Annuity purchase

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Wricha
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Annuity purchase

Post by Wricha » Sun May 26, 2019 2:14 pm

I have struggled with the thought of buying annuities. I am almost over the fact it’s insurance and not a savvy investment. My reason for buying is old age insurance and if something happens to me, partner doesn’t like dealing with investments. We have a fairly complicated portfolio (stock, bonds, significant commercial real holdings, commodities, small businesses (fun stuff) and other real estate holdings. Cash flow more than covers living expenses. I am thinking of buying enough annuities to cover living expenses which is going to be a significant amount of money. At 65 it seems waiting at least 5 years (To draw on tax deferred accounts) or possibly even 15 years to take advantage of the mortality credit is the way to go. Thought? And is there any advantage of buying in each year starting now?

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ResearchMed
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Re: Annuity purchase

Post by ResearchMed » Sun May 26, 2019 2:22 pm

Wricha wrote:
Sun May 26, 2019 2:14 pm
I have struggled with the thought of buying annuities. I am almost over the fact it’s insurance and not a savvy investment. My reason for buying is old age insurance and if something happens to me, partner doesn’t like dealing with investments. We have a fairly complicated portfolio (stock, bonds, significant commercial real holdings, commodities, small businesses (fun stuff) and other real estate holdings. Cash flow more than covers living expenses. I am thinking of buying enough annuities to cover living expenses which is going to be a significant amount of money. At 65 it seems waiting at least 5 years (To draw on tax deferred accounts) or possibly even 15 years to take advantage of the mortality credit is the way to go. Thought? And is there any advantage of buying in each year starting now?
I'll just make one comment: A life annuity (the only "good kind" of annuity) is NOT "not a savvy investment".
It is NOT an investment at all!
It should be viewed as insurance... "against" living too long.
However, this is insurance you would "like" to claim, unlike things like auto or homeowners insurance :happy

There is a lot here on BH about these, so perhaps do a search for SPIA on this forum.

We do plan to get one or more SPIA's ...

RM
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yousha
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Re: Annuity purchase

Post by yousha » Sun May 26, 2019 2:29 pm

What is a life annuity. Why is it preferred?

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Wricha
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Re: Annuity purchase

Post by Wricha » Sun May 26, 2019 2:46 pm

ResearchMed wrote:
Sun May 26, 2019 2:22 pm
Wricha wrote:
Sun May 26, 2019 2:14 pm
I have struggled with the thought of buying annuities. I am almost over the fact it’s insurance and not a savvy investment. My reason for buying is old age insurance and if something happens to me, partner doesn’t like dealing with investments. We have a fairly complicated portfolio (stock, bonds, significant commercial real holdings, commodities, small businesses (fun stuff) and other real estate holdings. Cash flow more than covers living expenses. I am thinking of buying enough annuities to cover living expenses which is going to be a significant amount of money. At 65 it seems waiting at least 5 years (To draw on tax deferred accounts) or possibly even 15 years to take advantage of the mortality credit is the way to go. Thought? And is there any advantage of buying in each year starting now?
I'll just make one comment: A life annuity (the only "good kind" of annuity) is NOT "not a savvy investment".
It is NOT an investment at all!
It should be viewed as insurance... "against" living too long.
However, this is insurance you would "like" to claim, unlike things like auto or homeowners insurance :happy

There is a lot here on BH about these, so perhaps do a search for SPIA on this forum.

We do plan to get one or more SPIA's ...
?
RM
At what age are you going to buy? Why? And do you plan on buying them all at once? Why?
Last edited by Wricha on Sun May 26, 2019 2:50 pm, edited 1 time in total.

22twain
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Re: Annuity purchase

Post by 22twain » Sun May 26, 2019 2:49 pm

yousha wrote:
Sun May 26, 2019 2:29 pm
What is a life annuity.
You pay an insurance company a lump sum of money. They pay you a monthly amount for the rest of your life. Optionally, you can designate a beneficiary e.g. your spouse, and the payments continue until both of you are dead. In that case the monthly payments are smaller for a given initial lump sum.
Why is it preferred?
One possible reason is the one that Wricha named. He wants to ensure that after his death, his partner receives a steady income without needing to know how to withdraw money from inherited assets. Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired.

