UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Annuities and Gift Annuities Date: 12/22/2006 7:19 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
In previous discussions of annuities, the idea of a gift annuity, to an university or charity, as an alternative to an annuity from an insurance company, has come up. We have largely dismissed gift annutiies as likely to pay much less, but without any firm numbers.

I'm not sure I'd call these firm numbers, but I am suddenly in possession of some data. My mother-in-law made a small annuity contribution to her alma mater, and named my wife as the joint annuitant at 100% for life. (The amount of money, from out point of view, isn't worth stooping down to pick up, even before inflation, but I think the %s hold.)

Anyway, I ran a life single fixed annuity for my wife through Vanguard, which I think would be about the same actuarials, since her mother's life expectancy is much, much less. The gift annuity comes in at exactly 5%. The Vanguard annuity is 6.1%. (I couldn't get the Vanguard calculator to do a joint annuity with 100% survivor benefit.) Now the gift annuity also comes with a tax write-off of about 33%. If you figure a 28% tax bracket (guessing), that's 9.24%, maybe as high as 10%. So, with compounding of the 10%, I'd estimate about 12 years before the Vanguard annuity comes out the better.

I was surprised the differences weren't a lot greater. Since most of us prefer to leave money to a favorite charity rather than an insurance company, it is worth knowing that this option seems viable if one reaches a point where an annuity might make sense.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement