Nervous about locking up money in SPIA

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
User avatar
Topic Author
tc101
Posts: 3810
Joined: Tue Feb 20, 2007 2:18 pm
Location: Atlanta - Retired in 2004 at age 54

Nervous about locking up money in SPIA

Post by tc101 »

I am 69, retired and in good health. I am single, a widower, and will probably remain single. I have no children. When I die my estate will go to my brother, his children, and some of my friends. It is not particularly important to me that anyone inherit anything, although I will be happy if they do.

I will start social security next year when I turn 70. It will pay for about half of my basic living expenses. I could put about 25% of my liquid assets in an SPIA and that would cover the other half of my basic living expenses. Social security is inflation adjusted, but an SPIA is not, so realistically I would need to put about 35% in SPIAs, and have some of that start when I am 75 and 80, to be really safely covered for life by social security and annuities.

It seems like the logical thing to do. I have no one I can really count on to look out for me when I get old and mentally slow. We had a good conversation here recently about aging, dementia and bad investments. Someone linked to the book:

"WHAT TO DO WHEN I GET STUPID: A Radically Safe Approach to a Difficult Financial Era".

https://smile.amazon.com/WHAT-WHEN-GET- ... op?ie=UTF8

Investing in SPIAs to cover basic living expenses seems like the logical thing to do ... but ...

It makes me nervous.

I went to this page and looked at rates of return:

https://www.immediateannuities.com/

The rate of return is very low. I know that you are paying for a type of insurance product, so if you live a long time you get a good return and if you die young you get a poor return, but if you calculate the return based on average life span, I believe it is a little less than a CD ladder.

In addition, I have a fear that SPIAs aren't as safe as they seem. I have a fear that at some time in the future the owners of some of these annuity companies will get together, pay millions of dollars in campaign contributions, get the laws changed, walk away from the companies with billion dollar bonuses, and leave a bunch of old people without annuity payments.

It makes me nervous to lock up so much money in one of these things because of the low returns and the potential risks.

What are your thoughts?
Last edited by tc101 on Mon Feb 25, 2019 11:40 am, edited 1 time in total.
. | The most important thing you should know about me is that I am not an expert.
Dottie57
Posts: 12379
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Nervous about locking up money in SPIA

Post by Dottie57 »

i will probably buy an SPIA AT 70 with 10-20% of my portfolio. With SS and SPIA I should be good. Rest of the portfolio will supply fun or different living situations as I age.

Remember to look at how much your state will guarantee if an insurance company goes bust. The insurane company should be highly rated. Make sure your annuities are from different companies.
delamer
Posts: 17458
Joined: Tue Feb 08, 2011 5:13 pm

Re: Nervous about locking up money in SPIA

Post by delamer »

If I was going to buy a SPIA, I’d be more concerned with finding a reputable issuer than I would be with grabbing a slighter higher interest rate.

Vanguard, maybe?

As far as whether the return is sufficient, that is only a decision you can make. Seems like staggering a couple annuities, as you mentioned, would allow you to take advantage of any future interest rate increases (although lower rates are possible too).
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
mhalley
Posts: 10432
Joined: Tue Nov 20, 2007 5:02 am

Re: Nervous about locking up money in SPIA

Post by mhalley »

I think spia are more useful when you don’t have enough money to have a safe withdrawal rate. But there is also something to be said for 5he peace of mind of knowing that you can’t be fleeced of that money if you do get demented. You also don’t have to do it all if it makes you nervous, just do 10% or so and see how you feel.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Nervous about locking up money in SPIA

Post by The Wizard »

tc101 wrote: Sun Feb 24, 2019 7:43 pm ...What are your thoughts?
I'm of similar age, 69, and starting full SS and RMDs in 2020.
I did a large immediate annuity with TIAA when I retired in 2013 and couldn't be more pleased.
Part of my annuity is "fixed" but the more exciting part is variable, based on the broad Stock market (CREF Stock) and commercial real estate (TREA).
So I'm a happy camper...
Attempted new signature...
User avatar
nisiprius
Advisory Board
Posts: 52216
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Nervous about locking up money in SPIA

Post by nisiprius »

"Term certain" is a kind of problem. Since an annuity is guaranteed to pay out for the term certain, during that period of time, if an annuitant dies, their payments continue. Therefore, money that could have been available to pay out to other annuitants is not available.

In other words, during the term certain, you are not getting any "mortality credits," the annuity is not benefiting from spreading risk among a population, and the SPIA is precisely what people who dislike annuities think it is. All that is happening during the term certain is that the annuity is taking your money up front, and then doling it back to you in installments, together with earnings from very conservative investments--and charging a fee for doing it.

It should be no surprise, then, that during the term certain, the rate of return is similar to that of other very conservative investments--minus a fee.

There's not much point in doing this, then. And if I'd figured that out before I bought my own SPIAs I would probably have chosen a shorter term certain.

Overall, averaging over all annuitants, average rate of return from an SPIA would be expected to be lower than you could get for yourself--it's just the return of very conservative investments, minus a fee.

Anyway, it is what it is. An SPIA isn't some kind of magic investment, you could duplicate the investment part yourself. The part that you can't duplicate for yourself is the insurance function--which doesn't begin until the term certain ends.

