. I’ve seen this over and over. High functioning elderly left on their own too much (or too stubborn for help, or no one to ask) making really bad decisions/being taken advantage of. It’s very difficult to make sound decisions under stress. Think about what it’s going to look like when you’re dealing with health issues, depression, anxiety. You can also invest more aggressively in the residual portfolio.
Great video! Very well presented.
It's a out retirement income vs investment allocation. Cover your living expenses and have the market does what it does. Also you can buy a joint longevity annuity that will cover both partners and maybe pay for future medical cost. Too many financial advisors don't like annuity be auar it's reduces their under management funds
Really enjoyed the video great objective information!
Amazing how prevailing interest rates play such a big part in these payouts.. running the same numbers now in oct '23 , the life only is 8,280 a year vrs your example from two yrs ago at 5,844 a year.. time for an updated youtube video ! One might run a savings withdrawal calculator to compare the results.. for example.. $100k invested with a 5 % return and drawing down 7296 a year (the 20 yr certain current number) the account would last about 21 years.. so the annuity wins if you live past age 88 in this example.
(23:12 replace bond ladder w/ annuities) Now that we're in a higher inflation environment, do you think locking in an annuity makes more sense than when this video was recorded and we were in historically long-term low inflation times? Just curious. Love your stuff. I've learned so much. Your style is very approachable, even to the unsophisticated investor. (Accepting that not 100% of the remainder would be in equities.)
I have a pension and looking at taking it as an annuity vs the lump sum payout. I think taking the annuity and taking Social Security at 67 or 70, I would only have to take out about 2% of my portfolio to help with the upkeep of inflation.
Annuity is a great way to create another source of income. Essentially you’re creating your own little pension.
29:40 hey, "you and I are not a study!" remember? lol -- I think re-saving some of the guaranteed income each month allows one to accumulate a cash bucket with the objective of using it to rebalance into one's equity allocation (addresses a point you made earlier in the episode re: annuitization giving up rebalancing from fixed income to equity)
Great video! I was curious how the rates quoted two years ago when this video was made compare to today so I went to the Schwab website and input same info ... $100K investment, 65 year old male residing in AL and the rate quoted is $678/mo. That's $191 or 39% more per month than quoted when the video was first made ($487). Can you share what may be responsible for the increase in the monthly payout? Is it tied to treasuries or rates set by the federal reserve? What influences the payout amount? I am interested in purchasing a SPIA and am wondering if I should do that now or wait a few months or longer if there is potential for the payout to increase. THANKS!
I think moving a percentage of your bond allocation into an annuity is not a bad idea, especially if the interest rate environment is favorable.
my planner is a benificery, the conflict of intrest is off the charts
Very thorough, thanks!
One of the things you assume is continuing competence! Here in the UK I'm 75; retired 3 years ago having been a contract analyst programmer in Oil Seismic Surveying. I have a UK State pension and two smallish occupational pensions which cover my living expenses and these are too a large extent inflation proofed. I also has a private pension pot which at 75 would have automatically turned into an annuity had I not transferred it into investments a month ago. Whereas I am happy to be a bit adventurous now to grow this (so low in income high in accumulation) I plan to move much of my investment into an annuity if there are any signs of being incompetent to manage the investments. I figure that the value I will get from delaying the annuity will justify this approach. Perhaps you could cover some scenarios for 75+ people, including strategy plans to accomodate for "reducing little grey cells". Of course the difference in tax regimes may make my suggestion difficult in detail?
A very good point.....competence is a big issue. My mother was sold a variable annuity with IRA money at age 75 from a " real nice person who was driving a nice Mercedes". I told mom she was paying for the Mercedes and ask her to talk to a financial advisor first. She didn't call the advisor and bought the annuity.
Eat lots of free dinners. I found FIA with income rider is the way to go. For income you can chose to take non-annuitized! Different outcome for your heirs. I got two FIA Annuities with income rider, non-annuitized payouts and other features. Mine are just cooking (rollup) now since I bought them for SS replacement.
As of right now. A single life with 10 year certain annuity at the Schwab link you provided with payments starting in 2026 pays 8.7%. Starting next year (2024) pays 7.4%.