Another reason is that you can you can get a higher monthly payout from an annuity than the safe withdrawal rate from an investment portfolio that starts with the same initial amount. This is because people who die early, lose some of the initial amount (the part that hasn't been paid out yet). That money goes to the people who live longer.

In effect, in buying a life annuity, you are betting against the other people who buy it, that you will live longer than them, and collect the money that they weren't able to collect (plus some investment gains, and minus the insurance company's expenses and profit).
My investing princiPLEs do not include absolutely preserving princiPAL.

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Wricha
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Re: Annuity purchase

Post by Wricha » Sun May 26, 2019 2:54 pm

22twain wrote:
Sun May 26, 2019 2:49 pm
yousha wrote:
Sun May 26, 2019 2:29 pm
What is a life annuity.
One possible reason is the one that Wricha named. He wants to ensure that after his death, his partner receives a steady income without needing to know how to withdraw money from inherited assets. Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired

Thanks good point

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Stinky
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Re: Annuity purchase

Post by Stinky » Sun May 26, 2019 2:58 pm

Wricha wrote:
Sun May 26, 2019 2:14 pm
And is there any advantage of buying in each year starting now?
I wouldn’t buy a SPIA each year.

But you could consider targeting a certain amount of your portfolio to purchase SPIAs, and split it into three purchases - one at 65, one at 70, and one at 75. Or any other patten that you like.

You could get quotes now to see what monthly income you could get from each purchase, based on today’s interest rates.
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yousha
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Re: Annuity purchase

Post by yousha » Sun May 26, 2019 3:53 pm

Thank you guys!

bsteiner
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Re: Annuity purchase

Post by bsteiner » Sun May 26, 2019 4:46 pm

22twain wrote:
Sun May 26, 2019 2:49 pm
... Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired.
...
That's a less expensive and more flexible solution. The annuity may make sense for someone who needs the insurance against living too long and running out of money, but that doesn't appear to be the case here.

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Wricha
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Re: Annuity purchase

Post by Wricha » Sun May 26, 2019 8:12 pm

bsteiner wrote:
Sun May 26, 2019 4:46 pm
22twain wrote:
Sun May 26, 2019 2:49 pm
... Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired.
...
That's a less expensive and more flexible solution. The annuity may make sense for someone who needs the insurance against living too long and running out of money, but that doesn't appear to be the case here.
Yes, need to look into this. Thanks

smectym
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Re: Annuity purchase

Post by smectym » Sun May 26, 2019 11:09 pm

Sometimes buying a life annuity makes sense. In other situations, especially if the buyer is late ‘50s/‘60s, even into early ‘70s, a term annuity (e.g. 10 years guaranteed) may make a lot more sense and spit out a lot more monthly income. A fixed term also curtails inflation risk. The higher monthly income from fixed term means the buyer can reserve assets for purchase of another annuity later in retirement, when a life annuity may indeed be the more sensible call. A dogmatic approach which preemptively dismisses anything but the life annuity is counter-productive. Sometimes the life annuity is the best approach; other times not.

3-20Characters
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Re: Annuity purchase

Post by 3-20Characters » Mon May 27, 2019 5:41 am

smectym wrote:
Sun May 26, 2019 11:09 pm
In other situations, especially if the buyer is late ‘50s/‘60s, even into early ‘70s, a term annuity (e.g. 10 years guaranteed) may make a lot more sense and spit out a lot more monthly income.
⬆️Emphasis mine

I don’t believe this is true. I’d have to see the numbers vs. a bucket of fixed holdings (like CDs). Using this as a guideline...
https://www.usaa.com/annuities/immediat ... alculator/

For a 61 year old male buying a 10 year, 250k annuity, I compared it to a fixed account returning 2%. The annuity pays out (2338.29×12×10=$280,595). One could match the annuity payment from the fixed account and have $20k left over at the end of 10 years. At 1% interest, the fixed account still has money left in it after 10 years. Even at 0% interest, it only comes up a few K short. Not sure what would entice me to hand over $250k to an insurance company under that scenario.

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Re: Annuity purchase

Post by LadyGeek » Mon May 27, 2019 5:53 am

This thread is now in the Personal Finance (Not Investing) forum (annuity).

