GLWB annuities

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smitcat
Posts: 2115
Joined: Mon Nov 07, 2016 10:51 am

GLWB annuities

Post by smitcat » Fri Feb 16, 2018 5:08 pm

Is it really best to take income from a GLWB annuity as soon as possible (eligible)?
This article says that it is just curious if everyone agrees....

https://www.kitces.com/blog/why-it-rare ... ase-study/

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: GLWB annuities

Post by itstoomuch » Fri Feb 23, 2018 1:22 pm

Depends :oops: :greedy
Ymmv
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: GLWB annuities

Post by itstoomuch » Fri Feb 23, 2018 3:00 pm

Essentially the problem is similar to whether or not taking the Option of exercising SS against alternatives.
depends :oops:
Ymmv :greedy
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

smitcat
Posts: 2115
Joined: Mon Nov 07, 2016 10:51 am

Re: GLWB annuities

Post by smitcat » Fri Feb 23, 2018 3:37 pm

itstoomuch wrote:
Fri Feb 23, 2018 3:00 pm
Essentially the problem is similar to whether or not taking the Option of exercising SS against alternatives.
depends :oops:
Ymmv :greedy
I do not see a parallel with taking SS as that has an inflation adjustment and also is non negotiable other than year to take.
If I had a choice (which I do not) I would take the funds in a single up front payment paid into SS rather than the SS payments.
But that is just a wasted thought as it is not an option.
Kitces calculates the reasoning behind the limits on the GLWB - the math is laid out for us to review.

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: GLWB annuities

Post by itstoomuch » Fri Feb 23, 2018 4:47 pm

IMO, YMMV
In a declining Market, Waiting to take SS, gives the appearance of SS increases. The Long Put.
https://www.investopedia.com/terms/l/long_put.asp

In a rising Market, Holding securities is more attractive than holding SS. The Long Call.
www.theoptionsguide.com/long-call.aspx

Add the two options together you get a Long Straddle-Strangle.
https://www.optionseducation.org/strate ... jsp?prt=mx
https://www.optionseducation.org/strate ... tml?prt=mx

For GLWB, the owner has the same options; To take the Income immediately, an expensive SPIA but with a possible remainder-residual to heirs; or to delay taking Income against the backdrop of the Market of your choice.

So we took SS early in an expected rising Market and Delayed taking GLWB, 2008-current.
Some of our GLWB options straddle-strangle options are coming due in late 2018.

YMMV



,
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: GLWB annuities

Post by itstoomuch » Fri Feb 23, 2018 5:00 pm

OP wrote:Is it really best to take income from a GLWB annuity as soon as possible (eligible)?
Ans: Depends on the owner, contract terms, and Markets :oops: . JMO.

Kitces cite of Moshe Milevsky's Monograph on GWLB annuities:
are general conclusions "Why It Rarely Pays To Wait On Taking Withdrawals From A Variable Annuity GLWB Rider – A Case Study"
to which I agree with and mirror my personal views on SS.

However, the title says that it "rarely". I found that sometimes, there are certain times and conditions where delaying is more beneficial, We caught a period of time where "rarely pays to wait", pays to wait :mrgreen:
If you take a immediate income from a GLWB VA, there is a good chance that a SPIA would be competitive.
No one knows until it happens :annoyed .
YContracttermsMV 8-)
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: GLWB annuities

Post by itstoomuch » Sat Feb 24, 2018 1:29 pm

I would agree with Kitces,
Based on current contract terms of Blended Funds, 2.5%-3.5% fees, guaranteed 3.5% Living benefit stepups, 3.5%-5% GLWB withdrawals, AND my current Market expectations and age @68/71. The last few years, I've been mulling this. I had not initiated withdrawals because I had hopes that this bull run will continue and thus our Income would increase accordingly. I had planned that if we would fall into a bear market decline, I would start the withdrawals.
IOW, I've been hoping for a bad Sequence of Returns. Instead, we are getting great Sequence of Returns since 2009.

If one is to buy any type of annuity (including SS) , the whole point is to outlive the tables and live off of the annuity's (Federal for SS) company coffers, and to do so, Sooner rather than Later.
YMMV

Disclaimer;
see notes in signature line.
We bought, 2008-2012, GLWB annuities for (ranked): #1 Insurance Value for Income (Long Staddle-Strangle option); #2 Income; #3 Ancillary options.
Annuity Accumulation Value has a current CAGR of 9%, all equity. Expected VA income is minimally 33% higher than original guaranteed income.
For us, our annuities today, are of less importance than in the 2008-2012 purchased period.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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