Greetings; it looks like annuities are not a favorite in TMF, but could they not be part of a retirement strategy, along with IRAs, mutual funds, stocks, bonds (corp. and municipal)? Thanks for your thoughts on this.
"Thanks for your thoughts on this. "^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^As with any investment, look at what the costs are - and this is not easy in virtually any insurance product. There is always a need to define what is the cost versus what are thereturns. e.g. think about a bond - you get a defined return over a fixed time period and at the conclusion you have your principal returned.The cost is the purchase price of the bond unless you sell before maturity.Now, look at an annuity - the cost is not only the initial purchase feebut the entire principal. On the surface, the annuity contract offers to pay a fixed sum back to you until you die - or reach a certain age. The return is generally a fixed maximum value - a series of equalpayments out into the future. The payments tend to be related to the current interest rates.So, in the current environment, payments will tend to not be as greatas they might be when interest rates go high again.The question then is how much are you willing to pay to cover risk? Also, you have to ask what risks may still remain?What happens if the insurance company goes belly-up?That risk also exists with bonds - what happens if the governmentor the courts order your bond interests to be over-ruled by someother interest group (e.g. ask GM bond holders how they made out afew years back).So - there you have a rather simplistic view of annuities.You pay a price for what sounds like a no-risk return of funds - but you have no control over the investments made by the companyselling the annuity - and really have no true knowledge of therisk that their investments involve. You have a contract thatthat company will pay you in the future over a rather long period of time. If you choose wisely, the risk is abated somewhat.I would suggest that the due diligence include a detailedcheck on the company offering the annuity as well as a thoroughcheck of the contract. Know the costs and know the retained risk.Howie52Not an area in which I have great expertise - and I tend to be both a worrier and a control freak.Also, I always figure that somehow or other, the world will go tohades in a hand-basket a day or two after I retire.
BTW - this board is not widely followed.I suggest you ask the question on one of the otherretirement discussion boards.
Hi, HowieMany thanks - I've had very much the same concerns, of course. I may go for a lifetime annuity, as part of my expected stream of retirement income, combined with a life insurance policy for my wife who is quite a bit younger than myself. Because of the latter, it would not make sense to buy a joint annuity (would bring down the income from the principal too much). On the other hand, I could use some of the annuity income to pay for a life insurance policy every month. She would also have the other assets to use. In the meantime, I would use the other assets to provide for a combination of growth (incl. 401-K) and income. Kind of covers all the risk bases the best I can...Best, HenriJ
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