The wiki has some background info: Category:Annuities
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Re: Annuity purchase

Post by MathIsMyWayr » Mon May 27, 2019 7:46 am

3-20Characters wrote:
Mon May 27, 2019 5:41 am
smectym wrote:
Sun May 26, 2019 11:09 pm
In other situations, especially if the buyer is late ‘50s/‘60s, even into early ‘70s, a term annuity (e.g. 10 years guaranteed) may make a lot more sense and spit out a lot more monthly income.
⬆️Emphasis mine

I don’t believe this is true. I’d have to see the numbers vs. a bucket of fixed holdings (like CDs). Using this as a guideline...
https://www.usaa.com/annuities/immediat ... alculator/

For a 61 year old male buying a 10 year, 250k annuity, I compared it to a fixed account returning 2%. The annuity pays out (2338.29×12×10=$280,595). One could match the annuity payment from the fixed account and have $20k left over at the end of 10 years. At 1% interest, the fixed account still has money left in it after 10 years. Even at 0% interest, it only comes up a few K short. Not sure what would entice me to hand over $250k to an insurance company under that scenario.
To get $2,338.29 per month for 10 years, the interest rate is about 2.38%. If you deposit $250k at an interest rate of 2.38%, then you may withdraw $2,338.29 per month for 10 years before exhausting it. It is like a mortgage, but you are the banker in this case.

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Re: Annuity purchase

Post by 3-20Characters » Mon May 27, 2019 8:18 am

MathIsMyWayr wrote:
Mon May 27, 2019 7:46 am
3-20Characters wrote:
Mon May 27, 2019 5:41 am
smectym wrote:
Sun May 26, 2019 11:09 pm
In other situations, especially if the buyer is late ‘50s/‘60s, even into early ‘70s, a term annuity (e.g. 10 years guaranteed) may make a lot more sense and spit out a lot more monthly income.
⬆️Emphasis mine

I don’t believe this is true. I’d have to see the numbers vs. a bucket of fixed holdings (like CDs). Using this as a guideline...
https://www.usaa.com/annuities/immediat ... alculator/

For a 61 year old male buying a 10 year, 250k annuity, I compared it to a fixed account returning 2%. The annuity pays out (2338.29×12×10=$280,595). One could match the annuity payment from the fixed account and have $20k left over at the end of 10 years. At 1% interest, the fixed account still has money left in it after 10 years. Even at 0% interest, it only comes up a few K short. Not sure what would entice me to hand over $250k to an insurance company under that scenario.
To get $2,338.29 per month for 10 years, the interest rate is about 2.38%. If you deposit $250k at an interest rate of 2.38%, then you may withdraw $2,338.29 per month for 10 years before exhausting it. It is like a mortgage, but you are the banker in this case.
You’re right. I did a quick spreadsheet and didn’t account for fully funding the year 10 withdrawal. I still stand by my analysis in principle (I think that we’re in agreement on that?). 2.38%+ would be an easy rate to get today, so I see no reason it give someone $250k for this “deal.” Maybe there are better products available? Also, although there is a survivor benefit for this annuity, not sure what would happen if both die. With a bank account, your beneficiaries keep what’s left of the money.

I’m not against annuities. I will consider SPIA at around ~80 using some of my money but will wait to see my circumstances before doing so.

MathIsMyWayr
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Re: Annuity purchase

Post by MathIsMyWayr » Mon May 27, 2019 10:04 am

3-20Characters wrote:
Mon May 27, 2019 8:18 am
MathIsMyWayr wrote:
Mon May 27, 2019 7:46 am
3-20Characters wrote:
Mon May 27, 2019 5:41 am
smectym wrote:
Sun May 26, 2019 11:09 pm
In other situations, especially if the buyer is late ‘50s/‘60s, even into early ‘70s, a term annuity (e.g. 10 years guaranteed) may make a lot more sense and spit out a lot more monthly income.
⬆️Emphasis mine

I don’t believe this is true. I’d have to see the numbers vs. a bucket of fixed holdings (like CDs). Using this as a guideline...
https://www.usaa.com/annuities/immediat ... alculator/