Rob, One thing to consider is income tax rates, both state and federal. People should not forget the annuity income is dumped on top of all your other sources of income and will therefore be taxed at the maximum tax rate you find yourself in. This is really bad when you also have high MRD's from your IRA.
The way around this is to purchase a well structured, fully funded IUL ( Indexed universal life policy), once a year or more has passed, one can take withdrawals in the form of loans which aren't taxed. On top of this , one can leave a huge death benefit to the heirs which isn't taxed, and one can sleep knowing that they don't have to worry about what the stock market does.
There are other benefits too, but one should do their own research.
😂 more fee's
Appreciate your input on this.
Love the show!
Thanks Nick. Treasury bonds are leaking and I think you are suggesting the same maybe possible for annuities. What's left? Not seeing a clear path going forward. It maybe time for me to call time out and sit on the sidelines for a while until something materializes and impacts the system....like perhaps..... Inflation.
Thanks for the Great Information Rob. I have a simple I think question. When will Bonds stop leaking money. I don't understand why the 10 and 30 year Treasury continues to decrease in value. I bring that up because to me it makes a strong case for purchasing a (stable) annuity?
You made lots of great points and made me thinking about taking a portion of my savings and investing in an annuity.
I’m writing from Ontario Canada and I really enjoyed the episode and am interested. In about a decade, I will have a defined benefit pensions which will be taxed as income. I see the annuity as basically the same in that it would be a second guaranteed form of income. Am I correct in that there will be similar tax implications as well he monthly deposit will be treated as income without the benefits of increasing the RSP contribution room? Thanks!
Hello like your blogs, very informative. Here's a kind long question. 1. Want to see what u think? . Annuity question. Have $300K, want a fixed immediate @5% annually. for 10,15 or 20 years Is that doable ? 5% of $300K is $15,000. If so, how does that work? If no, why not? 2. What are the fees or service charges for this kind of annuity? Are fee/service charge monthly/annually? Will fees increase over time and by what percentage? Looking for feeedback from all sources. Thanks in advance.
Excellent Video!!!
A reversed mortgage home wiil support as annual payment of approximately 8k at a much lower opportunity cost than purchasing a 100 spia with a 6% payout .
1 million dollars will be the opportunity cost on a 100k over a 30 retirement (earning 8%).
The future value on a 300k home appreciating at 3% over the same 30 period will be 738k And due to the non recourse factor of the HUD backed HECM loan 738k will satisfy the loan .
This strategy will work well if you had the 100k that was going towards purchasing the annuity invested in the market while you drew from the reverse mortgage instead.
20:00 this begets the question in converse: if you don’t (yet) have enough money to service your retirement objectives, would an income annuity make your predicament better or worse (or it’s a wash)?
Good question
I think you are correct that age 70 or above is a good time to consider an income annuity if you need one. You can get near or above 7% then. I personally like the idea of replacing some of my bond portfolio with an income annuity but not a large portion. A lot of retirees at 70 are going to be more like 50/50 in the stock and bond market. Replacing 10 to 15% with an income annuity does increase the return and lowers the risk. Maybe 20% if needed. But only if you need it. I agree that people with a lot of money don’t need one. But a lot of middle-class people may. Good presentation, fair and balanced.
Isn't it risky to have any money in the market at age 70? What if the market is down for the next ten years?
@@sanekabc maybe but depends on the person and % in the market. I'm about 68 and it does not bother me to have some money in the market; I can't see it down 10 yrs though it is possible
@@sanekabc What money you "need" for retire should not be in the stock market at age 70.
@@barrystover9860 1989 Nikkei 38915.....1/8/2023 25973...over 30 years and still down 33%
retirement
Rob, what are your thoughts on TIAA's traditional fixed annuity? Pays minimum 3% up to 4%.
Excellent! Thank you!
Thanks . Great Stuff !
Rob , great video with tonnes of information . Could you please share the list of companies that we can buy annuities. I hear companies like Fidelity and vanguard also offer annuities. Is that true
Fidelity does sell annuities: www.fidelity.com/annuities/overview I don't believe Vanguard does. I've never bought one, so don't have an opinion on Fidelity.
