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Wow! do you really need a study to know that the probability of not outliving your money increases, if you have a garanteed income for life? .
On another note. The study that you referenced in fact does an apple to orange comparison when they do a "no annutity", "25% annuity' "50% Annuity." The comparison are not on the same net dollar amounts. In order to have an annuity (25% or 50%) you would need more dollar to buy them and if you have more dollar the "no annuity" option will last long and now have a higher probability of lasting.
the guaranteed income for life does not mean three things .
one is that its enough to live on
two- that inflation wont eat you alive if like most annuities they dont inflation adjust unless your willing to take alot less.
three -you want to give away all your money when you die .
a combination of your own investments for inflation proofing and the annuity may work out best.
Annuities are an insurance product where the insurance company promises to pay you a stream of income in exchange for your investment.
There are many types of annuities. A fixed annuity would give you a steady and fixed rate of growth prior to when you start receiving payments. Variable annuities grow at a rate depending on your sub-account’s market performance. Annuities could provide you a sufficient amount of guaranteed income that you can rely on in retirement. There will be growth in your investment and you will receive a stable check for the duration of the annuity.
There’s no assurance if you’d be better off buying stocks since the market fluctuates.
Annuities are an insurance product where the insurance company promises to pay you a stream of income in exchange for your investment.
There are many types of annuities. A fixed annuity would give you a steady and fixed rate of growth prior to when you start receiving payments. Variable annuities grow at a rate depending on your sub-account’s market performance. Annuities could provide you a sufficient amount of guaranteed income that you can rely on in retirement. There will be growth in your investment and you will receive a stable check for the duration of the annuity.
There’s no assurance if you’d be better off buying stocks since the market fluctuates.
You are sounding like an insurance salesperson.
Guaranteed income that becomes too little (due to inflation) if you actually live to be 90 or more. Then it become INsufficient.
Don't forget that annuities are taxed at a MUCH HIGHER rate than normal investments like bond and stock index funds.
And annuities are TERRIBLE for heirs.
And annuities are illiquid. Kiss your principal goodbye.
If you have yet to annuitize a variable annuity you can get out but you will be SLAUGHTERED by Uncle Sam...
Again don't get me started on all of these crap insurance products.
As of now, the interest rate of the TSP immediate annuity (MetLife) is 2.125%. The G-fund return at the moment is 2.25%. And of course, there is no capital risk with the G fund. No way would I buy a TSP annuity right now.
I keep going back and forth on this idea. I am leaning towards doing just as the OP discussed, investing $100,000 of the equity from our house. But the taxes at ordinary income rates is a big concern.
As of now, the interest rate of the TSP immediate annuity (MetLife) is 2.125%. The G-fund return at the moment is 2.25%. And of course, there is no capital risk with the G fund. No way would I buy a TSP annuity right now.
I would not ever buy an annuity in TSP. For one the going interest rate is horrible. Two if you are a TSP account holder you already have an annuity in the form of a pension or two. In my case it is two.
So this is how I am doing this as a TSP account holder. I have enough to pick a set amount each month and it becomes a pension type income to me. I can adjust up or down once a year. As long as the withdrawals last more than 10 years (that is currently the trigger to make them consider the withdrawals not roll over withdrawals triggering them to keep 20% from each payment) you can pull whatever you like except you cannot stop. The lowest payment though can be $25.00 a month. TSP is going to make a modernization change. It has passed Congress and is sitting in the Senate with the same plan and once passed it will become law and changed for us. It will remove the restrictions that everyone has moved their money out because. DM me if you want more information or look on this forum for the thread I started on the subject.
The insurance man that sells you the annuity makes a cool 4-10%+ on your total investment up front. They have high recurring fees as well for the variable products.
You're betting against the actuaries on your payout life which is usually a really bad bet.
For every 100k immediate (late 60's) is around $575 a month or so last I had looked. Maybe $600. So you're looking at 14 years of payment before you even exhaust your principal balance you gave them and start earning "interest".
You never see any COL increases so inflation is going to rape your payment value over time. That $600 a month after 14 years will lost about $300 in purchasing power over that time. You would need $908 a month to equal the same amount with a 3% inflation rate.
I'm not saying they don't have a place in certain portfolios, I will say that many folks that invest in them have zero financial acumen what so ever and in general are poor options which heavily favor the agent and the insurance company selling them.
i would never buy any annuity product except an immediate annuity.
you will not see salesman push them , they are like buying a cd . if you like the draw rate that is the whole deal . no fine print , no hidden fees or expenses , it is what it is .
Immediate annuities have a place for some of us as a part of our income and only part of our portfolio, it is peace of mind knowing that it will hopefully always be there until you and or your spouse dies, just like buying term life insurance or mortgage insurance, it too can be said to be a waste of money if you live past the term but it too has a place for peace of mind for your surviving spouse or relatives.
Immediate annuities have a place for some of us as a part of our income and only part of our portfolio, it is peace of mind knowing that it will hopefully always be there until you and or your spouse dies, just like buying term life insurance or mortgage insurance, it too can be said to be a waste of money if you live past the term but it too has a place for peace of mind for your surviving spouse or relatives.
You are absolutely right. Though some who have say a pension already have that piece in their portfolio. Adding another doesn't make economic sense. For some as you said having it to be a baseline on top of SS if it is too low makes sense.
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