For a 61 year old male buying a 10 year, 250k annuity, I compared it to a fixed account returning 2%. The annuity pays out (2338.29×12×10=$280,595). One could match the annuity payment from the fixed account and have $20k left over at the end of 10 years. At 1% interest, the fixed account still has money left in it after 10 years. Even at 0% interest, it only comes up a few K short. Not sure what would entice me to hand over $250k to an insurance company under that scenario.
To get $2,338.29 per month for 10 years, the interest rate is about 2.38%. If you deposit $250k at an interest rate of 2.38%, then you may withdraw $2,338.29 per month for 10 years before exhausting it. It is like a mortgage, but you are the banker in this case.
You’re right. I did a quick spreadsheet and didn’t account for fully funding the year 10 withdrawal. I still stand by my analysis in principle (I think that we’re in agreement on that?). 2.38%+ would be an easy rate to get today, so I see no reason it give someone $250k for this “deal.” Maybe there are better products available? Also, although there is a survivor benefit for this annuity, not sure what would happen if both die. With a bank account, your beneficiaries keep what’s left of the money.

I’m not against annuities. I will consider SPIA at around ~80 using some of my money but will wait to see my circumstances before doing so.
Agree. It is difficult for a "young" retiree to justify purchasing fixed term annuities considering the current Treasury rates:
Date 1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr
05/24 2.37 2.38 2.35 2.39 2.33 2.16 2.10 2.12 2.22 2.32
You may also find CDs paying interests higher than 2.38%.

It is difficult to do a financial business with an informed customer!

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Re: Annuity purchase

Post by jimkinny » Mon May 27, 2019 3:33 pm

I have come fairly close to buying an annuity. The last time was several months ago. I am 71.

Thanks to the posters on this site, I decided to wait until age 75. There isn't any reason that required me to act now. Is there any reason you can't wait ?

If my health deteriorates between now and 75 then I won't have any need for a spia.

I don't see any reason to take the inflation risk now and by buying a deferred annuity.

Insurance company risk of failure is real and the longer the period of time, the greater the risk. The same can be said for inflation risk.

The only reason that I can find for acting now is that owning an income stream might bring with it "peace of mind" and perhaps more enjoyment derived from spending but I think I need to get over my habits of saving and convert to spending.

Best wishes

Swimmer
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Re: Annuity purchase

Post by Swimmer » Mon May 27, 2019 5:10 pm

I know very little about annuities, but it seems like one has to have a lot of faith in the insurance company—now and in the future. Is there a safety net?
With CDs, you’ve got FDIC. Am I missing something that makes annuities so (seemingly) attractive. Here in Florida they’re extremely popular.

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Re: Annuity purchase

Post by 22twain » Mon May 27, 2019 5:53 pm

Swimmer wrote:
Mon May 27, 2019 5:10 pm
Here in Florida
For which, see the Florida Life & Health Insurance Guaranty Association. Other states have something similar.
My investing princiPLEs do not include absolutely preserving princiPAL.

Topic Author
Wricha
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Re: Annuity purchase

Post by Wricha » Mon May 27, 2019 6:04 pm

22twain wrote:
Mon May 27, 2019 5:53 pm
Swimmer wrote:
Mon May 27, 2019 5:10 pm
Here in Florida
For which, see the Florida Life & Health Insurance Guaranty Association. Other states have something similar.
Thanks 22twain

smectym
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Re: Annuity purchase

Post by smectym » Mon May 27, 2019 10:43 pm

MathIsMyWayr wrote:
Mon May 27, 2019 10:04 am
3-20Characters wrote:
Mon May 27, 2019 8:18 am
MathIsMyWayr wrote:
Mon May 27, 2019 7:46 am
3-20Characters wrote:
Mon May 27, 2019 5:41 am
smectym wrote:
Sun May 26, 2019 11:09 pm
In other situations, especially if the buyer is late ‘50s/‘60s, even into early ‘70s, a term annuity (e.g. 10 years guaranteed) may make a lot more sense and spit out a lot more monthly income.
⬆️Emphasis mine

I don’t believe this is true. I’d have to see the numbers vs. a bucket of fixed holdings (like CDs). Using this as a guideline...
https://www.usaa.com/annuities/immediat ... alculator/