What you cannot do for yourself is to arrange for many of you, in parallel universes, to will each other the unspent money from an SPIA, so that the unspent money from you in your short-retirement parallel universes can fund the extra money required by you in your long-retirement parallel universes.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
aspirit
Posts: 478
Joined: Tue Jan 02, 2018 11:52 pm
Location: SMA.SFL

Re: Nervous about locking up money in SPIA

Post by aspirit »

I agree. Enjoy market returns as long as possible with your funds. However, do not rule out data. As mentioned the SPIA’s custodians steadfast liquidity is paramount. Bring the ‘deal’ to the provider, ...... you might get what you prefer, rather than accepting their advertised generic offering. Fewer providers. Shop it around, you never know, things change.
Best wishes.....
Last edited by aspirit on Sun Feb 24, 2019 9:26 pm, edited 1 time in total.
Time & tides wait for no one. A man has to know his limitations. | "Give me control of a nation's money and I care not who makes it's laws" | — Mayer Amschel Bauer Rothschild ~
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Nervous about locking up money in SPIA

Post by The Wizard »

nisiprius wrote: Sun Feb 24, 2019 8:21 pm "Term certain" is a kind of problem. Since an annuity is guaranteed to pay out for the term certain, during that period of time, if an annuitant dies, their payments continue. Therefore, money that could have been available to pay out to other annuitants is not available....
I agree with Nisi.
Term certain is generally a bad deal.
I did lifetime immediate annuities which are much more fun...
Attempted new signature...
User avatar
Topic Author
tc101
Posts: 3810
Joined: Tue Feb 20, 2007 2:18 pm
Location: Atlanta - Retired in 2004 at age 54

Re: Nervous about locking up money in SPIA

Post by tc101 »

I agree with Nisi.
Term certain is generally a bad deal.
I understand and agree. I just used the term certain as an example because it is easier to calculate the interest rate. Lifetime immediate annuities are what I would get. They are similar to the term certain in how they invest, and the interest rate less the insurance benefit of spreading the risk of time of death.
. | The most important thing you should know about me is that I am not an expert.
User avatar
LadyGeek
Site Admin
Posts: 95696
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Nervous about locking up money in SPIA

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
ResearchMed
Posts: 16795
Joined: Fri Dec 26, 2008 10:25 pm

Re: Nervous about locking up money in SPIA

Post by ResearchMed »

The Wizard wrote: Sun Feb 24, 2019 8:30 pm
nisiprius wrote: Sun Feb 24, 2019 8:21 pm "Term certain" is a kind of problem. Since an annuity is guaranteed to pay out for the term certain, during that period of time, if an annuitant dies, their payments continue. Therefore, money that could have been available to pay out to other annuitants is not available....
I agree with Nisi.
Term certain is generally a bad deal.
I did lifetime immediate annuities which are much more fun...
I think three things are sometimes confused:

1) An annuity for a period of X years: This is nothing more than giving the insurer a chunk of money, and they dole it back to you, plus a very modest, and known upfront, return. Nothing else. One could do something similar with, for example, CD's or even a bank account, carefully taking out only a certain amount each year, planned to use it all up in the X years.

2) An SPIA: This is the "classic life annuity", where one gives the insurer a chunk of money, and you are paid a certain amount for the rest of your life (or with a co-annuitant, with a pre-specified proportion to the survivor). Here, the money from those who die earlier goes to those who live longer. For those who do live longer, one cannot duplicate this with any certainty.

3) A combo: A life annuity WITH a given period of time guaranteed, regardless of whether the annuitant(s) survive that entire time. Because of this guaranteed payment, the "lifetime payment" is somewhat less.
This is sometimes suggested for those worried about having "all of their money disappear" if they die very soon after starting the annuity, and had legacy interests who thus "missed out".

The latter two can be adjusted for some increase, such as inflation adjusted, or with a specified annual percentage increase. Either of those will make the *starting* annual payment be less than without the adjustment, for the same up-front payment.

As with RMDs, none of this money *must* be spent each year. But it's what is "doled out" each year, however the arrangement is set up.

RM
This signature is a placebo. You are in the control group.
User avatar
Stinky
Posts: 14156
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Nervous about locking up money in SPIA

Post by Stinky »

tc101 wrote: Sun Feb 24, 2019 9:02 pm
I agree with Nisi.
Term certain is generally a bad deal.
I understand and agree. I just used the term certain as an example because it is easier to calculate the interest rate. Lifetime immediate annuities are what I would get. They are similar to the term certain in how they invest, and the interest rate less the insurance benefit of spreading the risk of time of death.
I agree with purchasing a SPIA with part of a nest egg.

My pension with MegaCorp gave me the option of a SPIA or a lump sum. I chose the SPIA for the life of DW and me, without a term certain. It gives me a better payout than a CD ladder, and ensures that we will receive monthly benefits as long as we live. There’s comfort in that.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
User avatar
Topic Author
tc101
Posts: 3810
Joined: Tue Feb 20, 2007 2:18 pm
Location: Atlanta - Retired in 2004 at age 54

Re: Nervous about locking up money in SPIA

Post by tc101 »

Does it make sense to purchase an SPIA in an IRA?
. | The most important thing you should know about me is that I am not an expert.
User avatar
powermega
Posts: 1199
Joined: Fri May 16, 2014 12:07 am
Location: Colorado

Re: Nervous about locking up money in SPIA

Post by powermega »

With your low concern for your heirs, you should consider a Life Only SPIA. It would have a greater payout than any Life With Period Certain, and certainly more than a Period Certain Only option. It is also possible to buy an inflation adjusted SPIA, or at least one that has a known annual adjustment like 2% or 3%. You can calculate what the effective IRR would be for your SPIA up through some ages, like age 85, 90, and 95. The mortality discounting will generally have a "break even" point around the life expectancy of the annuitant, using an adjusted mortality table that factors in the adverse risk selection that the annuity companies face (ex: sick people don't buy annuities, and more healthy people consider annuities, etc).

There's nothing bad about buying a SPIA with qualified money like an IRA. The SPIA payout will be 100% taxable, just like any withdrawal from a qualified (tax-deferred) account. In fact, a SPIA could be a great way to use some of your qualified tax-deferred money to lower your eventual RMDs at age 70.5 (not applicable to the OP, just generally speaking). Annuitizing qualified money is a much better option than taking a huge distribution, paying taxes at higher marginal tax rates, and then using the after-tax money to buy a non-qualified SPIA.
Even a stopped clock is right twice a day.
User avatar
Cyclesafe
Posts: 1474
Joined: Wed Dec 31, 2014 12:03 pm

Re: Nervous about locking up money in SPIA

Post by Cyclesafe »

Period certain annuities can be attractive if annuitizing an existing investment annuity contract with a higher-than-current-market annuitization commitment. Certainly not a reason to use investment annuities now, but the older contracts have good annuitization returns. Mine with Vanguard offers 4%.

