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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75534  
Subject: People are smarter than I thought Date: 1/29/2010 4:22 PM
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Interesting article in NY Times that says Obama wants more people to buy a Single Premium Immediate Annuity to secure their retirement. Of course the insurance industry thought this was an excellent idea, but the large hidden expenses of even so-called "low-cost" annuities make them bad deals for almost everybody.

http://www.nytimes.com/2010/01/30/your-money/annuities/30mon...

Meanwhile, almost all employees on the precipice of retirement who have access to annuities as a payout option steer clear when their companies offer them. 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.

</snip>


intercst
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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 66718 of 75534
Subject: Re: People are smarter than I thought Date: 1/29/2010 5:03 PM
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I guess they've been reading REHP.

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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: 66719 of 75534
Subject: Re: People are smarter than I thought Date: 1/29/2010 5:25 PM
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>> 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

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 66720 of 75534
Subject: Re: People are smarter than I thought Date: 1/29/2010 5:34 PM
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SPIA's, to the extent they are all defined the same way, is potentially a good option for at least part of a Retiree's fixed income, assuming, of course, that the retiree understands that at death any unused balance is lost, that the retiree has NO flexibility once the annuity stream begins, there is no protection for decreased purchasing power due to inflation and that the 'guaranteed' annuity stream may be only as good as the insurer making it.

The value of this to some is the assurance that they will be receiving a steady income stream without having to worry about market fluctuations. If this is what the Prez is referring to, couldn't agree more.

But this isn't what the insurance industry is thinking. Like eyeglasses on sale, the family photo special and term life insurance, companies don't have much margin on such standardized offerings that have lots of competition. Its the bells and whistles that carry the profit margin. With a SPIA, this will include such features as a survivorship benefit, a 'death benefit', cost-of-living feature, period certain, variable rates of return and so on.

That's not to say that these add-ons are necessarily bad....just expensive and confusing, amking comperable price comparisons difficult for most....just the way the insurance companies want it.

BruceM

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Author: ltangel Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 66725 of 75534
Subject: Re: People are smarter than I thought Date: 1/30/2010 7:19 PM
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I have an annuity which I AM WAITING to get out of as soon as I turn 59 and one half! I have been in it for 15 years and have 35,000 less than I did 15 years ago!It is invested in a S and P index fund and one growth fund . Question: any suggstions about how to to take this out and where toput it?It is1/3 of my savings. Many thanks!

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Author: Howie52 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: 66764 of 75534
Subject: Re: People are smarter than I thought Date: 2/18/2010 8:35 PM
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"Too bad, I actually used to like him a lot.

Kahuna, CFA "

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

If there is one thing that camme out of President O'bama's
election campaign, it is the fact that people change hope for
change and in fact can change.

And this is true for President O'bama as well.

Howie52
Also, the situation we all find ourselves in can change as well.

So don't get too discouraged about our president.
There is a long time until history can judge any man.

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