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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Re: update and a question Date: 12/18/2004 6:33 PM
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Author: stardustangel | Date: 12/18/04 11:25 AM | Number: 43641
My question is why is everybody so down on annuities?

My boyfriend's father (age 77) is particularly interested in an annuity that has a survivor benefit so that his wife (age 62) will be taken care of after he dies.


I am not as negative towards annuities as some are. I believe that, carefully selected and used properly, annuities can have a place in certain cases. In particular, I think an Immediate Annuity can be a good choice providing the cost is low enough. But, as other posters have said, the cost can often be so high it defeats the purpose.

An Immediate Annuity gives a stream of income for the rest of your life (or for a particular period of time), and can be structured to give a continuing stream to your spouse after your death. I think annuitizing enough of your retirement funds to cover your basic living expenses can make sense for some people.

You can find out just how much income to expect from an annuity here: http://www.immediateannuities.com/

Vanguard also sells a very low cost Immediate Annuity. See

http://www.vanguard.com/VGApp/hnw/PersonalHome

and

http://flagship2.vanguard.com/VGApp/hnw/web/corpcontent/jsp/FixedDeferredAnnuity.jsp

Once you buy an Immediate Annuity and you have a guaranteed income stream that covers your basic living expenses, you may then feel that you can take a little more risk with the rest of your investments. In many cases, this will allow a portfolio to grow much larger than it would have with typical conservative retirement investing (ie, bonds).

So, used correctly, I think that immediate annuities can have a place in some conservative retirement portfolios.

Russ
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