Life SPIAS are rarely a good financial investment. One can be fairly certain that a conservative independent investment will handily beat what's on offer for an annuity today. The life SPIA is a good financial investment if the annuitant lives past his/her life expectancy to the age used in the annuity's exclusion ratio calculated using Pub 939 table VI. In my case, for an annuity purchased at age 80, this age would be 98. Possible, but sadly, not likely.

Life SPIA's are good insurance, however, if one believes they will outlive their money and/or cannot be certain that the money will actually be there when needed. But there is then the specific (insurance company) risk and all the political risks mentioned above, which would likely affect non-annuitized assets too.

I will consider a SPIA at age 80 if nobody I trust steps up to guide me through my dotage. Funny how that possibility should provide a substantial incentive for someone to get involved...….
"Plans are useless; planning is indispensable.” (Dwight Eisenhower) | "Man plans, God laughs" (Yiddish proverb)
User avatar
market timer
Posts: 6535
Joined: Tue Aug 21, 2007 1:42 am

Re: Nervous about locking up money in SPIA

Post by market timer »

tc101 wrote: Sun Feb 24, 2019 7:43 pmA life income annuity is an insurance product and it is hard to calculate the rate of return, however a 15 year period certain annuity guarantees to pay out for 15 years if you are alive or dead, so it is easy to calculate rate of return. That rate is 2.7%. Less than you could get with a CD ladder.
Seems like the rate depends on the state you select (maybe due to sales taxes?). I was just quoted a $100K 15-year certain SPIA for age 70 male at 3.06% IRR in FL. In any case, you are basically buying an investment grade bond ladder with an average life of 7.5 years. It's pretty similar in risk to the VCIT ETF, which currently yields 3.92% with a 0.07% ER. So figure the insurance expense ratio is effectively 0.93%.

One advantage over a CD or bond ETF is tax deferral. Your investment in the SPIA compounds tax free until it is paid out. For this reason, I've looked at buying deferred income annuities as a way of increasing tax deferred space for long term bonds. Haven't pulled the trigger yet, but considering an annuity that starts paying out in 20-25 years, after the kids are out of college (SPIAs are not considered assets by FAFSA). There the value of tax deferral is significant, especially as my marginal rate is high today.

In your situation, I'd be tempted to buy a deferred income SPIA that starts paying out at age 80-85 and pays out for life. This would give you a significant benefit from tax deferral, hedge longevity risk, and build up some mortality credits between age 70 and 80-85. I don't see that much point to purchasing a 15-year certain annuity.
Olemiss540
Posts: 2140
Joined: Fri Aug 18, 2017 8:46 pm

Re: Nervous about locking up money in SPIA

Post by Olemiss540 »

I don't understand why you would have nerves?

From the sounds of it, you can cover spending needs on SS and a SPIA that includes only a 25% stake of your overall assets with zero need or desire to leave a legacy. Sounds like you won the game a while ago and who gives a holy heck if you get precisely the bestest most perfect returns on your SPIA investment?

You can guarantee comfort and still have a resounding 75% of your assets remaining for a rainy day. Start a thread about best locations for a beach destination or best mixed drink while sitting under a beach umbrella, as those are more deserving of your nerves.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Nervous about locking up money in SPIA

Post by Gill »

Olemiss540 wrote: Mon Feb 25, 2019 7:10 am I don't understand why you would have nerves?

From the sounds of it, you can cover spending needs on SS and a SPIA that includes only a 25% stake of your overall assets with zero need or desire to leave a legacy. Sounds like you won the game a while ago and who gives a holy heck if you get precisely the bestest most perfect returns on your SPIA investment?

You can guarantee comfort and still have a resounding 75% of your assets remaining for a rainy day. Start a thread about best locations for a beach destination or best mixed drink while sitting under a beach umbrella, as those are more deserving of your nerves.
Great post and my feelings entirely. What's there to be nervous about?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
lostdog
Posts: 5368
Joined: Thu Feb 04, 2016 1:15 pm

Re: Nervous about locking up money in SPIA

Post by lostdog »

Olemiss540 wrote: Mon Feb 25, 2019 7:10 am I don't understand why you would have nerves?

From the sounds of it, you can cover spending needs on SS and a SPIA that includes only a 25% stake of your overall assets with zero need or desire to leave a legacy. Sounds like you won the game a while ago and who gives a holy heck if you get precisely the bestest most perfect returns on your SPIA investment?

You can guarantee comfort and still have a resounding 75% of your assets remaining for a rainy day. Start a thread about best locations for a beach destination or best mixed drink while sitting under a beach umbrella, as those are more deserving of your nerves.

+1
Stocks-80% || Bonds-20% || Taxable-VTI/VXUS || IRA-VT/BNDW
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Nervous about locking up money in SPIA

Post by JoeRetire »

tc101 wrote: Sun Feb 24, 2019 7:43 pmI will start social security next year when I turn 70. It will pay for about half of my basic living expenses. I could put about 25% of my liquid assets in an SPIA and that would cover the other half of my basic living expenses. Social security is inflation adjusted, but an SPIA is not, so realistically I would need to put about 35% in SPIAs, and have some of that start when I am 75 and 80, to be really safely covered for life by social security and annuities.

It makes me nervous to lock up so much money in one of these things because of the low returns and the potential risks.
If your needs would be covered by social security and 35% or less of your nest egg, then there is no need to be nervous. There is no risk here.

