SPIA or Annuity regret anyone? Lessons learned?

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jamgand
Posts: 7
Joined: Fri Dec 07, 2018 9:50 am

SPIA or Annuity regret anyone? Lessons learned?

Post by jamgand »

Would love to hear some feedback on how people faced with an early retirement and may have chosen an SPIA feel about their decision?

Did the income give you the sense of relief?
What advice would you give someone considering them around the age of 50?
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David Jay
Posts: 14586
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: SPIA or Annuity regret anyone? Lessons learned?

Post by David Jay »

Most recommendations for SPIA purchase is much later in life - 70s and later. This is because mortality credits become a larger part of the calculations at those ages.

At age 50 you will mostly be getting the returns that insurance companies receive from holding bonds, less the overhead of the insurance company. It makes a lot of sense to hold bonds yourself and avoid the overhead of the insurance company.

The other issue at age 50 is that you are facing 40 or 50 years of inflation. For comparison, 50 years ago you could purchase a new automobile for $2000.

Here is the link to the Wiki page for fixed immediate annuities: https://www.bogleheads.org/wiki/Immediate_fixed_annuity
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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