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There have been many threads about annuities, but in combing them I can't quite find the answer to my question, which is, how do you pick the best time in your life to buy that immediate annuity?
I'm 60, retiring in 66 days (but who's counting), and planning to draw down my taxable accounts for the next 2 - 6 years. Somewhere in there I'd like to use part of my 403(b) to buy an immediate annuity. The 403(b) and investments are all diversified funds of varying types, such as Retirement 2020 and Cap Appreciation at T Rowe Price and a really diverse (20 or so funds) in the company retirement plan. So I don't have those buckets of stocks and bonds that are often mentioned here. (I also have savings, but I'm leaving them out of the equation.)
Is there any advantage to waiting X number of years before buying that annuity? Is there a way to figure out what, for example, $200K will buy now versus later? Other than, the longer I wait, the more the money grows in the account.
It depends on your situation. If drawing down your taxable accounts for the next 6 years gets you to FRA for SS and you can live on the FRA amount, then if I were you, I would just let the 403(b) grow in the diversified funds "forever" (hopefully they are equivalent to lowcost ETFs, if you have any funds that charge an expense ratio greater than 0.25 I would sell them and replace with lowcost funds) and draw down from your 403(b) as needed after you reach FRA. If you can live on the SS annuity, to me there is no reason to buy a second annuity. So my answer would be to never buy an annuity although that is probably not the answer you are looking for.
fumbling, thanks. I won't be able to live only on the FRA amount.
Yes, I can just draw down from my 403(b) at 66. That is an option. I'm weighing it against using part (maybe half) of the 403(b) for an annuity, because my TIAA-CREF guy told me about the advantages. To me, the main benefit is the peace of mind factor; the second most important is the fact that my monthly payment will be higher than I could safely withdraw on my own.
Also, if it's a nice amount and I don't want to wait until 65 or 66 to buy it, why not buy it next year? It would give me more money to play with during the earlier part of my retirement.
I wrote to him and asked why he had picked age 70. He wrote the following to me: "The amount you receive for an immediate annuity is based on your REMAINING life expectancy. The longer the life expectancy, the LESS you receive. So if you start at age 54, your payments will be stuck at a very low rate for life. Therefore, depending on current interest rates (which are low now, I would no start an immediate annuity until age 70 or 75. If rates rise, maybe the numbers will look okay at ages 65 or even 62. See the calculator at http://www.retirement-income.net/ret...ty-calculator/"
This made sense to me. I also used this calculator: Retirement calculator to help me to determine how much money I will need each year of my retirement.
From all of this data I figure out what amount of immediate annuity I would need to purchase.
If you are concerned that you would run out of money before age 70, you would need to purchase the annuity earlier.
There have been many threads about annuities, but in combing them I can't quite find the answer to my question, which is, how do you pick the best time in your life to buy that immediate annuity?
I'm 60, retiring in 66 days (but who's counting), and planning to draw down my taxable accounts for the next 2 - 6 years. Somewhere in there I'd like to use part of my 403(b) to buy an immediate annuity. The 403(b) and investments are all diversified funds of varying types, such as Retirement 2020 and Cap Appreciation at T Rowe Price and a really diverse (20 or so funds) in the company retirement plan. So I don't have those buckets of stocks and bonds that are often mentioned here. (I also have savings, but I'm leaving them out of the equation.)
Is there any advantage to waiting X number of years before buying that annuity? Is there a way to figure out what, for example, $200K will buy now versus later? Other than, the longer I wait, the more the money grows in the account.
waiting is better as the monthly payment will be higher.
You will also get a better monthly payment as interest rates go up.
Consider postponing SS. That will be like buying an annuity and probably less costly.
One thing I don't understand is why you have to wait until age 66 to make a withdrawal from your 403(b)? Accouring to what /I've read, it works just like a 401k plan. You can also roll it over to an IRA account.
I don't have to wait until 66 to withdraw, I can do it at any time. I was advised to withdraw from my taxable accounts first, so I thought I'd wait and let the 403(b) grow for a few more years.
I don't have to wait until 66 to withdraw, I can do it at any time. I was advised to withdraw from my taxable accounts first, so I thought I'd wait and let the 403(b) grow for a few more years.
Don't forget possible tax bracket considerations if you are also planning to start SS at 66. Drawing from retirement accounts then combined with the SS revenue could bump you up in tax brackets. You will owe income tax on all of the money you take out of 401/403 tax sheltered accounts vs dividend, capital gains etc on taxable accounts and not your contributions etc. Crunch the numbers and decide.
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