That said, you don't need an annuity to cover your expenses. Talk with a fiduciary fee-only financial planner. Get your funds into whatever investment vehicle makes you feel safe, and set up a systematic withdrawal plan.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Nervous about locking up money in SPIA

Post by Gill »

JoeRetire wrote: Mon Feb 25, 2019 7:30 am That said, you don't need an annuity to cover your expenses. Talk with a fiduciary fee-only financial planner. Get your funds into whatever investment vehicle makes you feel safe, and set up a systematic withdrawal plan.
...but that doesn't provide the guarantee he may be seeking.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
User avatar
Watty
Posts: 28860
Joined: Wed Oct 10, 2007 3:55 pm

Re: Nervous about locking up money in SPIA

Post by Watty »

tc101 wrote: Sun Feb 24, 2019 7:43 pm It will pay for about half of my basic living expenses. I could put about 25% of my liquid assets in an SPIA and that would cover the other half of my basic living expenses. Social security is inflation adjusted, but an SPIA is not, so realistically I would need to put about 35% in SPIAs, and have some of that start when I am 75 and 80, to be really safely covered for life by social security and annuities.
One thing to factor in is that part of your living expenses can be covered by interest and dividends which are running around 2% and those are pretty secure. You can set your mutual funds to not automatically reinvest these to provide an income stream. You would only need another source of income to cover the gap that these and Social Security do not cover.

I didn't try to crunch the numbers but as an alternative I would also look at buying a 30 year ladder of individual TIPS bonds to cover this gap since you would not need to worry about inflation with these. These can be counted as part of your normal bond asset allocation. These are taxed on the inflation adjustment each year so they they would work best in a retirement account or if you are in a low tax bracket.

For comparison The Vanguard Target Retirement Income Fund is 30% stocks and 70% bonds so even if you used up to 70% of your portfolio to buy a TIPS ladder you could still have 30% stocks asset allocation and not have an extreme asset allocation.

TIPS only go out 30 years so you could extend the ladder each year by buying a new 30 year TIPS bond so that when you are 75 you would be buying a new 30 year TIPS bond that will mature when you are 105.
jimkinny
Posts: 1856
Joined: Sun Mar 14, 2010 1:51 pm

Re: Nervous about locking up money in SPIA

Post by jimkinny »

I too feel somewhat apprehensive about buying an SPIA. I feel that way when I buy a new car or a house too. I figure the apprehension is in part due to fear of the unknown/unfamiliar. I am going to use less that 25% of investments, although 25% would be more logical. Maybe in several years i will commit more funds.

I am going to buy an SPIA next week and am 71.

I likely will do this through Vanguard's connection to Income Solutions but I will double check with immediate annuities and a new site that is called Blueprint income, that I read about on this website last week. I got to admit though, I would feel much more comfortable using Vanguard association with Income Solutions than the others, and that likely is just a behavioural flaw.

In the past, when checking the payout, the insurers on Income Solutions have provided the highest quotes and have had very good ratings from A.M. Best etc...

I am only going to buy 1/2 of the total I intend to spend this year. Insurer's go broke, even the best rated, so I want to spread the risk a bit using different insurers and only the highest rated. Any back up provided my state's guarantee association is welcome, but I want to start with the least risk.

Future event's might make this purchase seem a bit dumb, but that is the future.
Angst
Posts: 2968
Joined: Sat Jun 09, 2007 11:31 am

Re: Nervous about locking up money in SPIA

Post by Angst »

market timer wrote: Mon Feb 25, 2019 6:31 am
tc101 wrote: Sun Feb 24, 2019 7:43 pmA life income annuity is an insurance product and it is hard to calculate the rate of return, however a 15 year period certain annuity guarantees to pay out for 15 years if you are alive or dead, so it is easy to calculate rate of return. That rate is 2.7%. Less than you could get with a CD ladder.
[Snip...]

In your situation, I'd be tempted to buy a deferred income SPIA that starts paying out at age 80-85 and pays out for life. This would give you a significant benefit from tax deferral, hedge longevity risk, and build up some mortality credits between age 70 and 80-85. I don't see that much point to purchasing a 15-year certain annuity.
I anticipate that when I turn 70 I'll be considering doing this ↑ or else simply waiting until I turn 80 or so to buy a small SPIA to supplement my basic expenses coverage; I would not be interested in a period certain annuity either. At 80 I'd have a better handle on my longevity prospects and future expenses, and perhaps I'd expect interest rates to be higher than they are at 70? I won't know until then though.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Nervous about locking up money in SPIA

Post by dbr »

To address some of the causes of your nervousness:

1. An SPIA does not "lock up" your money. When you buy the SPIA your money is gone forever and there is nothing uncertain to be nervous about.

2. The measure of the value of an SPIA is not "return" but whether or not the payout is helpful to your situation. The payout is sensitive to prevailing interest rates at the time you buy the SPIA. It could be that it is bad luck that now is not a superior time to buy an SPIA, but it should be better now than it was a couple of years ago. As far as helpful, if 1/4 of your assets given up fills out your income needs, that sounds helpful. On the other hand your retirement income may well be secure enough that adding an SPIA doesn't add anything. Otar discusses this in his book and points out that the gray area of people flirting with 4%+ withdrawal rates is where an SPIA is helpful. The green area at lower withdrawal rates an SPIA doesn't add anything and the red area of too high withdrawal rate cannot be saved by anything. SPIA reduces longevity risk, which is an issue you have to judge for yourself. Fixed nominal income has inflation risk so you have to examine the overall risk from inflation. You can run a retirement income model to compare scenarios.

3. Institutional risk can be diversified by buying more than one SPIA from different companies. Paranoia over conspiracy scenarios does not have a cure.
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: Nervous about locking up money in SPIA

Post by wolf359 »

I'm years away from doing this, but I'm also considering use of a SPIA when the time comes. I have similar concerns about giving up so much money at once.

One thing to consider - as long as you don't annuitize ALL your money (and limiting it to 25% is well below any concerning thresholds), people who have the bulk of their core living expenses covered by guaranteed fixed payment products such as annuities, social security, and pensions spend more in retirement than those who are using mostly investments.

4% rule notwithstanding, the natural human reaction when the market drops is to reduce spending.

If your living expenses are coming from a guaranteed fixed payment, you don't reduce that part of your spending in reaction to the market.

