Company suggestions for Annuity

[summerof42]

I know, I know. . . your {{{{cringing}}} at the very thought and I'm sure your hair is standing on edge; however, my reason for an Annuity is 1) budget/monies will be tight and I prefer and feel better knowing I'm receiving a set amount each month for life, 2) prefer not to worry about risk, 3) and/or balancing, 4) where to draw from monthly, quarterly, etc.

PLEASE KNOW I'm not putting all my eggs in one basket. Looking to do annuity between $92k - $100k which is about 1/3rd of my retirement funds. Other funds are currently held in Vanguard (IRA's to include a Roth) and 401k's.

Next step is to roll over my 401ks into either current Vanguard account in either Stocks/Bond percentages or one simple fund, i.e., Target Date, Balanced, many of the other one-fund portfolio to make it easy on me since by no means and I'm knowledgeable about the above mentioned, or switch everything over to Fidelity or Schwab.

With that said, I did check the current rate on 'immediate annuities" and it looks like $92-$100k would bring in around $600, depending on the option I choose, i.e., Life, Life 10 yr certain, etc.

Given many folks on this forum already have an annuity and are pleased, I would like to know which companies are trustworthy.

Thank you in advance for the suggestions and not screaming at me!
PS. Please don't suggest to continue to work given the amount of retirement savings - health does not allow and I've been pushing it to he max in continuing to WFH for the last 2 years. It's time.

[InNameOnly]

I have an annuity that I bought before discovering Bogleheads.
The annual income from it along with social security more that cover basic expenses including taxes, medicare B,D and F. Under the secure act 2.0, I believe 100% of the annuity goes toward RMDs when they start. The remaining portion of my tIRA, about 70%, is all Total Market Index Funds and is only tasked with covering the effects of inflation on the annual 20k from the annuity. Looking back I would be dollars ahead if I had bought an index fund instead. But 20/20 hindsight is usually clearer that the road ahead. I will say this through, during all the market ups and downs since COVID and all the joy it brought, I have sleep well every night. So maybe for me the lower steady return was/is worth it.

Our annuity is through Lincoln Financial Group, www.lincolnfinancial.com

[mhalley]

There is one annuity that bogleheads aren’t opposed to, the spia. I have seen https://www.immediateannuities.com/a/sp ... O2EALw_wcB recommended for annity searches before.
Look into getting the best return from the highest rated companies as mentioned here
https://www.immediateannuities.com/insu ... y-ratings/
Of course you could ladder your annuities with different companies to spread the risk.

[placeholder]

I have an annuity in that I elected to take my pension that way rather than a lump sum so I don't see much wrong there.

[Jovby]

Nothing wrong with a (SPIA) annuity. Much easier to spend when you know it can never run out. Inflation is a risk, but it sounds like you are taking steps to mitigate that. You might look at your state's annuity guaranties, they may protect you up to a certain limit, which can help you feel safer with the decision.

[Stinky]

Yes, the SPIA that you’re thinking about buying is considered by most Bogleheads to be a “good” annuity.

You can go to immediateannuities.com or blueprintincome.com to get quotes on SPIAs from well rated companies. I believe that most all companies on those sites have ratings of A or higher from AM Best.

Go ahead and get some quotes. Then post back here with the names and ratings of the companies you’re considering and we can make comments.

[summerof42]

Many thanks to all for your responses and for also not chewing me out! Yes, a SPIA is the type of annuity I would like to purchase. Given we are still dealing with a rollercoaster market and could be for quite a while, I would feel comfortable with 1/3 of my retirement funds in this type of annuity with guaranteed monthly payouts.

It's currently invested in a "Flexible Premium Annuity (fixed @ 3%) with Modern Woodmen of America which was purchased back in 2008, but I haven't drawn any funds, but did rollover funds from an old employer's 401k. Actually, quite glad I did as I watched my 401ks and IRAs drop considerably while this grew at 3%. Since I've owned it for 10+ years there would be no penalties or fees for pulling it out and purchasing a SPIA.

[Stinky]

Many thanks to all for your responses and for also not chewing me out! Yes, a SPIA is the type of annuity I would like to purchase. Given we are still dealing with a rollercoaster market and could be for quite a while, I would feel comfortable with 1/3 of my retirement funds in this type of annuity with guaranteed monthly payouts.