Can you please present ideas how to develop retirement income vs investment allocation. How to minimize tax liability during retirement
Enjoyed the video. Question for you, now that interest rates are quite different than when you made this video, have your recommendations for them changed? A fixed income life annuity seems more attractive at this point in time but I'm curious what your thoughts are
Yes, I am looking at annuities now with interest rate ~ 8%.
FWIF I'm comparing my pending-retirement wife's modest pension to the estimated annuity tools on Schwab and Fidelity. The annuities are $100+ less per month than her company's monthly pension payment. That's a big bite!
If you ask a financial advisor about buying an annuity, he/she will definitely recommend you buy one because the commissions are tempting
I have an annuity with after tax dollars, I had to leave there for 5 years. At the end of 5 years, I plan to cash it out and invest elsewhere. I could leave it and Annuitized it later, but I don’t recall Payments for Life. I’m thinking it until the money runs out. I could also let it set there and my beneficiaries would get it. What’s your opinion?
Thank you Rob.
The problem is the last thing I need is more “uncontrolled” income on top of social security and rmds.
Hello Rob, could you please create a video sharing why you are not a fan of Index annuities? You've alluded to these in several videos but by guaranteeing principle and yielding up to 80 percent (some are uncapped) of numerous funds and/or indexes to choose from each year, it would be interesting to learn why you deem them as financially unwise, especially in these uncertain times
Do those who spend only 2.5% of their assets spend very little? Some of them, maybe, but not others! I can think of a few retired guys who have a savings rate, not a withdrawal rate.
ca you do a video on purchasing MYGAs (multi year guaranteed annuities) since the rates are high now
CDs are backed by the FDIC, treasury bills by the full faith and credit of the US government. How does the guarantee provided by the insurance company issuing the contract compare - what if they fail?
Hi, Rob . what do you think about variable annuity ? people say is has higher potential growth than GLI and GFI
shout out the lawn mower in the background LOL
I have 3 annuities that are all have a 3% inflation rate Plus when i die my beneficiares get all the money back Pacific Life
how do you handle RMD`s? you cant touch what you gave to the insurance company. im sure its counted in your IRA balance for RMD~s
Maybe those investment firms do not want you to invest in annuities. No fees for them?
My WR is high and the final value I get is 110. That can't be correct. For the top I have 8.8 - 4 and the bottom is 7.5-4.
I've got a Jackson national flexible premium fixed annuity that was issued in 1991 and is based on 1971 mortality tables. It pays 3% guaranteed and the pay table is amazing. I can put up to five million into it with additional contributions having no surrender fees. Only the first contribution back in 1991 was subject to surrender charges. If annuitized the payback is 11.3 years and the payout rate (Which goes up a little each year) is currently 8.3% at age 61. With this set of circumstances I'm thinking putting more in above the $300,000 state guarantee is a good bet. Opinions?
To me you came across as being neutral on annuities and not saying for or against annuities. However, for the blue collar middle class working Americans annuitizing up too 50% of there retirement nest egg to guarantee income really make sense. You can use the other part of the retirement nest egg for growth and income to help fight inflation. This is annuitizing just before retirement and after growing the retirement nest egg.
How about divide the money for the annuity and do everything everyone suggests . No matter how it done most will disagree .
Thanks Rob
The forumla says I should only allocate ~ 20% to an annuity.
However. Here's a thought.
I am now considering annuitizing 50% of my portfolio and reallocating the other 50% from moderate/fixed income into Vanguard index funds.
The annuitized portion would provide me with the comfort of a steady income that covers my expenses (along with SSI) and afford me the peace of mind to take on some risk with the remainder. After ~ 10 years of the annuity payments being effectively diminished by inflation that other portion should have (theoretically) doubled and I can then consider the next step.
I also have a small stock (as opposed to retirement) portfolio and a rental property that should appreciate over that time. Having a source of steady income (longevity insurance) will remove the temptation to sell those in an economic panic.
I will be talking this over with my (fee based, fiduciary) financial planner.
Interesting approach replacing fixed income investments part of your portfolio. I guess there is a risk that the company that issued the annuity goes belly up though, maybe you need a couple of annuities with different companies depending on how much you're talking about.