I don't know if I'm going to pull that annuity trigger when the time comes, but that consideration is a main reason it's still on the table. (That and if/when my spouse outlives me she doesn't have to worry about how to invest and get money out. She'll be okay.)
User avatar
HomerJ
Posts: 21282
Joined: Fri Jun 06, 2008 12:50 pm

Re: Nervous about locking up money in SPIA

Post by HomerJ »

wolf359 wrote: Mon Feb 25, 2019 9:34 am I'm years away from doing this, but I'm also considering use of a SPIA when the time comes. I have similar concerns about giving up so much money at once.

One thing to consider - as long as you don't annuitize ALL your money (and limiting it to 25% is well below any concerning thresholds), people who have the bulk of their core living expenses covered by guaranteed fixed payment products such as annuities, social security, and pensions spend more in retirement than those who are using mostly investments.

4% rule notwithstanding, the natural human reaction when the market drops is to reduce spending.

If your living expenses are coming from a guaranteed fixed payment, you don't reduce that part of your spending in reaction to the market.

I don't know if I'm going to pull that annuity trigger when the time comes, but that consideration is a main reason it's still on the table. (That and if/when my spouse outlives me she doesn't have to worry about how to invest and get money out. She'll be okay.)
I agree with all of this.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Dottie57
Posts: 12379
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Nervous about locking up money in SPIA

Post by Dottie57 »

tc101 wrote: Sun Feb 24, 2019 10:24 pm Does it make sense to purchase an SPIA in an IRA?
I would do it in a Roth. I am doing Roth conversions for the nect 4-6 years. Part of the money will go into an SPIA and therefore be untaxed when receiving payments.
GrowthSeeker
Posts: 1071
Joined: Tue May 15, 2018 10:14 pm

Re: Nervous about locking up money in SPIA

Post by GrowthSeeker »

tc101 wrote: Sun Feb 24, 2019 7:43 pm I will start social security next year when I turn 70. It will pay for about half of my basic living expenses. I could put about 25% of my liquid assets in an SPIA and that would cover the other half of my basic living expenses.
...
In addition, I have a fear that SPIAs aren't as safe as they seem. I have a fear that at some time in the future the owners of some of these annuity companies will get together, pay millions of dollars in campaign contributions, get the laws changed, walk away from the companies with billion dollar bonuses, and leave a bunch of old people without annuity payments.
I like the way you think.

So, once SS kicks in, 25% of your liquid assets in a SPIA would cover ALL of your living expenses. So I think that means your investable portfolio is on the order of 50x, where x is your annual expenses minus SS.
So you could do almost anything and be fine. I'm in a similar boat with similar concerns.
Olemiss540 wrote: Mon Feb 25, 2019 7:10 am I don't understand why you would have nerves?

From the sounds of it, you can cover spending needs on SS and a SPIA that includes only a 25% stake of your overall assets with zero need or desire to leave a legacy. Sounds like you won the game a while ago and who gives a holy heck if you get precisely the bestest most perfect returns on your SPIA investment?

You can guarantee comfort and still have a resounding 75% of your assets remaining for a rainy day. Start a thread about best locations for a beach destination or best mixed drink while sitting under a beach umbrella, as those are more deserving of your nerves.
Exactly what I was thinking.

So my take here is: it's not really about the money, it's about the stress related to the money. So the question you have to ask yourself it: which would give you more stress, not having a "paycheck" that covers your expenses (and needing to draw down from your bonds/money markets etc), ... vs ... worrying whether the insurance company is going to screw you.
Just because you're paranoid doesn't mean they're NOT out to get you.
2pedals
Posts: 1988
Joined: Wed Dec 31, 2014 11:31 am

Re: Nervous about locking up money in SPIA

Post by 2pedals »

I am reading this same book by Lewis Mandell. He stresses a plan on how to protect yourself for an irrational self in the future from aging issues. He does make a very strong argument to use SPIAs to fill the income gap if SS and pensions are not enough to cover basic retirement expenses (including inflation). The establishment of a trustee in a living will is also important for the management of financial assets. Excellent book, just not sure how I will implement the suggestions, yet. I need to mull it over some. Cognitive decline is a big issue.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Nervous about locking up money in SPIA

Post by The Wizard »

dbr wrote: Mon Feb 25, 2019 9:21 am ...Otar discusses this in his book and points out that the gray area of people flirting with 4%+ withdrawal rates is where an SPIA is helpful. The green area at lower withdrawal rates an SPIA doesn't add anything and the red area of too high withdrawal rate cannot be saved by anything...
While I'm familiar with Otar's work from a while back, I consider his color coding concept entirely too limiting.
Pensions and Immediate Annuties are often considered in parallel, so would we say that pensions are only for people in the gray zone? I don't think so.

I annuitized a decent chunk of my 403(b) account with TIAA when I retired in 2013 because I wanted reasonably high total income in retirement while insulating my remaining portfolio from significant drawdown pressure. This has worked out reasonably well...
Attempted new signature...
inbox788
Posts: 8372
Joined: Thu Mar 15, 2012 5:24 pm

Re: Nervous about locking up money in SPIA

Post by inbox788 »

tc101 wrote: Sun Feb 24, 2019 7:43 pmWhen I die my estate will go to my brother, his children, and some of my friends. It is not particularly important to me that anyone inherit anything, although I will be happy if they do.

I will start social security next year when I turn 70. It will pay for about half of my basic living expenses. I could put about 25% of my liquid assets in an SPIA and that would cover the other half of my basic living expenses. Social security is inflation adjusted, but an SPIA is not, so realistically I would need to put about 35% in SPIAs, and have some of that start when I am 75 and 80, to be really safely covered for life by social security and annuities.

It seems like the logical thing to do. I have no one I can really count on to look out for me when I get old and mentally slow. We had a good conversation here recently about aging, dementia and bad investments. Someone linked to the book:
...
It makes me nervous to lock up so much money in one of these things because of the low returns and the potential risks.

What are your thoughts?
If you don't particularly care if anything is left behind, what is the risk, other than leaving less or zero having bought an SPIA? On the other hand, if you live past your life expectancy, that's when an SPIA pays off.