It's currently invested in a "Flexible Premium Annuity (fixed @ 3%) with Modern Woodmen of America which was purchased back in 2008, but I haven't drawn any funds, but did rollover funds from an old employer's 401k. Actually, quite glad I did as I watched my 401ks and IRAs drop considerably while this grew at 3%. Since I've owned it for 10+ years there would be no penalties or fees for pulling it out and purchasing a SPIA.

It’s good to hear that you’re thinking of a SPIA.

In addition to the websites above for quotes, I’d suggest that you ask Modern Woodmen for a quote. I have no idea how competitive they might be, but it can’t hurt to ask.

Post back with questions.

[Jack FFR1846]

An SPIA is an excellent choice for anyone who can't sleep with market volatility. My own small pension came up a year ago for either monthly payments or a lump sum. I took the lump sum and as we know, the market from a year ago to now, I'd have done far better with those payment from the pension which is essentially an annuity. But I do have a large fixed income pile of investments, so I just say "oh well" and move on.

[summerof42]

Many thanks to all for your responses and for also not chewing me out! Yes, a SPIA is the type of annuity I would like to purchase. Given we are still dealing with a rollercoaster market and could be for quite a while, I would feel comfortable with 1/3 of my retirement funds in this type of annuity with guaranteed monthly payouts.

It's currently invested in a "Flexible Premium Annuity (fixed @ 3%) with Modern Woodmen of America which was purchased back in 2008, but I haven't drawn any funds, but did rollover funds from an old employer's 401k. Actually, quite glad I did as I watched my 401ks and IRAs drop considerably while this grew at 3%. Since I've owned it for 10+ years there would be no penalties or fees for pulling it out and purchasing a SPIA.

It’s good to hear that you’re thinking of a SPIA.

In addition to the websites above for quotes, I’d suggest that you ask Modern Woodmen for a quote. I have no idea how competitive they might be, but it can’t hurt to ask.

Post back with questions.

Hi Stinky,

Actually, I did ask Modern Woodmen of America for a quote thinking I could just roll it over to a SPIA and was told they no longer provide them. So, I'm on my own out there in looking for one and at the risk of being sincere, I'm not the best in searching for such products; hence, asking the wonderfully, brilliant folks on this site.

[ralph124cf]

I have an annuity that I bought before discovering Bogleheads.
The annual income from it along with social security more that cover basic expenses including taxes, medicare B,D and F. Under the secure act 2.0, I believe 100% of the annuity goes toward RMDs when they start. The remaining portion of my tIRA, about 70%, is all Total Market Index Funds and is only tasked with covering the effects of inflation on the annual 20k from the annuity. Looking back I would be dollars ahead if I had bought an index fund instead. But 20/20 hindsight is usually clearer that the road ahead. I will say this through, during all the market ups and downs since COVID and all the joy it brought, I have sleep well every night. So maybe for me the lower steady return was/is worth it.

Our annuity is through Lincoln Financial Group, www.lincolnfinancial.com

Reference only your statement about 100% of the annuity going toward RMDs: No. The amount that you have paid for the annuity is subtracted from the basis that your RMD is calculated on, but the payment from the annuity is not subtracted from the RMD.

Ralph

[Stinky]

So, I'm on my own out there in looking for one and at the risk of being sincere, I'm not the best in searching for such products; hence, asking the wonderfully, brilliant folks on this site.

My suggestion above was to go to immediateannuities.com and blueprintincome.com, input your information, and get some on-line quotes. No obligation to buy anything from them, and no need to talk to them at this stage of the process. (Of course, if you want to talk to them now, you can call during business hours, and I'm sure they'll be happy to help.)

When you've gathered your quotes, you can post your information here, including the names of the companies that you have quotes from, and folks can give you their comments.

SPIAs are such a simple and commodity-like product that it's straightforward to get an initial quote online.

[InNameOnly]

I have an annuity that I bought before discovering Bogleheads.
The annual income from it along with social security more that cover basic expenses including taxes, medicare B,D and F. Under the secure act 2.0, I believe 100% of the annuity goes toward RMDs when they start. The remaining portion of my tIRA, about 70%, is all Total Market Index Funds and is only tasked with covering the effects of inflation on the annual 20k from the annuity. Looking back I would be dollars ahead if I had bought an index fund instead. But 20/20 hindsight is usually clearer that the road ahead. I will say this through, during all the market ups and downs since COVID and all the joy it brought, I have sleep well every night. So maybe for me the lower steady return was/is worth it.

