Skip to main content
No. of Recommendations: 2
7% right now

That 7% is a reflection of mostly your principle being paid back to you with anywhere from 1% to maybe 2.5% in interest.

It is a reverse mortgage. When you buy a house, the bank loans you $400,000 and you make principle and interest payments. With an annuity, you loan the insurance company $400,000 and they pay you principle and interest - and just like a mortgage, the lower the rates, the less interest (and more principle) is required.
Print the post Back To Top
No. of Recommendations: 19
Immediate annuities determine their payout based on current interest rates. We are very near all time lows in interest rates. That means it will take more money to buy the same guaranteed income than at nearly any other time in our history.

I have nothing against immediate annuities but right now is probably one of the worst times to buy one - and I sell them as part of my profession.
Print the post Back To Top
No. of Recommendations: 0
Immediate annuities determine their payout based on current interest rates. We are very near all time lows in interest rates. That means it will take more money to buy the same guaranteed income than at nearly any other time in our history.

I have nothing against immediate annuities but right now is probably one of the worst times to buy one - and I sell them as part of my profession.
Print the post
--------------------------------------------------------------------------------------------------------Hawkwin, thanks, what would you suggest?
Print the post Back To Top
No. of Recommendations: 8
We are complexly familiar with annuities
Income now covers all expenses.
Large cash account.
No kids, in good health, no where we want to leave money to.

Thinking of buying immediate annuities now, partially now, all when one passes for other partner income.
Also,maybe deferred, 25% of IRA's
Opinions appreciated.



The "problem" that annuities are supposed to address is the annuitant running out of money. Although I hope you and your spouse have many more years of healthy living, you really don't have the same longevity risk as a 58 year old early retiree with no pension and years before social security eligibility. On top of that, if your "Income now covers all expenses" you really don't need more guaranteed monthly income.

Why do you need to "do something" with your account? Why now?

If it were me: I'd keep the money in our accounts and invest somewhere between 25% and 75% stocks (low cost index fund), depending on risk tolerance and the rest in cash/bond funds. "Risk tolerance" would be the amount of stock crash that *wouldn't* cause me to abandon the asset allocation. That'll build up so whichever of you passes away first will leave the money to the survivor to spend and compensate for whatever loss of income that death causes.

Without knowing more about your individual situation, this (buying an annuity) looks like an answer in search of a question.

What just occurred to me: Did someone (a relative, a salesman, a planner) recently float this idea?
Print the post Back To Top
No. of Recommendations: 2
Charitable remainder trusts available from many charities give a tax deduction based on life expectancy and steady income for life.

With interest rates so low, limiting immediate annuities as much as possible is preferred. Equities like an S&P 500 index fund offer better returns.

The classical TMF way is a ladder ed maturity bond portfolio containing 5 years of living expenses with the rest invested in equities.

The bond ladder provides a buffer against a down market. You maintain it by selling equities each year sufficient to replace the maturing bond.
Print the post Back To Top
No. of Recommendations: 4
It warms my heart that I no longer have to warn about the high costs of a "low-cost, single-premium immediate annuity". Others are doing it for me.

intercst
Print the post Back To Top
No. of Recommendations: 27
I have nothing against immediate annuities but right now is probably one of the worst times to buy one - and I sell them as part of my profession.

Having watched your posts for several years hereabouts, I admire your integrity and belief in presenting the “real” sides of an issue, not just those which favor yourself.

I disagree with you on some things, but I wanted to put in words what a simple click of the “rec” button does not do.
Print the post Back To Top
No. of Recommendations: 1
It warms my heart that I no longer have to warn about the high costs of a "low-cost, single-premium immediate annuity". Others are doing it for me.

intercst


What would you recommend for my very lame SIL who can't manage her money for shyte? Actually had a mental breakdown a few years ago. Totally irresponsible. I have mentioned an annuity to her (elderly) parents, and they don't like the idea.

I have a Mutual Fund broker I trust (Is that a contradiction in terms? "Mutual Fund broker" and "trust"?) Thinking of asking for his advice.

In general, I have been thinking of a Vanguard Life fund. Is there a way to prevent her being able to liquidate it?

She isn't crazy, just very irresponsible.

CNC
Print the post Back To Top
No. of Recommendations: 5
Perhaps a spendthrift trust?
Print the post Back To Top
No. of Recommendations: 0
I may be wrong, but I think if you put it in her name, then she can do whatever she wants. You can't protect people from themselves, short of having them declared legally incompetent.