There's no rush in getting the SPIA now, other than securing some protection and certainty, but at a cost of lower returns than investing it yourself. Don't you get a higher return (taking higher risk) investing the funds yourself for 10 years and deferring the purchase?
Cyclesafe wrote: Mon Feb 25, 2019 4:39 amI will consider a SPIA at age 80 if nobody I trust steps up to guide me through my dotage. Funny how that possibility should provide a substantial incentive for someone to get involved...….
I have been learning, and planned on considering an SPIA around 80, but I didn't think having someone involved or not made a difference on that decision. And if there were someone, wouldn't the incentive be all wrong?

You can't spend it all and leave something behind. An SPIA is terrific at helping you spend it all.
User avatar
quantAndHold
Posts: 10141
Joined: Thu Sep 17, 2015 10:39 pm
Location: West Coast

Re: Nervous about locking up money in SPIA

Post by quantAndHold »

Since you're only spending 25% on the annuity now, you always have the option of buying a second annuity later, to cover increased spending needs (because of inflation, increased need for care, etc). If it were me, I would go with coving current needs plus a small margin now, then revisit my needs at age 80.
Dottie57
Posts: 12379
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Nervous about locking up money in SPIA

Post by Dottie57 »

quantAndHold wrote: Mon Feb 25, 2019 12:14 pm Since you're only spending 25% on the annuity now, you always have the option of buying a second annuity later, to cover increased spending needs (because of inflation, increased need for care, etc). If it were me, I would go with coving current needs plus a small margin now, then revisit my needs at age 80.
This.
User avatar
nisiprius
Advisory Board
Posts: 52216
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Nervous about locking up money in SPIA

Post by nisiprius »

tc101 wrote: Sun Feb 24, 2019 10:24 pm Does it make sense to purchase an SPIA in an IRA?
It doesn't work that way. You don't hold an SPIA within an IRA.

You can either fund an SPIA with post-tax dollars or "qualified" dollars within an IRS.

If they are funded with post-tax dollars, the IRS considers that the payouts are return of principal until some point--maybe when the total of the payouts equals the initial payment. From that point on, they are ordinary income.

If they are funded with "qualified" dollars from an IRA, they SPIA is not "within" the IRA. It is a brand new thing itself. The IRS considers the SPIA to be a kind of IRA in itself. All of the payouts are considered to be taxable distributions from an IRA and taxed accordingly. The IRS also considers that the payouts satisfy the required minimum distribution requirements, regardless of whether or not they match their RMD table.
Last edited by nisiprius on Thu Feb 28, 2019 12:38 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
WillRetire
Posts: 781
Joined: Mon Jun 05, 2017 10:01 am

Re: Nervous about locking up money in SPIA

Post by WillRetire »

If it makes you nervous to commit that much money in 1 shot, try laddering SPIAs. I.e. Spend less money on the first SPIA, with the plan that you will buy another in 2-3 years. Interest rates may go up during that time, in which case you'll get a better deal plus you'll be older, which gets you more income for the same principal. If interest rates go down, true, you may wish you had put more in the first one, but again, you'll be older and that buys you more. You can also wait a bit longer to buy the 2nd and 3rd, and so on, if interest rates are declining.

Pay attention to the insurer's ratings and financial strength, as well as fees. And consider purchasing subsequent SPIAs from a different insurer, so as not to exceed the amount that is protected from a firm's financial collapse.
User avatar
Munir
Posts: 3200
Joined: Mon Feb 26, 2007 3:39 pm
Location: Oregon

Re: Nervous about locking up money in SPIA

Post by Munir »

nisiprius wrote: Mon Feb 25, 2019 12:30 pm
tc101 wrote: Sun Feb 24, 2019 10:24 pm Does it make sense to purchase an SPIA in an IRA?
It doesn't work that way. You don't hold an SPIA within an IRA.

You can either fund an SPIA with post-tax dollars or "qualified" dollars within an IRS.

If they are funded with post-tax dollars, the IRS considers that the payouts are return of principle until some point--maybe when the total of the payouts equals the initial payment. From that point on, they are ordinary income.

If they are funded with "qualified" dollars from an IRS, they SPIA is not "within" the IRA. It is a brand new thing itself. The IRS considers the SPIA to be a kind of IRA in itself. All of the payouts are considered to be taxable distributions from an IRA and taxed accordingly. The IRS also considers that the payouts satisfy the required minimum distribution requirements, regardless of whether or not they match their RMD table.
Nisiprius, you have a couple of typos when you mean to say IRA but instead said IRS. I also assume you also meant to say "principal" and not "principle".
A lifetime SPIA with a period certain is preferable to no period certain since you don't lose all your money if you die too soon. In my case, I found a 10-year certain lifetime SPIA was ideal since my initial total payment was returned to me in 10 years. The slightly lesser amount in the monthly payout with a period certain was worth it to keep my mind at ease in case of an "early" death.
User avatar
Darth Xanadu
Posts: 1108
Joined: Sat Jan 27, 2018 12:47 am
Location: MA

Re: Nervous about locking up money in SPIA

Post by Darth Xanadu »

nisiprius wrote: Mon Feb 25, 2019 12:30 pm The IRS considers the SPIA to be a kind of IRA in itself. All of the payouts are considered to be taxable distributions from an IRA and taxed accordingly. The IRS also considers that the payouts satisfy the required minimum distribution requirements, regardless of whether or not they match their RMD table.
I'm not sure I understand this, can you please elaborate? I would think that if the SPIA payout for the year is less than the calculated RMD, then you would need to make up the difference with additional withdrawals from traditional pre-tax accounts?

EDIT: or maybe there's a separate RMD calculation for non-SPIA amounts?
SGM
Posts: 3341
Joined: Wed Mar 23, 2011 4:46 am

Re: Nervous about locking up money in SPIA

Post by SGM »

I like SPIAs with a lifetime payout. Time certain payouts will decrease the monthly deposit amount. I don't want to lose the mortality credits. DW was offered time certain payouts for her TIAA-CREF annuity and I told her I didn't want any protection and get the higher payout for herself.

