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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: of 75777  
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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