Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Make your own annunity without the huge fees to a broker. It’s not hard.

You can buy low fee annuities-just don't go for all the bells and whistles.
I plan on doing a QLAC with a portion of my retirement assets to adjust for longevity risk and to protect my basic livelihood if my spouse were to need LTC for a long time. Most economists who study personal finance and who aren't trying to sell you something think at least a small amount of annuities make sense. It also helps adjust your risk tolerance so you can invest more heavily in equities which will likely pay off more.

How does one plan for longevity risk? You save/plan while young investing into 401-ks and IRAs and if possible brokerage accts. Most working people when they retire will qualify for SS payments. Which is an annuity payment. So most people already own an annuity. No need to annuitize your retirement accts with an Insurance firm. You can set up withdrawal plans/amounts as needed with your IRA administrator for income needs and RMDs.

One of the important points of utilizing an annuity is that an insurance company ensures that your stream of income is guaranteed

Taking regular distributions from an IRA or 401k does not guarantee a consistent income stream over the years. If the market takes a dump and you have an annuity, it is on the insurance company to continue your payments.

Who is going to guarantee your income stream over time when your Vanguard Funds are worth 20% less, and dividend and income payments have been slashed?

Can you do better in an index fund? Sure. Same as it it better to have a 3 percent Mortgage and invest at 7 percent. Sure. But quite often people are looking for less risk. A guaranteed payment stream could could mean less risk that the money will be there in a given year. And you do not have to worry about it. To some people not worrying is worth the cost. Same with the mortgage. If you feel better with no mortgage and you do not want to take that risk then you do it. There is a cost for that.

Having said all of that annuities are normally not something to do unless you understand what you are doing and you need to solve for some issue.

Anonymous wrote:

Anonymous wrote:No they are not worth it. Only worth it to the broker who is selling it to you. What it is; you invest a chunk of money, say $1 million. You are guaranteed an amount of money every month or year for life, say $50,000 per year for life.

Why it's bad; broker gets a big commission, and you can do better investing your money in an index fund for example, and get more than $50,000 per year

If you get one through the TSP there is no commission. It can make sense anyway under certain conditions. But I agree it is not for most people. And don’t let anyone sell you one.

NP here. Getting one without a commission would negate a lot of the criticism that annuities get. That said, I understand the points about index funds growing etc. It seems like another point made in this thread about having a portion, but not all, of one's 401k converted to an annuity could make sense for anyone who wants to know what he'll be getting every month without fail.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Make your own annunity without the huge fees to a broker. It’s not hard.

You can buy low fee annuities-just don't go for all the bells and whistles.
I plan on doing a QLAC with a portion of my retirement assets to adjust for longevity risk and to protect my basic livelihood if my spouse were to need LTC for a long time. Most economists who study personal finance and who aren't trying to sell you something think at least a small amount of annuities make sense. It also helps adjust your risk tolerance so you can invest more heavily in equities which will likely pay off more.

How does one plan for longevity risk? You save/plan while young investing into 401-ks and IRAs and if possible brokerage accts. Most working people when they retire will qualify for SS payments. Which is an annuity payment. So most people already own an annuity. No need to annuitize your retirement accts with an Insurance firm. You can set up withdrawal plans/amounts as needed with your IRA administrator for income needs and RMDs.

SS is not enough to cover my basic living expenses--esp if my spouse were to need LTC. I will have a small QLAC to cover the gap between SS and what I consider my basic needs . I've done the modelling using a variety of tools--given my risk tolerance/assets and expense needs, this is the highest performing approach. I can devote far more assets to equities if I put an annuity in place for age 80+.

Anonymous wrote:

Anonymous wrote:Make your own annunity without the huge fees to a broker. It’s not hard.

You can buy low fee annuities-just don't go for all the bells and whistles.
I plan on doing a QLAC with a portion of my retirement assets to adjust for longevity risk and to protect my basic livelihood if my spouse were to need LTC for a long time. Most economists who study personal finance and who aren't trying to sell you something think at least a small amount of annuities make sense. It also helps adjust your risk tolerance so you can invest more heavily in equities which will likely pay off more.

How does one plan for longevity risk? You save/plan while young investing into 401-ks and IRAs and if possible brokerage accts. Most working people when they retire will qualify for SS payments. Which is an annuity payment. So most people already own an annuity. No need to annuitize your retirement accts with an Insurance firm. You can set up withdrawal plans/amounts as needed with your IRA administrator for income needs and RMDs.

Anonymous wrote:Make your own annunity without the huge fees to a broker. It’s not hard.