When we reach the appropriate ages we might purchase an SPIA in 5 year intervals. My small pension was taken when interest rates were much higher. Unlike most people, I will have DW as the sole beneficiary. I expect her to live longer and I can live on a lot less than most.

I think there is some increased protection against dementia in having a direct deposit into checking from an SPIA compared to having access to the principal and investing it. If one steals your nest egg, it is difficult to recover the stolen property? Bernie Madoff's victims recovered much more money than most others have been able to recover.

I am more likely to spend from a deposit coming in every month from an annuity than from a portfolio.


We are not the usual people who need SPIAs, but I like them anyway and will purchase with a small part of our portfolio. I project that we will take less out of the portfolio and at least one of us will live a long time. I like Taylor's idea of buying annuities and giving gifts to grown children sooner rather than after death.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Nervous about locking up money in SPIA

Post by The Wizard »

Darth Xanadu wrote: Mon Feb 25, 2019 1:01 pm
nisiprius wrote: Mon Feb 25, 2019 12:30 pm The IRS considers the SPIA to be a kind of IRA in itself. All of the payouts are considered to be taxable distributions from an IRA and taxed accordingly. The IRS also considers that the payouts satisfy the required minimum distribution requirements, regardless of whether or not they match their RMD table.
I'm not sure I understand this, can you please elaborate? I would think that if the SPIA payout for the year is less than the calculated RMD, then you would need to make up the difference with additional withdrawals from traditional pre-tax accounts?

EDIT: or maybe there's a separate RMD calculation for non-SPIA amounts?
Nisi spoke correctly.
Lifetime immediate annuities are totally outside of RMD consideration.
And you get roughly twice the payout in early years compared to RMD tables, so twice the income tax payment.
The IRS "likes" higher tax payments...
Attempted new signature...
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: Nervous about locking up money in SPIA

Post by wolf359 »

nisiprius wrote: Mon Feb 25, 2019 12:30 pm
tc101 wrote: Sun Feb 24, 2019 10:24 pm Does it make sense to purchase an SPIA in an IRA?
It doesn't work that way. You don't hold an SPIA within an IRA.

You can either fund an SPIA with post-tax dollars or "qualified" dollars within an IRS.

If they are funded with post-tax dollars, the IRS considers that the payouts are return of principle until some point--maybe when the total of the payouts equals the initial payment. From that point on, they are ordinary income.

If they are funded with "qualified" dollars from an IRS, they SPIA is not "within" the IRA. It is a brand new thing itself. The IRS considers the SPIA to be a kind of IRA in itself. All of the payouts are considered to be taxable distributions from an IRA and taxed accordingly. The IRS also considers that the payouts satisfy the required minimum distribution requirements, regardless of whether or not they match their RMD table.
Are you referring to a Qualified Longevity Annuity Contract (QLAC)? It's a longevity annuity held within an IRA. Link to IRS here for details: https://www.treasury.gov/press-center/p ... l2448.aspx As of 2018, the dollar limit is $130,000 (or 25% of the IRA account balance, whichever is less), where it currently remains as of 2019. If OP wishes to research it, perhaps that's the terminology to use.

The concept is that if you buy a QLAC, the amount purchased is exempted from RMDs until it starts paying out. You can defer the payout up to age 85.

A QLAC is allowed to have a feature adjusting for inflation as a simple percentage. However, the inflation adjustment only starts when the payment starts -- if there's inflation during the deferral period, there's no help for that.

A QLAC is also allowed to have a "return of premium death benefit." If you die before you recoup the amount of the premium, the unpaid amount can be returned to the estate.

Those benefits are why you might consider a QLAC. Note that when the QLAC starts paying out, it will increase your taxable income and be paid at ordinary income rates.
michaeljc70
Posts: 10843
Joined: Thu Oct 15, 2015 3:53 pm

Re: Nervous about locking up money in SPIA

Post by michaeljc70 »

Though I don't think a SPIA is a bad idea,I'm going to disagree with the majority. You have enough money to return enough to cover your expenses (with the SS) without being aggressive. I'd pick a level of risk you are comfortable with and just put it there (or leave it where it is if you are comfortable with that). You will probably wind up with more income and more to leave to heirs. If you are old and your mind is going, I don't see how a SPIA is going to help much. You could still do something silly with the checks. I guess it would keep you from buying 3x ETFs with all your money or giving it away to Ducks Unlimited.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Nervous about locking up money in SPIA

Post by willthrill81 »

I would share the OP's reticence about permanently giving up all access to annuitized funds for a future benefit that could conceivably go away. Like most 'guarantees', SPIAs have steep price tags, especially if you get one with a CPI adjustment. And if you get one with a CPI adjustment and both longevity and high inflation manifest themselves, taxflation may hit you hard.

I personally believe that the better strategy for many may be to calculate the difference between their essential spending needs and their SS benefit. That difference, if positive, could be self-annuitized with something like a TIPS ladder. But again, taxflation can be a real problem unless you're doing all of this with Roth funds.
The Sensible Steward
User avatar
HueyLD
Posts: 9789
Joined: Mon Jan 14, 2008 9:30 am

Re: Nervous about locking up money in SPIA

Post by HueyLD »

nisiprius wrote: Mon Feb 25, 2019 12:30 pm
tc101 wrote: Sun Feb 24, 2019 10:24 pm Does it make sense to purchase an SPIA in an IRA?
It doesn't work that way. You don't hold an SPIA within an IRA.

You can either fund an SPIA with post-tax dollars or "qualified" dollars within an IRA.

If they are funded with "qualified" dollars from an IRA, they SPIA is not "within" the IRA. It is a brand new thing itself. The IRS considers the SPIA to be a kind of IRA in itself. All of the payouts are considered to be taxable distributions from an IRA and taxed accordingly. The IRS also considers that the payouts satisfy the required minimum distribution requirements, regardless of whether or not they match their RMD table.
A minor correction to what Nisiprius said.

A SPIA purchased with IRA money is still IRA. But the money is transferred from your investment account to an insurance company's balance sheet in return for a promised payment stream. It is like IRA 2.0.