Our annuity is through Lincoln Financial Group, www.lincolnfinancial.com

Reference only your statement about 100% of the annuity going toward RMDs: No. The amount that you have paid for the annuity is subtracted from the basis that your RMD is calculated on, but the payment from the annuity is not subtracted from the RMD.

Ralph

Looking back at my post, it seems I did not express my thoughts correctly. What I meant to say was that under SECURE 2.0, 100% of the Variable Annuity distribution is counted towards one’s RMD. Or am I still not reading this right?

"The SECURE 2.0 Act addresses a few issues related to the use of annuities with retirement savings accounts. For instance, if a retirement account includes an annuity, the account was split under prior law between the part holding the annuity and the part that doesn't for purposes of applying the RMD rules. This could result in higher RMDs. The SECURE 2.0 Act allows you to combine distributions from both parts when calculating your annual RMD amount."

Source: https://www.kiplinger.com/retirement/new-rmd-rules

[retireIn2020]

I have an annuity that I bought before discovering Bogleheads.
The annual income from it along with social security more that cover basic expenses including taxes, medicare B,D and F. Under the secure act 2.0, I believe 100% of the annuity goes toward RMDs when they start. The remaining portion of my tIRA, about 70%, is all Total Market Index Funds and is only tasked with covering the effects of inflation on the annual 20k from the annuity. Looking back I would be dollars ahead if I had bought an index fund instead. But 20/20 hindsight is usually clearer that the road ahead. I will say this through, during all the market ups and downs since COVID and all the joy it brought, I have sleep well every night. So maybe for me the lower steady return was/is worth it.

Our annuity is through Lincoln Financial Group, www.lincolnfinancial.com

Reference only your statement about 100% of the annuity going toward RMDs: No. The amount that you have paid for the annuity is subtracted from the basis that your RMD is calculated on, but the payment from the annuity is not subtracted from the RMD.

Ralph

Looking back at my post, it seems I did not express my thoughts correctly. What I meant to say was that under SECURE 2.0, 100% of the Variable Annuity distribution is counted towards one’s RMD. Or am I still not reading this right?

"The SECURE 2.0 Act addresses a few issues related to the use of annuities with retirement savings accounts. For instance, if a retirement account includes an annuity, the account was split under prior law between the part holding the annuity and the part that doesn't for purposes of applying the RMD rules. This could result in higher RMDs. The SECURE 2.0 Act allows you to combine distributions from both parts when calculating your annual RMD amount."

Source: https://www.kiplinger.com/retirement/new-rmd-rules

Basically, the cash value of the variable annuity gets added to your pre-tax portfolio balance used to calculate your RMD amount, and anything you withdraw from that variable annuity counts as an RMD distribution. Same with any IRA annuity that has not been annuitized.

A SPIA premium amount comes off of your pre-tax portfolio balance and is no longer used in RMD calculations.

Here's a good link on the subject.
https://www.annuityexpertadvice.com/annuity-rmd/

[InNameOnly]

I have an annuity that I bought before discovering Bogleheads.
The annual income from it along with social security more that cover basic expenses including taxes, medicare B,D and F. Under the secure act 2.0, I believe 100% of the annuity goes toward RMDs when they start. The remaining portion of my tIRA, about 70%, is all Total Market Index Funds and is only tasked with covering the effects of inflation on the annual 20k from the annuity. Looking back I would be dollars ahead if I had bought an index fund instead. But 20/20 hindsight is usually clearer that the road ahead. I will say this through, during all the market ups and downs since COVID and all the joy it brought, I have sleep well every night. So maybe for me the lower steady return was/is worth it.

Our annuity is through Lincoln Financial Group, www.lincolnfinancial.com

Reference only your statement about 100% of the annuity going toward RMDs: No. The amount that you have paid for the annuity is subtracted from the basis that your RMD is calculated on, but the payment from the annuity is not subtracted from the RMD.

