Poll: Annuities and your life

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills

What are your plans for annuity ownership?

I currently have one or more
23
26%
I don't currently have one but plan on getting one some day
25
28%
I have no plans on getting an annuity
40
45%
 
Total votes : 88

Poll: Annuities and your life

Postby EternalOptimist » Wed May 08, 2013 2:31 pm

What are your plans for annuity ownership?
"When nothing goes right....go left"
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Re: Poll: Annuities and your life

Postby Retread » Wed May 08, 2013 2:33 pm

What kind of an annuity - deferred or immediate?
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Re: Poll: Annuities and your life

Postby EternalOptimist » Wed May 08, 2013 2:40 pm

Retread wrote:What kind of an annuity - deferred or immediate?
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Either kind
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Re: Poll: Annuities and your life

Postby Gnirk » Wed May 08, 2013 2:41 pm

If I were to need an annuity, it would be a SPIA. One never knows, as life circumstances can change abruptly.
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Re: Poll: Annuities and your life

Postby TomatoTomahto » Wed May 08, 2013 2:53 pm

If my wife and I hit 70, we'll possibly take some portion of our portfolio and buy SPIAs. The rest of our portfolio we'll try to grow.
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Re: Poll: Annuities and your life

Postby ruralavalon » Wed May 08, 2013 3:01 pm

I voted "I don't currently have one but plan on getting one some day" even though that doesn't quite fit.

We looked at SPIAs in 2007-08. We didn't buy but decided to consider that again at around age 70 (2 more years).

Here's a good list of reasons to buy later -- viewtopic.php?p=697548#p697548 .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: Poll: Annuities and your life

Postby nodenuff2 » Wed May 08, 2013 3:24 pm

Wrestling with this decision now. We have the option to take a pension or a lump sum. Keeps me up at night but friends say what a good problem. Closer to decison date we will put it all out here and get the opinion of others. Leaning on splitting the baby.
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Re: Poll: Annuities and your life

Postby bertilak » Wed May 08, 2013 4:26 pm

ruralavalon wrote:I voted "I don't currently have one but plan on getting one some day" even though that doesn't quite fit.

Me too.

My "plan" is to leave that option open, depending on how things go over the next 5-10 years.
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Re: Poll: Annuities and your life

Postby dhodson » Wed May 08, 2013 4:28 pm

exactly
its an option to keep open but not commit early to
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Re: Poll: Annuities and your life

Postby otbricki » Wed May 08, 2013 4:47 pm

I think it's nice to have a most of your basic needs covered by a guaranteed income stream, which is why I took my pension as an annuity. That plus SS and my wife's pension is enough to live on without hardship if it came down to that.

However I have no intention of converting anything more than that to annuity as I want to leave a good legacy for my children.
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Re: Poll: Annuities and your life

Postby Sheepdog » Wed May 08, 2013 5:45 pm

At age 79 last year, I bought my first small annuities (SPIA) (two $50K) which gives us $800 a month. I may buy more if interest rates rise to assist my wife's money management if I become infirm or I pass on. Another $1600 monthly plus that $800 and SS would cover our (her) expenses. Right now that $1600 easily comes from our IRAs, but she does not want to learn how to manage it, so additional SPIAs would ease her mind.
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Re: Poll: Annuities and your life

Postby bertilak » Wed May 08, 2013 6:47 pm

Sheepdog wrote:At age 79 last year, I bought my first small annuities (SPIA) (two $50K) which gives us $800 a month. I may buy more if interest rates rise to assist my wife's money management if I become infirm or I pass on. Another $1600 monthly plus that $800 and SS would cover our (her) expenses. Right now that $1600 easily comes from our IRAs, but she does not want to learn how to manage it, so additional SPIAs would ease her mind.
Jim

Simplicity is a good point. If cash just automatically flows into a checking account that saves a lot of trouble (complexity, worry, need for hands-on management, etc.).
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Re: Poll: Annuities and your life

Postby mickeyd » Wed May 08, 2013 7:00 pm

With 6 retirement income streams and an IRA/Roth stash that I have yet to touch, I have no current or future need for an annuity. I do however, beleive that a low cost annuity (VG version) can be an awsome part of the right portfolio.
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Re: Poll: Annuities and your life

Postby FrugalInvestor » Wed May 08, 2013 7:11 pm

Our income is currently generated exclusively from our investments. We will eventually have some social security income and will likely consider a SPIA as well. In large part the motivation would be to simplify management of our finances as we age.
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Re: Poll: Annuities and your life

Postby hicabob » Wed May 08, 2013 7:17 pm

I would have checked a "not sure" box. If I do eventually buy an annuity (spia of course), I expect the frugalness in me would turn me into more of a health/nutrition aficionado very quickly!
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Re: Poll: Annuities and your life

Postby FrugalInvestor » Wed May 08, 2013 8:02 pm

hicabob wrote:I would have checked a "not sure" box. If I do eventually buy an annuity (spia of course), I expect the frugalness in me would turn me into more of a health/nutrition aficionado very quickly!


Maybe you should buy one now then.
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Re: Poll: Annuities and your life

Postby Iorek » Wed May 08, 2013 8:18 pm

I think we'll have enough DB/SS income not to get one, but if that wasn't true then there's a good chance I'd get a SPIA at retirement.
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Re: Poll: Annuities and your life

Postby bertilak » Wed May 08, 2013 8:28 pm

Iorek wrote:I think we'll have enough DB/SS income not to get one, but if that wasn't true then there's a good chance I'd get a SPIA at retirement.

