UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: ziggy29 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: of 76079  
Subject: Re: People are smarter than I thought Date: 1/29/2010 5:25 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
>> While various surveys show that roughly 15 to 25 percent of corporations offer annuities to workers who are retiring, including big employers like I.B.M., a 2009 Hewitt Associates study reported that just 1 percent of workers actually bought one. <<

Well, that's true, but anyone who would have cashed in stocks in 2008 and early 2009 to buy an annuity would have been insane (given that they would have been selling stocks low into a low-interest rate environment when annuities pay out squat). And in reality, it was only the last couple of years that reminded some people how much they would have preferred a steady income stream in retirement instead of a risky 401K.

The other problem is that very SPIAs offered up contain COLAs, and when they do the initial payout shrinks dramatically.

I would expect *some* uptick in the number of people who would want to convert risky assets into secure income, but that security comes at a price. And that price is *never* higher than it is in an environment similar to what we've had in the last 2+ years: risk-aversion leading to volatile stock markets and very low bond interest rates. This is the time when more people are willing to pay a high premium for "security" -- often the worst time to "buy" more security.

Depending on the market conditions and tax laws in the future and what the next 15-20 years hold for us, I might consider trading in *some* of my 401K and IRA investments for an SPIA -- assuming stocks aren't beaten down at the time and that interest rates aren't pathetic. That time sure as heck isn't now, especially not the bond rates that determine annuity payouts.

Annuities mostly suck, but SPIAs aren't inherently terrible -- but there are certainly wrong times to buy them.

#29
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Berkshire Hathaway

IBM: Is Buffett Wrong, or Brilliant?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.
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