Ralph

Looking back at my post, it seems I did not express my thoughts correctly. What I meant to say was that under SECURE 2.0, 100% of the Variable Annuity distribution is counted towards one’s RMD. Or am I still not reading this right?

"The SECURE 2.0 Act addresses a few issues related to the use of annuities with retirement savings accounts. For instance, if a retirement account includes an annuity, the account was split under prior law between the part holding the annuity and the part that doesn't for purposes of applying the RMD rules. This could result in higher RMDs. The SECURE 2.0 Act allows you to combine distributions from both parts when calculating your annual RMD amount."

Source: https://www.kiplinger.com/retirement/new-rmd-rules

Basically, the cash value of the variable annuity gets added to your pre-tax portfolio balance used to calculate your RMD amount, and anything you withdraw from that variable annuity counts as an RMD distribution. Same with any IRA annuity that has not been annuitized.

A SPIA premium amount comes off of your pre-tax portfolio balance and is no longer used in RMD calculations.

Here's a good link on the subject.
https://www.annuityexpertadvice.com/annuity-rmd/

Thank you for this info. Looks like if I am able the transfer funds to a SPIA, even after a surrender charge we could receive the same annual amount and have lower RMDs when they start. That's what I love about this place. Knowledgeable folks willing to share their insight.

[bertilak]

A very good cousin to the SPIA is a Deferred Income Annuity (DIA). This is like an SPIA that you buy today (thus locking in the return) but defer payments for a while. By waiting some time, the eventual return is greater than if you start taking the annuity payments immediately (as with the "I" in SPIA). That lock in is the selling point. It gets you a guarantee now instead of being exposed to annuity-market volatility between today and when you collect.

I am already retired but just bought a DIA with a 5-year deferral as a hedge against future inflation AND as a way to cover lost pension income to my wife If I die before her. If in 5 years that income is not needed (let's hope), I can start investing it.

I mention this because, if I read your post correctly, you are not yet in need of the annuity income so the "D" in DIA may be appropriate. You can get a DIA from all the same places you can get an SPIA.

Don't be confused by an SPDA. That does NOT guarantee an income stream. It is a way to grow your investment in a guaranteed way with (I think) some tax advantage. Once the deferral period is over, you STILL need to negotiate an income annuity and do so at the then-current returns. At least this is what I found wen looking into things. It is POSSIBLE there are SPDAs that behave like what I referred to here as DIAs but that's not what I found. I don't know how universal the terminology is.

[bspieler]

Nationwide has some interesting annuities. We purchased one last year through a whole life policy exchange. USAA has very simple annuities with very little risk.

[Wrench]

A very good cousin to the SPIA is a Deferred Income Annuity (DIA). This is like an SPIA that you buy today (thus locking in the return) but defer payments for a while. By waiting some time, the eventual return is greater than if you start taking the annuity payments immediately (as with the "I" in SPIA). That lock in is the selling point. It gets you a guarantee now instead of being exposed to annuity-market volatility between today and when you collect.

I am already retired but just bought a DIA with a 5-year deferral as a hedge against future inflation AND as a way to cover lost pension income to my wife If I die before her. If in 5 years that income is not needed (let's hope), I can start investing it.

I mention this because, if I read your post correctly, you are not yet in need of the annuity income so the "D" in DIA may be appropriate. You can get a DIA from all the same places you can get an SPIA.

Don't be confused by an SPDA. That does NOT guarantee an income stream. It is a way to grow your investment in a guaranteed way with (I think) some tax advantage. Once the deferral period is over, you STILL need to negotiate an income annuity and do so at the then-current returns. At least this is what I found wen looking into things. It is POSSIBLE there are SPDAs that behave like what I referred to here as DIAs but that's not what I found. I don't know how universal the terminology is.

To supplement this excellent post, I own a DIA I purchased about 4 years ago, with a start date 5.5 years from the purchase date The contract terms allow me to move the start date one time, either sooner than originally stated in the contract, or later than that in the contract. In the former case, the payout would be lower, in the latter, higher. Furthermore, I can add money to the annuity at any time up to 13 months prior to the original start date, though the payout percentages on the additional contribution may differ from the original purchase. To me, the flexibility of these terms is another valuable benefit of a DIA. For example, I may well add additional funds this year to increase my income to cover the large inflationary increases of the last few years. It is important if you buy a DIA that you completely understand all the terms in the contract because they may vary between companies and may even differ between different contracts within the same company.