Is your DB inflation-indexed? If not you need a way to account for that.

A big enough portfolio can do that for you, but that has no longevity insurance (other than being "big enough" which is hard to pin down -- the very definition of "not guaranteed").

This is my case, where I'm pretty sure I have a "big enough" portfolio to make up for inflation's damage to my DB. What I am considering is to eventually start buying small SPIAs to put some guarantees on the extra income needed because of inflation. Skim it off the top of my investment returns, so to speak.
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Re: Poll: Annuities and your life

Postby Johm221122 » Wed May 08, 2013 8:29 pm

Will definitely consider SPIA when mortality credits make them attractive and will almost certainly buy one when mortality credits become extremely attractive
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Re: Poll: Annuities and your life

Postby Bill M » Wed May 08, 2013 8:58 pm

bertilak wrote:My "plan" is to leave that option open, depending on how things go over the next 5-10 years.

Also.
But....be aware that somewhere around the mid 80s (just when the mortality credits become significant), an annuity purchase is no longer an option. Insurance companies seem so worried about being sued by heirs
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Re: Poll: Annuities and your life

Postby Frugal Al » Thu May 09, 2013 11:07 am

I understand the appeal and the argument in favor of SPIAs, but I wouldn't touch one of these products today. It's a bit like buying into a long bond at today's rates. The insurance companies are well aware of the boomers' concern about outliving their money which also affects their pricing. And the mortality assumptions are tilted by the overabundance of longevity prone customers, dampening the mortality credit. Now, if they were mandated across the entire population... :oops:
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Re: Poll: Annuities and your life

Postby swong » Thu May 09, 2013 12:06 pm

For those who may not know, many people like myself went with a annuity for a multitude of reasons. Someone may have hinted with interest rates so low it would not be a wise decision to consider a SPIA. This could not be further from the truth. Yes, interest rates are obscenely low however for many a annuity typically guarantees a consistant monthly income. For example, my former employer guaranteed I would get a yearly dollar amount equal to roughly 42% of my best 5-yr average salary. Therefore with interest rates so low my employer had to kick in an added $172k (versus the lump sum) to my lump sum in order for the yearly annuity payout to be equal to 42%. This among many reasons mentioned in other posts was another prime factor in my decision making process. Since traditional pensions are going by way of the dinosaur it's a shame our sons and daughters can no longer partake of such a good hard earned benefit. What sourered me especially in taking a lump sum versus the annuity was the fact I am 7 years shy of age 70-1/2. Best I could do is temporatily delay paying taxes when RMD's kick in. Rough math showed I would fare better with the annuity since NYS exempts the first 20k of this annuity. More importantly my spouse has a extremely outstanding longevity, living well until their 90's it was my way of guaranteeing she would be taken care of when I am no longer around.
RMD's once initiated typically require you draw down in roughly 20 yearly payments. The federal tax bite on extremely large traditional IRA can be huge almost painful when you actually see the dollar amount involved. All I can say is depending on your accumulated investments and savings, what state you're are taxed in, and using a annuity as another leg in your retirement stool, complete your due diligence and see if a annuity is in your best interests.
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Re: Poll: Annuities and your life

Postby Frugal Al » Thu May 09, 2013 1:34 pm

Swong, an SPIA and the annuitization of a DB plan are very different animals, although similar in some respects. Also, the decision process with a DB plan is forced upon us, and must often be responded to in a relatively short period of time, whether it be a few months or by age 70.5. On the other hand, we have total control over an SPIA decision. As for RMDs being higher for an IRA as opposed to a like value annuitized DB, that might be true in later years, but the opposite is true in the earlier years. On the IRS Uniform Lifetime Table RMDs start at about 3.65% payout, and don't reach common SPIA payout rates until about age 85. Hopefully as the RMD payout creeps up, so will tax brackets, although that doesn't seem likely. The likely reason this worked out for you is in part because of the NYS $20k exemption.

I would never fault anyone for taking the annuitization of a DB plan. It should be the default position unless there is good reason to the contrary, such as marginal health, or it is more than the PBGC insurable amount, or it's in a plan that isn't growing and it's not inflation indexed, or it's just a great offer, which does occasionally happen, etc. I just triggered my lump sum today...I wish the market weren't so high :oops: .
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Re: Poll: Annuities and your life

Postby nodenuff2 » Thu May 09, 2013 2:24 pm

Frugal Al would you have "split the baby if you had the chance? 1/2 lump 1/2 annunity?
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Re: Poll: Annuities and your life

Postby Frugal Al » Thu May 09, 2013 3:14 pm

nodenuff2 wrote:Frugal Al would you have "split the baby if you had the chance? 1/2 lump 1/2 annunity?

In my case, no. I'm 6 years from retirement age and the benefit isn't growing. It's an OK payout, and 15 months ago it was $20k less--the segment rates have been kind. I'll need a 5% rate of return to break even at 65--a risk I'm willing to take to counter the inflation risk of annuitizing. There are no guarantees, whether one annuitizes a non COLA DB plan, or takes the lump sum. We don't know what inflation will do, or if our investments will be able to adequately counter it.

This is a small part of my overall retirement portfolio. If it were a larger portion I might consider "splitting the baby." Of course that often isn't an option, nor was it in my case.
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Re: Poll: Annuities and your life

Postby cheese_breath » Thu May 09, 2013 3:19 pm

I have an annuity, but only because GM transformed my salaried pension into a Prudential annuity. I have no plans to acquire any more annuities unless HP transforms my EDS pension into an annuity some day.
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