If you were so inclined you might be able to set up a trust that benefits her, but has an administrator you appoint (e.g. the Countess). I'm far from an expert on on trusts, but that's all I can think of. You'd have to consult an attorney to be sure

Though, frankly, I'm inclined to tough love. If she blows her money, maybe she'll learn something when no one bails her out.
Print the post Back To Top
No. of Recommendations: 1
Though, frankly, I'm inclined to tough love. If she blows her money, maybe she'll learn something when no one bails her out.

Not inclined to let her starve on the street. She wouldn't even have a good piece of cardboard.
Print the post Back To Top
No. of Recommendations: 1
CNC asks,

What would you recommend for my very lame SIL who can't manage her money for shyte? Actually had a mental breakdown a few years ago. Totally irresponsible. I have mentioned an annuity to her (elderly) parents, and they don't like the idea.

I have a Mutual Fund broker I trust (Is that a contradiction in terms? "Mutual Fund broker" and "trust"?) Thinking of asking for his advice.

In general, I have been thinking of a Vanguard Life fund. Is there a way to prevent her being able to liquidate it?

She isn't crazy, just very irresponsible.

</snip>


You can certainly set up a Vanguard account to pay out interest and dividends while keeping the corpus intact, but if it's in your SIL's same, she can still liquidate it. As others have suggested, you need some kind of trust arrangement to prevent SIL from liquidating the account.

Exercising control over someone else's money behavior is always going to cost extra in fees, expenses and costs unless a family member wants to get in the middle of it gratis. I wouldn't.

intercst
Print the post Back To Top
No. of Recommendations: 0
Not inclined to let her starve on the street.

I get the feeling, but in the end you cannot protect someone from themselves. You might be able to set up some sort of trust for her, but I'm not sure. You'd have to talk to an expert (i.e. trust attorney). I'm almost certain if her name is on it as an owner, she can liquidate it. So you almost certainly don't want to do that.

If she is capable of learning, do the tough love for a while and then say something like "this is the last time we'll bail you out...mess up again and you're on your own". If not, contact the attorney.

FWIW, we have an investment for my SIL. She sent about $2000 (in cash through the mail!), and we bought some stock for her. I think she's forgotten about it, and it's now worth over $30000. When her number comes up, and she can relocate to the US, we're going to give it to her as some cash to get established. We also have a settlement from when 1poorkid was hit (her car was totaled). I plan to release that to her when she moves out permanently. It's in Vanguard, growing steadily.

1poorguy
Print the post Back To Top
No. of Recommendations: 3
Exercising control over someone else's money behavior is always going to cost extra in fees, expenses and costs unless a family member wants to get in the middle of it gratis. I wouldn't.

intercst


Larf! SIL doesn't trust the Countess. The Countess, Mom, and SIL are the last of the (immediate) family. I think she (SIL) may listen to me long enough to get her to an advisor - once she is in a Vanguard (or other) program she may be inclined to leave it alone as long as she doesn't run low on funds.

Interesting situation. Could be worse. There could be no money.

CNC
... Hey! SIL is good looking. Would you like to meet her?
Print the post Back To Top
No. of Recommendations: 1
thanks to all
but an immediate annuity for couple 81, is about 7% right now immediate annuites.com
a tontine would be ideal but is illegal.
Where can we get 7% safely?

Maybe I am missing something, tell me.
Print the post Back To Top
No. of Recommendations: 2
thanks to all
but an immediate annuity for couple 81, is about 7% right now immediate annuites.com
a tontine would be ideal but is illegal.
Where can we get 7% safely?

Maybe I am missing something, tell me.
-------------------------------------------------------------------------------------------------
Answer my own question
Maybe because most of money is my own money coming back.
Print the post Back To Top
No. of Recommendations: 3
If she is capable of learning, do the tough love for a while and then say something like "this is the last time we'll bail you out...mess up again and you're on your own

This does not work with people who are inherently irresponsible, self destructive, or simply incapable of modulating their behavior. You can’t tell an alcoholic, drug addict, compulsive gambler, or similar “OK, one more time, but that’s it.” It doesn’t work that way.