You can buy low fee annuities-just don't go for all the bells and whistles.
I plan on doing a QLAC with a portion of my retirement assets to adjust for longevity risk and to protect my basic livelihood if my spouse were to need LTC for a long time. Most economists who study personal finance and who aren't trying to sell you something think at least a small amount of annuities make sense. It also helps adjust your risk tolerance so you can invest more heavily in equities which will likely pay off more.

Make your own annunity without the huge fees to a broker. It’s not hard.

Anonymous wrote:What is exactly annuity and do u reccomend it

If you were 80+ years old, in good health, had a family history of 95+ longetivity, and had no desire to leave an inheritance, only then would I even consider a Single Premium Immediate Annuity.

Otherwise, no way, never.

Anonymous wrote:No they are not worth it. Only worth it to the broker who is selling it to you. What it is; you invest a chunk of money, say $1 million. You are guaranteed an amount of money every month or year for life, say $50,000 per year for life.

Why it's bad; broker gets a big commission, and you can do better investing your money in an index fund for example, and get more than $50,000 per year

The above post was brought to you by Ken Fisher

Anonymous wrote:If it’s a savings vehicle to defer taxes instead of one to have an income stream is it a good idea?

This is an it depends question. I purchased one through vanguard in the early 1990s invested in the S and P 500. (Vanguard no longer offers this and my annuity was transferred by them to an insurance company). It is kind of like an IRA in that as you withdraw funds they are treated like taxable income.

From an estate perspective it is kind of worse, because, as far as I have been able to discern, heirs must take out the funds in five years as taxable income vs. ten years for an IRA. On the upside, the annuity is not subject to RMDs.

These variable annuity products have changed a lot since the 1990s. I understand that for some of them you can combine long-term care insurance, for example. Commissions and fees will definitely be very important in any purchase decision.

Looking back, I wish I had just plunked the money into an index fund in a Vanguard brokerage account instead.

it has a psychological appeal. You can also get one that pays out for a period certain, even if you die early (your designated beneficiary gets the $).

Yes, sometimes annuities can be great for a surviving spouse - especially an elderly widow. Having had to help my mother with this after my dad passed younger than expected, it is really nice for her to have a consistent source of income in addition to social security that does not require sales of other stocks, assets, etc. Although I love index funds for myself, I was surprised to see how well this annuity will serve her and served my father for a few years after his retirement. But it really depends, and most annuities may not be worth the cost. You need a fiduciary fee-only CFP who can advise on these things.

Jane Bryant Quinn’s book (How to make your money last) is good. She does not dismiss annuities

To me, who has no pension, it has a psychological appeal. You can also get one that pays out for a period certain, even if you die early (your designated beneficiary gets the $).

Anonymous wrote:What is exactly annuity and do u reccomend it

A key thing that wasn't mentioned is that with an annuity you share your mortality risk.

Let's say you and someone else puts in $1M each at the age of 65. You live until you're 85 but the other guy dies at 70. Of the $2M put in, ignoring any investment gains and costs here, you might get paid $1.6M and the other guy only $0.4M. So annuities are probably not a good bet if you expect to die early, but they can mitigate the risk of not dying early. This is an insurance effect you simply do not get if you invest the money yourself in index funds (or in anything, really).

A good source of information is Jack Guttentag. I learned a lot from him (and saved tens of thousands on my mortgages) when I was shopping for homes; I plan to do the same when it's time to look into these. I will admit though that I do not follow all of his math yet (like the charts in this article.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No they are not worth it. Only worth it to the broker who is selling it to you. What it is; you invest a chunk of money, say $1 million. You are guaranteed an amount of money every month or year for life, say $50,000 per year for life.

Why it's bad; broker gets a big commission, and you can do better investing your money in an index fund for example, and get more than $50,000 per year

Can you give me example of index fund

VTSAX is very popular and tracks total US stock market. FNCMX tracks tech heavy NASDAQ, FXAIX tracks S&P 500 as examples.

-dp

Do u think it is okay to put money in index fund while market is high?

PP, no one can answer that for YOU. That's something only YOU know and it depends on your financial situation. It's uncomfortable jumping in high but it will also equally uncomfortable jumping in when market is low.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No they are not worth it. Only worth it to the broker who is selling it to you. What it is; you invest a chunk of money, say $1 million. You are guaranteed an amount of money every month or year for life, say $50,000 per year for life.

Why it's bad; broker gets a big commission, and you can do better investing your money in an index fund for example, and get more than $50,000 per year

Can you give me example of index fund

VTSAX is very popular and tracks total US stock market. FNCMX tracks tech heavy NASDAQ, FXAIX tracks S&P 500 as examples.

-dp

Do u think it is okay to put money in index fund while market is high?

Market timing is discusses ad nauseum here. Please do a little bit of searching or a little bit of googling.