@@sooner_born2256 I decided on 40% (which was in CD's). And yes, more than one to keep them within the 250K insurance limit covered by the state guaranty fund.
@@sooner_born2256 Using the formula Rob presented, the calculation came to 35%
The one I got starts @ 7.15% (if I start it now). If I can delay it to age 65 (I am 63) it will be 7.8%. If I can hold out until 68 before starting the income, it will be 9.6%.
My plan is to invest into a myga to a spia . Stan the annuity man gave me some good insights on this strategy. What are your thoughts on it ?
I’m glad that you went to Stan the Man because what he says is so true and accurate
The monthly guaranteed makes inflation adjustments?
Good info! Thanks for sharing.
Have you done a video on creating your own annuity? It may not make sense, but why can’t someone do it themselves? Is it too difficult? I’m a novice, but seems like it would be better to replicate it and keep the principal for the family.
You can. Just build a treasury ladder from year 0 to year 30 or whenever you think you would die. Obviously there is quite a bit of math involved. The main two benefits of income annuities, from my point of view, is simplicity, and the life insurance piece. The simplicity piece comes into play with retirees that don't know that much, or don't want to build their own treasury ladder or manage a portfolio. They would rather have that time back to enjoy their retirement. The life insurance piece is helpful since the annuity companies can insure against longevity, which you as the individual can not do.
You can always pick the annuity with 20 year guaranteed if the principal loss worries you. Usually doesn't ding your payment too much.
The formula dictates that the better annuity is, that is the bigger AR it pays, the less of it I should buy. It doesn't make sense.
Bob, if I buy an annuity using money from an IRA how does that effect your yearly RMD requirement? If for example I buy an annuity using a significant chunk of my IRA would I still have to compute my RMD each year by including the amount I paid for the annuity plus the money left in my IRA?
Only with a QLAC you can postpone RMD requirements..... with a SPIA using IRA money the amount you receive each year will be subtracted from your RMD requirements...yes you would add the annuity value to the remaining IRA to compute RMDs...hope that helps....a little info than you asked for 😀
God bless you
What good would 10% bonds in Buffets 90/10 portfolio do for you?
What is your opinion of laddered annuities?
Question. Now, 1 year later, given the rates we have today what are your thoughts on the following: I am 60 yrs old. Should I put money into a deferred fixed annuity to lock in todays rates?
You just can't answer that question in a vacuum in my opinion. Needs to be based on your entire financial picture and your own personal approach to funding retirement.
From what I've observed, the increase in interest rates have benefited MYGA greatly and really have not affected SPIA or DIA; same payouts as before FED increases. Makes sense; for MYGA the carriers are matching our payout with short term treasuries etc which are UP ... long term treasuries are lower return than short term ... AKA the inverted yield curve situation that persists. So long term SPIA and DIA not joining the party. Maybe when we see MYGA rates deflate will be the pivot to consider long term SPIA DIA. Not that they will be better than now; just that MYGA will not be better than SPIA DIA as they are now.
Its amazing how many people in Texas do not realize pensions are funded by annuities. People happy about their income certainty have pensions. Business owners must create their own retirement plan and pension, which are funded with annuities. Social security is bankrupt and at the mercy of political risk every cycle.
Where are the links?
This video is from 2021. I got a quote June 2024 with higher intrest Rates. 62 male in Michigan recieve $1000 per month wud cost $163k it wud break even at 13.5 yr so I would be 75 $1000 p mo so if I live 20 yr is $200,000 25 YR IS $300,000
Wonder about annuity laddering say every 5 yrs as part of your bond portfolio portion as you retire where when you get older your bond portion would generally increase and you could annuitize a portion of that to guarantee. I’m nearly 50 and 90/10 mix, but my wife wants more guarantee’d income and fearful of the market, while I’m more bullish.
Definitely a solid strategy. I don't need annuities, but if I did, I would likely ladder them. Pros and cons, like anything in life. But I do like the strategy.
Thanks a lot
Rob, really good explanation regarding the target fund cap gain situation. I had a large cap gain and called VG after seeing an article in the WSJ. They had someone reach out to me. He basically scolded me for having the fund in a taxable account, but he also said the cap gains have been high in general in that fund in the past. I went back the 9 years I could go back and wrote back that his statement was false and listed the gains. My resulting cap gain amount was many times that of the previous 9 years. Ouch.