I don’t have the answer, but ‘tough love’ for these types is a recipe for failure. My advice would be to find a competent (and older) estate planning attorney and set up whatever legal structure would allow the principle to be disgorged over time but *not* allow the claimant to access the principal ever. I don’t know if there’s a way to keep the J.D.Wentworths away from such a honeypot, but I’d guess it’s been successfully done somewhere, somehow.
Print the post Back To Top
No. of Recommendations: 7
This does not work with people who are inherently irresponsible, self destructive, or simply incapable of modulating their behavior. You can’t tell an alcoholic, drug addict, compulsive gambler, or similar “OK, one more time, but that’s it.” It doesn’t work that way.

I don’t have the answer, but ‘tough love’ for these types is a recipe for failure.--Goofyhoofy


As CNC said, some people just can't manage money for shyte. There is no way to explain it to them. I own either fully, or in partnership, 15 rental properties. Over the years, as I have had tenants come and go, I have come to believe that many people would be best served by giving their stash to an insurance company in the form of a single premium annuity and accepting a small, regular payment each month. Many just do not have the personality traits that prevent losing any sum of money they get. How many times have I heard "when I get my income tax refund I'm going to buy...."

Yes, single premium annuities are expensive. But as the song said, "the high cost of living ain't nothing like the cost of living high"

tsimi
Print the post Back To Top
No. of Recommendations: 2
I don’t have the answer, but ‘tough love’ for these types is a recipe for failure.

I'm helping a mentally competent 95 year old friend setup long term homecare. His child recently passed and no one else is available to take care of him. He's resistant to my recommendations and what he's attempting to do will, in the long term, fail which significantly increases the chances of his dying.

It's his life, decision, consequences.
Print the post Back To Top
No. of Recommendations: 0
Maybe because most of money is my own money coming back.

Yup, that's it.

Simple way to see when it switches from being your own money coming back to you to being the company's money coming to you. Divide the premium you paid by the monthly amount it will pay to you.

I would not be surprised if the crossover point was near or over age 100.
Print the post Back To Top
No. of Recommendations: 1
I'm helping a mentally competent 95 year old friend setup long term homecare. His child recently passed and no one else is available to take care of him. He's resistant to my recommendations and what he's attempting to do will, in the long term, fail which significantly increases the chances of his dying.

It's his life, decision, consequences.


My FIL swore a mighty oath (some years ago): "When I leave this house, it will be feet first." Three years ago his asthma, COPD, and congestive heart failure put him in the hospital for two weeks followed by a month in a convalescent [SIC] hospital. He was sent home to hospice, which we interpreted as a three month death sentence. Well, he has had ups and downs over the last three years. The last down was to a hospital bed in one of the rooms in his house. The MIL is working herself to death taking care of him. She reluctantly agreed to hire people to help. (She has a hard time letting anyone help, esp. in the kitchen or around the house, but she lets them do some of the more disgusting parts of caring for him.) Everyone, even including his wife, is eager for him to die. Three years. I have promised the Countess that I will not do that to her. We are moving to a CCRC https://en.wikipedia.org/wiki/Continuing_care_retirement_com... These commuities include skilled nursing care for the end-of-life situations. (We have applied and been accepted, but there is a long waiting list for admission. Kinda ghoulish, waiting for someone to die so you can have their apartment.)

I plan to live to a healthy 100 years, and to die peacefully in my sleep, but sometimes parts of our lives are out of our control.

CNC
Print the post Back To Top
No. of Recommendations: 12
thanks to all
but an immediate annuity for couple 81, is about 7% right now immediate annuites.com
a tontine would be ideal but is illegal.
Where can we get 7% safely?

Maybe I am missing something, tell me.

</snip>


The annuity isn't paying you a 7% return like a bond. The insurance company has already taken your money. They're just giving some of the principal back to you over time.

You can't get 7% return safely anywhere.

intercst
Print the post Back To Top
No. of Recommendations: 0
Where can we get 7% safely?
Maybe I am missing something, tell me.


A 7% *RETURN* would really be something. That would mean 7% of what you put in is coming to you annually, then someone gets the original amount eventually (e.g., a bond). In your case, the 7% is returning you a bunch of your own money plus "mortality credits." The mortality credits benefit you when the amount you got back exceeds what you put in, and benefits the annuity company when people pass away prior to that point. Of course, the financial companies set the mortality credits in such a way as to reflect expected life spans along with current rates of return.
Print the post Back To Top
No. of Recommendations: 6
intercst:

{{{thanks to all
but an immediate annuity for couple 81, is about 7% right now immediate annuites.com
a tontine would be ideal but is illegal.
Where can we get 7% safely?