And the annuity payments from the SPIA satisfy the RMD requirement for the amount transferred. You will still be subject to RMD for the IRA balance that is not annualized.
User avatar
fishandgolf
Posts: 794
Joined: Fri Nov 25, 2016 1:50 pm

Re: Nervous about locking up money in SPIA

Post by fishandgolf »

HueyLD wrote: Mon Feb 25, 2019 4:47 pm
nisiprius wrote: Mon Feb 25, 2019 12:30 pm
tc101 wrote: Sun Feb 24, 2019 10:24 pm Does it make sense to purchase an SPIA in an IRA?
It doesn't work that way. You don't hold an SPIA within an IRA.

You can either fund an SPIA with post-tax dollars or "qualified" dollars within an IRA.

If they are funded with "qualified" dollars from an IRA, they SPIA is not "within" the IRA. It is a brand new thing itself. The IRS considers the SPIA to be a kind of IRA in itself. All of the payouts are considered to be taxable distributions from an IRA and taxed accordingly. The IRS also considers that the payouts satisfy the required minimum distribution requirements, regardless of whether or not they match their RMD table.
A minor correction to what Nisiprius said.

A SPIA purchased with IRA money is still IRA. But the money is transferred from your investment account to an insurance company's balance sheet in return for a promised payment stream. It is like IRA 2.0.

And the annuity payments from the SPIA satisfy the RMD requirement for the amount transferred. You will still be subject to RMD for the IRA balance that is not annualized.


Thank you HueyLD for clearing that up..........
NoHeat
Posts: 308
Joined: Sun Sep 18, 2016 10:13 am

Re: Nervous about locking up money in SPIA

Post by NoHeat »

tc101 wrote: Sun Feb 24, 2019 7:43 pm I will start social security next year when I turn 70. It will pay for about half of my basic living expenses. I could put about 25% of my liquid assets in an SPIA and that would cover the other half of my basic living expenses. Social security is inflation adjusted, but an SPIA is not, so realistically I would need to put about 35% in SPIAs, and have some of that start when I am 75 and 80, to be really safely covered for life by social security and annuities.

It seems like the logical thing to do. I have no one I can really count on to look out for me when I get old and mentally slow.
I think your plan is perfect for your situation.

Your situation is that you've got about 4X the assets needed for your basic living expenses, so there's no point in chasing high returns -- you're not trying to win a contest with anybody for amassing the biggest fortune. You've already won, by making your portfolio plenty big to meet your needs.

You've properly identified another goal of surviving cognition decline, and annuities are a great way to do that. An alternative is a trust, set up with a bank trust department, which will charge maybe 0.5% AUM fees or more, which you can probably afford with your 4X funding level.

The one thing I'd do differently is that instead of buying a too-large SPIA to deal with inflation, I would buy a right-sized SPIA plus some deferred annuities. (You could put 25% into the SPIA, and then a ladder of deferred annuities, with payments starting at two-year or five-year intervals to offset a predicted 3% inflation or whatever you want; New York Life is a frequently-mentioned seller of deferred annuities.)

There's no risk that all insurance companies will decide to systematically quit paying because they feel like just keeping the assets to themselves -- they are state regulated. There is a risk that individual insurance companies could fail, due to vast numbers of their bonds going bad in an economic depression, and for that reason I would spread the SPIA among a couple of insurance companies, keeping the amounts below $200k or whatever is the limit for your state's guarantee.
FBN2014
Posts: 871
Joined: Sat Mar 08, 2014 2:07 pm

Re: Nervous about locking up money in SPIA

Post by FBN2014 »

Your plan is sound but only use a AAA insurance company to relieve your angst. New York Life, Guardian, MassMutual are all AAA and none of them will be failing any time soon. I would check the state guaranty amount in your state. Most states have a $100,000 - 250,000 guaranteed reimbursement per contract if the insurance company fails. Just split up the amount you want to put into the SPIA and split it up between as many AAA companies as required to meet your income goal and rest easy at night.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Nervous about locking up money in SPIA

Post by JoeRetire »

Gill wrote: Mon Feb 25, 2019 7:32 am
JoeRetire wrote: Mon Feb 25, 2019 7:30 am That said, you don't need an annuity to cover your expenses. Talk with a fiduciary fee-only financial planner. Get your funds into whatever investment vehicle makes you feel safe, and set up a systematic withdrawal plan.
...but that doesn't provide the guarantee he may be seeking.
Gill
As I wrote, if your needs would be covered by social security and 35% or less of your nest egg, then there is no need to be nervous. There is no risk here. No guarantee is needed.
This isn't just my wallet. It's an organizer, a memory and an old friend.
TravelforFun
Posts: 2799
Joined: Tue Dec 04, 2012 10:05 pm

Re: Nervous about locking up money in SPIA

Post by TravelforFun »

I just bought a $250,000 SPIA from New York Life. The reason I settled for $250K is because that's the maximum amount my state (TX) would insure. The annuity I got is joint life with cash refund and a 2% COLA. I'm supposed to receive my first payment of $915 within the next 30 days. I'm 66 and my wife is 62 and we will buy another SPIA for my wife next year. These two annuities plus our SS benefits should take care a large portion of our expenses and allow us to invest the rest of our portfolio in a more aggressive manner.

TravelforFun
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Nervous about locking up money in SPIA

Post by Gill »

JoeRetire wrote: Mon Feb 25, 2019 7:37 pm
Gill wrote: Mon Feb 25, 2019 7:32 am
JoeRetire wrote: Mon Feb 25, 2019 7:30 am That said, you don't need an annuity to cover your expenses. Talk with a fiduciary fee-only financial planner. Get your funds into whatever investment vehicle makes you feel safe, and set up a systematic withdrawal plan.
...but that doesn't provide the guarantee he may be seeking.
Gill
As I wrote, if your needs would be covered by social security and 35% or less of your nest egg, then there is no need to be nervous. There is no risk here. No guarantee is needed.
How can you say there is no risk? Of course there is with any portfolio. It can’t replace the guarantee inherent in an SPIA.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
Post Reply