Wrench

[Wrench]

A very good cousin to the SPIA is a Deferred Income Annuity (DIA). This is like an SPIA that you buy today (thus locking in the return) but defer payments for a while. By waiting some time, the eventual return is greater than if you start taking the annuity payments immediately (as with the "I" in SPIA). That lock in is the selling point. It gets you a guarantee now instead of being exposed to annuity-market volatility between today and when you collect.

I am already retired but just bought a DIA with a 5-year deferral as a hedge against future inflation AND as a way to cover lost pension income to my wife If I die before her. If in 5 years that income is not needed (let's hope), I can start investing it.

I mention this because, if I read your post correctly, you are not yet in need of the annuity income so the "D" in DIA may be appropriate. You can get a DIA from all the same places you can get an SPIA.

Don't be confused by an SPDA. That does NOT guarantee an income stream. It is a way to grow your investment in a guaranteed way with (I think) some tax advantage. Once the deferral period is over, you STILL need to negotiate an income annuity and do so at the then-current returns. At least this is what I found wen looking into things. It is POSSIBLE there are SPDAs that behave like what I referred to here as DIAs but that's not what I found. I don't know how universal the terminology is.

DELETED - DUPLICATE

[CWRadio]

Can a Boglehead explain this statement with examples.

"The SECURE 2.0 Act addresses a few issues related to the use of annuities with retirement savings accounts. For instance, if a retirement account includes an annuity, the account was split under prior law between the part holding the annuity and the part that doesn't for purposes of applying the RMD rules. This could result in higher RMDs. The SECURE 2.0 Act allows you to combine distributions from both parts when calculating your annual RMD amount."

Source: https://www.kiplinger.com/retirement/new-rmd-rules

For example I have $1 million in my IRA account. In November I buy a SPIA for $100,000 from my IRA which pays $7000 a year. My RMD on the remaining $900,000 is $40,000 for the next year. Can I use the $7,000 I receive during the year from my SPIA in my calculation of my RMD payment of $40,000 - $7000 (from SPIA) = $43,000 from my IRA account. Paul

[Wrench]

Can a Boglehead explain this statement with examples.

"The SECURE 2.0 Act addresses a few issues related to the use of annuities with retirement savings accounts. For instance, if a retirement account includes an annuity, the account was split under prior law between the part holding the annuity and the part that doesn't for purposes of applying the RMD rules. This could result in higher RMDs. The SECURE 2.0 Act allows you to combine distributions from both parts when calculating your annual RMD amount."

Source: https://www.kiplinger.com/retirement/new-rmd-rules

For example I have $1 million in my IRA account. In November I buy a SPIA for $100,000 from my IRA which pays $7000 a year. My RMD on the remaining $900,000 is $40,000 for the next year. Can I use the $7,000 I receive during the year from my SPIA in my calculation of my RMD payment of $40,000 - $7000 (from SPIA) = $43,000 $33,000 from my IRA account. Paul

A great question and I have looked in vain to find an answer. I think we have to wait for regulations to be issued based on the new law. But, I doubt it will be as simple as your example. The annuity value after purchase is not $100K - it is the present value of the future stream of income generated from that $100K. For example, see https://www.envestnetinstitute.com/arti ... load/10291. So if the annuity payments are to be counted as RMD, likely the annuity value will have to counted in the numerator of the RMD calculation, i.e., after purchase your IRA account now has a value of at least $1 MM dollars and maybe more depending on your age of purchase. For example if your life expectancy is 17 years and the discount rate is 4%, then the present value of your annuity compounded monthly would be ~$115.5K so your IRA "balance" for RMD calculation purposes would be $1.0155M In that case, using your figures, your RMD would be 4.44% of 1.0155M = $45,130. Assuming the $7K counts toward that, you would need to withdraw $38,130 from your remaining IRA balance.

Honestly though, this is total speculation on my part. I believe we will have to wait for the IRS (or the insurance companies?) to provide guidance for how to interpret this provision of Secure 2.0.

Wrench

[CWRadio]

Thanks Wrench for the additional information and correcting my math. Maybe Ed Slott knows the answer. Paul