For a 61 year old male buying a 10 year, 250k annuity, I compared it to a fixed account returning 2%. The annuity pays out (2338.29×12×10=$280,595). One could match the annuity payment from the fixed account and have $20k left over at the end of 10 years. At 1% interest, the fixed account still has money left in it after 10 years. Even at 0% interest, it only comes up a few K short. Not sure what would entice me to hand over $250k to an insurance company under that scenario.
To get $2,338.29 per month for 10 years, the interest rate is about 2.38%. If you deposit $250k at an interest rate of 2.38%, then you may withdraw $2,338.29 per month for 10 years before exhausting it. It is like a mortgage, but you are the banker in this case.
You’re right. I did a quick spreadsheet and didn’t account for fully funding the year 10 withdrawal. I still stand by my analysis in principle (I think that we’re in agreement on that?). 2.38%+ would be an easy rate to get today, so I see no reason it give someone $250k for this “deal.” Maybe there are better products available? Also, although there is a survivor benefit for this annuity, not sure what would happen if both die. With a bank account, your beneficiaries keep what’s left of the money.

I’m not against annuities. I will consider SPIA at around ~80 using some of my money but will wait to see my circumstances before doing so.
Agree. It is difficult for a "young" retiree to justify purchasing fixed term annuities considering the current Treasury rates:
Date 1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr
05/24 2.37 2.38 2.35 2.39 2.33 2.16 2.10 2.12 2.22 2.32
You may also find CDs paying interests higher than 2.38%.

It is difficult to do a financial business with an informed customer!
The binary choice my post is concerned with is life annuity vs. fixed term annuity. I accept that the prospective annuitant could also crunch some numbers and end up deciding not to purchase any annuity, and instead set up a CD ladder, or a money market or stable value fund, etc. But my point is a narrow one: sometimes, as opposed to a life annuity, the fixed term may be the superior solution. A textbook example from our own experience: creating an income bridge to fill the gap years between quitting one’s job and pulling the trigger on social security.

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jose
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Re: Annuity purchase

Post by jose » Tue May 28, 2019 6:20 am

For a fixed term, the calculation to compare with a CD ladder is straightforward, but I doubt it is more advantageous. For example, you can get out of a CD ladder easily by not renewing CDs or paying EWP.

I see the annuity as a pure insurance for longer life than expected. In that case, it only makes sense if it meets two conditions:

1. It must be lifelong and COLA'd. Long life is... long. You need a good adjustment to not lose purchasing power. It will not help if you are 98 years old and your 30 year old SPIA is almost worthless. Either you insure totally, or not at all.

2. Insurance costs money. It doesn't have to be a "sound investment". An SPIA is not a financial plan, but a complement to reduce risk. You only need to insure longevity beyond your regular life expectancy, which should be covered by your financial plan. Only buy the insurance you really need.

jose

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Re: Annuity purchase

Post by Sandtrap » Tue May 28, 2019 10:10 am

Options:

1. Simplify your holdings. This might include consolidating or selling off some R/E as well as simplifying the portfolio funds.

2. Consider "laddering" in a series of SPIA's starting from age 70 or 80, etc? (perhaps with the goal of covering baseline expenses).

3. Consider, after simplifying non portfolio holdings, or liquidating as needed, using Vanguard VPAS services to handle the portfolio.

*Suggest posting a portfolio review in the forum format for more comprehensive suggestions in better context.

j
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Re: Annuity purchase

Post by willthrill81 » Tue May 28, 2019 10:15 am

bsteiner wrote:
Sun May 26, 2019 4:46 pm
22twain wrote:
Sun May 26, 2019 2:49 pm
... Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired.
...
That's a less expensive and more flexible solution. The annuity may make sense for someone who needs the insurance against living too long and running out of money, but that doesn't appear to be the case here.
I agree. If cash flow alone is satisfying the OP's needs, without any regard to capital appreciation, then why should additional income be purchased?

Buying a life annuity is an irrevocable decision and, like any such choice, should be approached with great caution.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Wricha
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Re: Annuity purchase

Post by Wricha » Tue May 28, 2019 10:34 am

willthrill81 wrote:
Tue May 28, 2019 10:15 am
bsteiner wrote:
Sun May 26, 2019 4:46 pm
22twain wrote:
Sun May 26, 2019 2:49 pm
... Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired.
...
That's a less expensive and more flexible solution. The annuity may make sense for someone who needs the insurance against living too long and running out of money, but that doesn't appear to be the case here.
I agree. If cash flow alone is satisfying the OP's needs, without any regard to capital appreciation, then why should additional income be purchased

Buying a life annuity is an irrevocable decision and, like any such choice, should be approached with great caution.
Thanks,
The cash flow does cover all expenses , so why the annuity? The annuity will create cash flow that requires no/limited oversight and is more difficult to be diluted through fraud as one ages.