Maybe I am missing something, tell me.}}}

"The annuity isn't paying you a 7% return like a bond. The insurance company has already taken your money. They're just giving some of the principal back to you over time."

At 7% it will take over 14 years before the insurance company pays to the amount you invested with them.

In the meantime the insurance company will invest the money and keep all dividends and investment return.

Per https://www.ssa.gov/oact/STATS/table4c6.html life expectancy for an 81 yo male is 7.76 years and if you make it to 89, the life expectancy is another 4.37 years (so 12.13 years is beating the odds twice and still less than 14= years) and for an 81 yo female is 9.09 years and if your wife makes it to 90, her life expectancy is another 4.78 years (so 13.87 is also beating the odds twice). Odds way favor the insurance company unless you are both very healthy and from a long-lived gene pools.

And what would you do with the 7% that the annuity pays every year? Buy another annuity? If not, why just do the same with your funds now and skip the annuity?

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 3
At 7% it will take over 14 years before the insurance company pays to the amount you invested with them.

14 + 81 = 95. You'll just be getting your own money back until age 95.
Print the post Back To Top
No. of Recommendations: 33
Maybe because most of money is my own money coming back.

It's ALL your own money coming back unless you live to 95. Only then do you start to actually earn money.

But - due to the vagaries of tax accounting - you will get charged income tax on some portion of your own money coming back to you. That means that even at age 95 you STILL won't have all of your money back.

Frankly, you'd be better off burying the money in the backyard and digging a bit up as needed. Make sure your heirs know where to dig.

--Peter

PS - OK, don't actually bury the money. A standard savings account earning a whopping 0.01% interest would leave you with more money at age 95 than this annuity would.
Print the post Back To Top
No. of Recommendations: 2
what would you suggest?

What problem are you trying to solve? Do you need immediate income? How flexible and discretionary are your expenses?

I think if I was trying to secure income today in this environment, I would turn to qualified dividends.
Print the post Back To Top
No. of Recommendations: 1
I admire your integrity and belief in presenting the “real” sides of an issue,

Thank you. In a perfect world, I would be unemployed - and would be happy to find another profession.
Print the post Back To Top
No. of Recommendations: 2
7% right now

That 7% is a reflection of mostly your principle being paid back to you with anywhere from 1% to maybe 2.5% in interest.

It is a reverse mortgage. When you buy a house, the bank loans you $400,000 and you make principle and interest payments. With an annuity, you loan the insurance company $400,000 and they pay you principle and interest - and just like a mortgage, the lower the rates, the less interest (and more principle) is required.
Print the post Back To Top
No. of Recommendations: 2
Yes do not become the trustee of an irresponsible person or they’ll make your life a living hell!

Pay a bank. They’ll hassle the bank not you.

From Michael Codon who wrote “Beyond the grave” about estate planning
Print the post Back To Top
No. of Recommendations: 1
It's true that interest rates are at a record low. Using that logic, it's a terrible time to buy an annuity. Or is it? If you wanted to buy an immediate annuity 20 years ago, and were waiting for interest rates to rise back to historical average levels, you'd still be waiting.

I helped my mother buy immediate annuities between ages 75 and 80. All have small inflation kickers (up to 2 or 3%). She's now age 85 and in fairly good health. Her annuity income, along with SS, is the cornerstone of her spending. This is supplemented by an investment portfolio that covers big ticket expenses and should last her lifetime.

My point is that the time to buy an SPIA is when you need it and you are age ready. Even those who bought them when interest rates were high, say in 1975, found that rates went even higher after that.
Print the post Back To Top
No. of Recommendations: 0
Or you could be one of the rare but many (an oxymoron) who live to 105. Then you're glad there is that income. Or your caregivers are glad.
Print the post Back To Top
No. of Recommendations: 14
Daryll44 reasons,

Or you could be one of the rare but many (an oxymoron) who live to 105. Then you're glad there is that income. Or your caregivers are glad.

</snip>


Wouldn't your caregivers be even more glad of the fortune you'd have without the headwinds of the 15%-20% you lose to the cost of the annuity?