Question, as a class action attorney, does the claimant end up with less, in general, than they would if they sued on their own? Is it possible to join the original plaintiffs once the suit has been filed? Do you have any idea how many pennies on the dollar you can expect in a class action suit like this? Would the proceeds be taxable? Thank you
Hey Rob, love this podcast, very timely. I'm very curious you thoughts about the podcast "Fun with Annuities"..let say episode #48. Reasons for an Annuity ..Acronym "PILL". I would love you thoughts on this....thanks for all you do!
I'll check it out.
Annuity gives you retirement income. That's income without spending down the stock portfolio. The annuity along with social security create the income floor without worrying about the behavior of a market out of your control
huh? the money you would be scammed into an annuity is in fact taking/spending away from your stock portfolio. An annuity simply gives you your money back. It's basically paying an insurance company to give you your money back, while they profit from it. The mafia provides you with security for a donation, too. You could simply self-annuitize, which is the whole 4% or x% safe withdrawal rate, by having some discipline in your withdrawal rates and investments in retirement. Annuities are carefully calculated by insurance actuaries to use your principal seed money and repay you fixed amount of that seed money over time, and most importantly not to pay you any of the house's (insurance company's) money. That's why insurance actuaries make the big bucks. The only way for you to get back anything beyond your principal seed money is for you to live a very long time, which is atypical if the high priced insurance actuaries have effectively done their jobs. Why would you pay someone 100% principal plus fees, to only get back maybe 70% of your principal? You know something is bad or suspect when: they (annuities) are pressure sold to vulnerable populations, feed on that vulnerable population's fears, and use complex structures, wording, and fine print to confuse that vulnerable population. The $1.8Trillion annuity market is simply predatory, but politicians who line their campaign coffers with insurance lobbyist money and tax revenue are more than willing to continue letting predatory insurance industry peddle annuities to vulnerable populations.
An IA with a LTC Rider might be a good idea for people with certain genetic health risks.
I personally can't see any scenario where an annuity would be a good fit for me.
So If I have a Income annuity at 200k And a total including annuity portfolio of 1,000,000 Does the amount coming out of the Income annuity count towards RMD's at 73 or are the RMD's calculated on the 800k balance? Thanks
I have an income annuity. From what I understand it does not count toward RMD's.
It is very misleading when someone talks about a 'rate of turn' on an annuity. Since with an annuity you have lost the entire principal, the money you get per year isn't really a 'rate of turn' on your investment.
What is ARF
I guess you can say an annuity, like social security, is supplemental income.
"Never buy something you can't auction or pawn."
Annuities are golden handcuffs, very expensive way to limit your total returns. Loved your quick analysis, like a band aid on a broken arm! The only people that really love annuities are insurance companies and their commission based salesmen.
My fiduciary told me to never ever invest in annuities! Unfortunately I already had one that was left to me. It's does earn interest but very little 2%. Now it may somehow be good for certain situations but be very careful in shopping for them if you decide to go for one. Beware banks push them because they earn a commission when you get one! An iseries bond maybe a much better option as it pays interest at the rate of inflation.
Hey Rob! I'm about 10 years from retirement and am considering an Annuity as a way to payoff my mortgage, lump sum, at a point in the future. Plan is to invest about $200k in the annuity which is what I would owe based on the mortgage amortization schedule for the date I want to retire. My goal is to guarantee the money is there which is why I'm considering this as part of my 401k rollover. Bad or good idea?
Have you considered the tax implications when you draw the lump sum to pay off the mortgage.
It’s about peace of mind. Guaranteed income. Hand your money over to the insurance company and they distribute it back to you. Now THAT is passive investing. You make no decisions or have any concern over where the market may be heading.
As soon as I finish my Morningstar articles I know what topic is on for your site
This insurance person is trying to sell me this kind of investment and keeps pushing it and say that it outperforms the S&P. Is this true?
no. person keeps pushing because of his fat commission and huge profit margin for peddling crappy annuities.