An advisor for annuity or retirement income gap

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midwest60
Posts: 6
Joined: Sun Sep 08, 2019 9:23 pm

An advisor for annuity or retirement income gap

Post by midwest60 »

I am 61 and have at least six years to go before retirement. I have $1.45 million saved between my rolled-over 401K (now an IRA at Vanguard) and my current employer 401K with Fidelity. I have no pension and don’t own my home.

I’ve used several financial calculators that indicate I will need to save another $84K a year in order to meet my retirement nest egg of $2.6m.

Since I only have an emergency fund and hope to put any savings towards eventually buying a home, I am limited in saving anything more. I am searching for an advisor who can help me weigh the cons and pros of purchasing an annuity and also identify an alternative to an annuity. So far, I have not identified any particular advisor or company.

Any suggestions?
SnowBog
Posts: 4696
Joined: Fri Dec 21, 2018 10:21 pm

Re: An advisor for annuity or retirement income gap

Post by SnowBog »

First, congrats looks like you've grown your savings by nearly 24% over the past two years since your first post. viewtopic.php?t=290500

Second, you don't likely need to hire an advisor, and arguably you are better off without one. Most of them will "sell" you something, to their benefit more than yours. To remind you of some of the advice from your last post:
lakpr wrote: Sun Sep 15, 2019 2:03 am You do not need any professional advice
Brianmcg321 wrote: Sun Sep 15, 2019 8:06 am Read the wiki about the three fund portfolio.

A simple portfolio is not only easy to manage, but will have lower fees, and a much higher return than if you let someone else manage it for you.

Take your time to educate yourself.
If you ultimately decide to work with a financial advisor, I'd only consider a "fee only" advisor (aka pay by the hour or a flat fee) who does not /can not sell you anything to avoid conflicts of interest.

Third, I feel like your question is either missing context or is conflicted. An annuity is not going to help you reach $2.6M... An annuity would require you to give up some of your existing $1.45M in exchange for some sort of income structure. That may - or may not - make sense for you... But it definitely isn't going to get you to $2.6M...
midwest60 wrote: Tue Oct 26, 2021 9:23 pm I’ve used several financial calculators that indicate I will need to save another $84K a year in order to meet my retirement nest egg of $2.6m.
...
I am searching for an advisor who can help me weigh the cons and pros of purchasing an annuity and also identify an alternative to an annuity.
Fourth, I think you are asking the wrong question and/or are looking at this backwards. Your savings target is primarily a reflection of your expenses (more specifically your retirement expenses minus any income sources like social security). Without knowing your expenses, it's impossible to know if $2.6M makes sense for you. Maybe you need less - or more... Additionally, maybe you can look at reducing expenses if needed which has a dual effect of lowering the amount you need to save overall and giving you more that you can save per year.

Lastly, for better guidance its best to provide a complete picture so people can understand the context, options, etc. This post has the recommended format, and you can click the edit button on your original post and add the additional details. viewtopic.php?t=6212
venkman
Posts: 1338
Joined: Tue Mar 14, 2017 10:33 pm

Re: An advisor for annuity or retirement income gap

Post by venkman »

How much do you anticipate needing to pull from your portfolio annually once you retire?

As far as guaranteed lifetime income, there aren't really any alternatives to an annuity. I think they can be a particularly good choice for people who haven't reached their nest egg goal by retirement, since they provide the highest safe payout rate. If you annuitize a portion of your portfolio, the remaining assets don't have to work as hard to produce return, and you can afford to be more aggressive with those assets because of the guaranteed income you've got coming in. The main drawback of annuities is that the money is guaranteed not to be available for heirs.

You can run your own annuity quotes at ImmediateAnnuities.com.

You might also check out Stan the Annuity Man for lots of in-depth annuity content.

As far as advisors, any independent, hourly fee-based CFP should be able to help you formulate a plan.
dbr
Posts: 46177
Joined: Sun Mar 04, 2007 8:50 am

Re: An advisor for annuity or retirement income gap

Post by dbr »

Otar addresses some issues regarding annuities in his book: http://retirementoptimizer.com/

While you may be a candidate for his "gray" zone, it sounds like you may be in the "red" zone where an annuity is not helpful. Note annuities are expensive when interest rates are low, but gaining by investing is also hard.
Topic Author
midwest60
Posts: 6
Joined: Sun Sep 08, 2019 9:23 pm

Re: An advisor for annuity or retirement income gap

Post by midwest60 »

Thank you for all the great advice. I will investigate.
Rex66
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Joined: Tue Aug 04, 2020 5:13 pm

Re: An advisor for annuity or retirement income gap

Post by Rex66 »

You should also keep in mind that very few annuities actually have true inflation protection so you are trading one risk for another.
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