The only annuity that makes financial sense is the one that you can buy from the US Gov't by delaying SS to age 70. That's literally about half the cost of what a commercial insurer would charge for the same inflation-adjusted monthly benefit.

intercst
Print the post Back To Top
No. of Recommendations: 2

The only annuity that makes financial sense is the one that you can buy from the US Gov't by delaying SS to age 70. That's literally about half the cost of what a commercial insurer would charge for the same inflation-adjusted monthly benefit.


Yeah, but that's the only way and the only time you can get it. Delay filing for SS until your 70'th birthday. And you can't pick the amount, the SSA decides the amount. And for most people it's not a huge amount of dollars.
Print the post Back To Top
No. of Recommendations: 9
Rayvt complains,

<<The only annuity that makes financial sense is the one that you can buy from the US Gov't by delaying SS to age 70. That's literally about half the cost of what a commercial insurer would charge for the same inflation-adjusted monthly benefit.>>

Yeah, but that's the only way and the only time you can get it. Delay filing for SS until your 70'th birthday. And you can't pick the amount, the SSA decides the amount. And for most people it's not a huge amount of dollars.

</snip>


So what? You buy as much of an annuity as you can at half price from the US Gov't. And then you can buy an additional benefit at full price from a commercial insurer.

Are you arguing that one should leave $100,000 or more on the table and buy the whole thing from an insurer because you find it inconvenient?

That seems dumbfoundingly stupid.

intercst
Print the post Back To Top
No. of Recommendations: 10
Um, they are 81. They can't go back and change the decision they made when they were 62, or 65.

And you keep saying "buy an annuity at half price from the US Gov't." You aren't "buying" anything, you are just deferring filing for SS.
Print the post Back To Top
No. of Recommendations: 3
If you wanted to buy an immediate annuity 20 years ago, and were waiting for interest rates to rise back to historical average levels, you'd still be waiting.

?????

20 years ago, 20 yr treasuries were paying over 5%. Today it is less than 2%. Not only that, but rates were trending lower 20 years ago - and continued to go lower for the next two decades.

$2000 in monthly income in 2001 would probably cost you only 60% of what it would require today.


20 years ago was an outstanding time (best time in the last 20 years) to lock in long term rates if you were considering an immediate annuity.
Print the post Back To Top
No. of Recommendations: 3
Delay filing for SS until your 70'th birthday. And you can't pick the amount, the SSA decides the amount. And for most people it's not a huge amount of dollars.

It's 5% per year between age 62 and FRA (as high as 67 for some of us) and 8% per year after that. For an FRA of 67, delaying to 70 is pretty substantial.
Print the post Back To Top
No. of Recommendations: 0
I have been working on this idea for many, many years and have no answer. Any new ideas would be appreciated. Years ago, I read the book "Die Broke". The idea of using your money, and runs out just when you die.
Print the post Back To Top
No. of Recommendations: 3
I have been working on this idea for many, many years and have no answer. Any new ideas would be appreciated. Years ago, I read the book "Die Broke". The idea of using your money, and runs out just when you die.

Well, putting all of your money into joint and survivor annuities that end when the 2nd one dies, along with spending all the income from those annuities each year, would accomplish that. You would give any excess to insurance companies, but since you said you don't have anyone that you want to leave the money to, there's not necessarily anything wrong with that. And if at least one of you lives longer than the insurance company estimates, you might actually receive more from the insurance company.

AJ
Print the post Back To Top
No. of Recommendations: 0
aj writes,

You would give any excess to insurance companies, but since you said you don't have anyone that you want to leave the money to, there's not necessarily anything wrong with that.

</snip>


I've always been of the opinion that even the least charitable person in the country can find a more deserving beneficiary of the terminal value of one's retirement portfolio than an insurance company executive.

Just give it to the Red Cross or the Salvation Army, if you don't want to put any thought into it.

intercst
Print the post Back To Top
No. of Recommendations: 2
Have you considered a charitable remainder trust?

You can set one up to pay you annually in the form of an annuity for the rest of your life. Might be a better alternative than, as suggested above, your early demise leading to a windfall for the insurance company.
Print the post Back To Top
No. of Recommendations: 7
Years ago, I read the book "Die Broke". The idea of using your money, and runs out just when you die.

I would hate getting down to one year of expenses left, and hoping I die in 364 days.
Print the post Back To Top