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willthrill81
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Re: Annuity purchase

Post by willthrill81 » Tue May 28, 2019 10:38 am

Wricha wrote:
Tue May 28, 2019 10:34 am
willthrill81 wrote:
Tue May 28, 2019 10:15 am
bsteiner wrote:
Sun May 26, 2019 4:46 pm
22twain wrote:
Sun May 26, 2019 2:49 pm
... Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired.
...
That's a less expensive and more flexible solution. The annuity may make sense for someone who needs the insurance against living too long and running out of money, but that doesn't appear to be the case here.
I agree. If cash flow alone is satisfying the OP's needs, without any regard to capital appreciation, then why should additional income be purchased

Buying a life annuity is an irrevocable decision and, like any such choice, should be approached with great caution.
Thanks,
The cash flow does cover all expenses , so why the annuity? The annuity will create cash flow that requires no/limited oversight and is more difficult to be diluted through fraud as one ages.
If your goal is simplicity, that is more a question of asset type. Stock and bond funds are simple compared to commercial real estate and business ownership. Are you prepared to divest yourself of the latter in order to achieve simplicity?

If your goal is fraud prevention, then the above suggestion to employ a trust is a good one. With a trusted and capable CPA acting as the trustee, you could employ this option and move the complexity of your holdings onto someone else.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Wricha
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Re: Annuity purchase

Post by Wricha » Tue May 28, 2019 2:38 pm

willthrill81 wrote:
Tue May 28, 2019 10:38 am
Wricha wrote:
Tue May 28, 2019 10:34 am
willthrill81 wrote:
Tue May 28, 2019 10:15 am
bsteiner wrote:
Sun May 26, 2019 4:46 pm
22twain wrote:
Sun May 26, 2019 2:49 pm
... Another way to do this is to put assets in a trust and appoint someone (and pay him/her) to manage the trust and distribute the money as desired.
...
That's a less expensive and more flexible solution. The annuity may make sense for someone who needs the insurance against living too long and running out of money, but that doesn't appear to be the case here.
I agree. If cash flow alone is satisfying the OP's needs, without any regard to capital appreciation, then why should additional income be purchased

Buying a life annuity is an irrevocable decision and, like any such choice, should be approached with great caution.
Thanks,
The cash flow does cover all expenses , so why the annuity? The annuity will create cash flow that requires no/limited oversight and is more difficult to be diluted through fraud as one ages.
If your goal is simplicity, that is more a question of asset type. Stock and bond funds are simple compared to commercial real estate and business ownership. Are you prepared to divest yourself of the latter in order to achieve simplicity?

If your goal is fraud prevention, then the above suggestion to employ a trust is a good one. With a trusted and capable CPA acting as the trustee, you could employ this option and move the complexity of your holdings onto someone else.
a
I believe the trust is the way to work through this (thanks bogleheads) . Real estate has given me great returns and would encourage young folks in that direction if they are so inclined. Once you have reached a certain age it is probably best to take the real estate to the cemetery.

afan
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Joined: Sun Jul 25, 2010 4:01 pm

Re: Annuity purchase

Post by afan » Fri May 31, 2019 5:00 am

Setting asude the annuity question for the moment, who is going to manage the rest of this complex portfolio after the OP's death? Clearly not the partner. The choices are

1. OP simplifies the investments soon and leaves, for example, a balanced fund, as the entire portfolio.

Or

2. OP hires someone who can deal with the complexity now and in the future.

Option 2 essentially requires a traditional bank truste department or trust company (NOT Vanguard).

For this sort of portfolio the right trust department can do the job but it will cost plenty. It will also be expensive to have the bank act as executor and unwind these investments after the OP's death. At least for that route, once the unwinding is done, managing the investments becomes simple.

With a corporate trustee, maintaining a predictable income for the partner would be part of the service.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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