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Author: AlaskaSteve100 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76113  
Subject: Annuities? Date: 9/29/2004 11:43 PM
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My mother, 76 years old, just sold her house and moved into a senior living apartment type of thing.

She has $185K from the sale of her house, $55K in other savings, and that is it. She needs to generate some income to make her rent, and has been approached by several annuity sellers. But they don't want to give her details until she is ready to plunk down her cash.

Q. What kind of interest can she expect from a lifetime annuity of $200k?

Q. Anyone know if she would be better off if she just bought a 10-year instrument?

Thanks.

Alaska Steve
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Author: cliff666 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42509 of 76113
Subject: Re: Annuities? Date: 9/30/2004 1:59 AM
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But they don't want to give her details until she is ready to plunk down her cash.

Phuck that! Full disclosure NOW! Otherwise, run, don't walk to the door. Really, at 76 years old, she may have another 20 years in her, and she should plan on that, or more (You didn't mention her health.), so a ten year instrument isn't attractive, to me, at any rate.

You don't say where she lives, or how much she gets from Social Security or other income. What are her needs?

More questions than answers, sorry.

cliff

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42512 of 76113
Subject: Re: Annuities? Date: 9/30/2004 9:54 AM
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http://www.immediateannuities.com/

The above site should give you at least a ballpark idea of how much she might receive from an annuity purchase.

Tread carefully in dealing with all of the sleazebags coming out of the woodwork to prey on your mother. They are really only after their commission, not her best interest. It isn't necessarily clear that an annuity is best for her, but you will have to do some investigation or hire a good fee-only planner to figure out what is appropriate. Also keep in mind that when you buy an annuity, you are exposed to the credit of the insurance company selling the annuity (make sure they have a strong credit rating), and that you get a stream of payments for life only (i.e. you don't get back your principal ever).

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42516 of 76113
Subject: Re: Annuities? Date: 9/30/2004 1:07 PM
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that you get a stream of payments for life only (i.e. you don't get back your principal ever). brewer12345 wrote.

There are annuities where you principal is guaranteed the trade off is that the monthly payment is lower.

Depending on your mother's needs and desires a fixed annuity could be just what SHE wants. The problem with fixed annuities is that an annuitant is locking in historically low interest rates.

Bond/Cd ladders could be an option, but I recommend speaking with a financial planner who bills by the hour.

buzman


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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42517 of 76113
Subject: Re: Annuities? Date: 9/30/2004 1:38 PM
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Welcome, Alaska Steve. Glad you could join us.

First, there is an Annuities board in Fooldom, where all postings I am aware of get linked. Here is TMF's take on annuities--

http://boards.fool.com/Message.asp?mid=20902854

Watch out for high sales commission on some annuities. The charges are listed in special sections of the WSJ. One of them was summarized recently on the annuities board.

A websearch will turn up websites that will tell you what income you can expect from an immediate annuity of a given size. The figures vary with the life expectancy of the individual (age, sex, etc), and with current interest rates. That's a good place to begin.

Vanguard and Fidelity offer low cost annuities. They have no sales commissions. Should have great deals for comparison. Fidelity has offices where you can talk to a specialist face to face. Otherwise most is done by phone or internet.

Your mother will get more income from an annuity than she will from a bond, for example. That's because the annuity refunds her principal with the payments. The bond remains part of her estate when she passes; the annuity passes to the insurance company.

By 10 yr instrument, do you mean ten year fixed term immediate annuity? The fact that interest rates are now at historic lows and might be higher some time in the future could make that attractive. The next 10 yr instrument might give higher payout when rates are higher. However, watch out for sales commissions. So I would suggest a careful comparison of how much more you might expect to receive vs say the cost of a 20 yr annuity now.

At age 76, and more of us living past 90, your mother should be concerned about inflation. A recent posting mentioned that Vanguard offers a mixed annuity that will supposedly track inflation. Otherwise, you could be best off to buy 10 annuity now and invest the remaining funds in something containing a mix of stocks and bonds. Then buy a larger annuity with those funds later to allow for increases in cost of living.

Good luck with your choices.

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Author: randyeball Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42738 of 76113
Subject: Re: Annuities? Date: 10/16/2004 7:40 PM
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Depending on the product she could generate anywhere from 1-7% income from the $200K. If the goal she has is income and she plans on passing whatever she has left to her beneficiaries, then the 7% variable annuity solution could work. The insurance companies would say that they will protect her principal up to 14.2 years (7% *14.2 = 100%). If she went with an immediate annuity, she'd probably get less than 7% for her money and if she lives more than 10 years, the beneficiares get nada. With rates in the toilet, forget a fixed annuity. There is nothing along that line that makes sense in this market. There is also the possibility for an indexed annuity, but they are a bit complex and require long holding periods.

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