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Old 04-11-2014, 10:54 AM
 
673 posts, read 837,976 times
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My husband was laid off recently. He is 61, I am 58. I still work, but I don't bring in much and have no benefits. We will have to get our own health insurance in 3 months (OUCH!) and he also is getting 3 mos of severance. He is hoping to do some consulting work (he is an engineer) but cannot rely on that. We are moving to a more retirement friendly state which we had been researching for a future move. We thought we had several more years to work and save. I will try to find a job there F/T with benefits, but cannot rely on that as it is very difficult in today's economy to find.

We went to our financial guy today and crunched number along with him. At our next session we will discuss when to take SS. My husband wants to at 62 but I am hesitant as it guarantees us 8% increase yearly to wait. But, we do not have enough monthly to live on. We have a shortfall and have to dig into our savings and investments.

I will say that we are 40/60 now and will keep it that way. I know it is risky, but we have to think growth longterm as we truly don't have enough.

Which brings me to annuities. He is suggesting to us to take 25% of our savings and put it in an income annuity which will NOT have a cost of living adjustment. He felt that we would need this by later this year when we have to start withdrawing money.

I have been using him for a while. I like him, but he does work for Fidelity and I get nervous when I think "is he just suggesting this because he works for the company? Is this truly in my best interet?" He told us it will have a "joint payment stream". I have a lot to research on all of this.


Always heard stay away from annuities. But, we DO NOT have a pension. We have our savings and future SS. That's it folks!! So, please give your opinions and insights.

On another side note, we thankfully were saving over 30% of our income in the past year or so. I know we will save moving, but unless I get health insurance for us through a job, that is where the bulk of our money will be going.

Mortgage, cars, credit cards- 0- but will probably need a 2nd hand car in year or so.
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Old 04-11-2014, 11:21 AM
 
71,520 posts, read 71,694,121 times
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I like immediate annuities/equities combo's and so do quite a few financial researchers.

You use the equities to cover your inflation protection.

You can even use annuities/bonds with equities .

Do not get involved with any other type of annuity.

ideally covering your basic expenses with the annuity while letting the equities run and grow over time and provide inflation protection has worked well.
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Old 04-11-2014, 12:14 PM
 
Location: Phoenix, AZ > Raleigh, NC
15,068 posts, read 19,002,971 times
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I'd suggest hiring a new financial planner. The type that doesn't sell ANYTHING except his/her knowledge and expertise.

Of course the Fidelity guy is trying to get you to buy annuities. He'll get a big, fat commission on that deal.

I'm not saying that annuities are always a bad idea. But just remember - it's a big, big financial decision, and basically irrevocable.

You're financial situation has dramatically changed. You and your husband are probably a bit shell shocked. This is the PERFECT opportunity to get a fresh, new look through a new pair of OBJECTIVE eyes. Find someone you pay by the hour who does not sell products. Look for a Certified Financial Planner (CFP) or Personal Financial Specialist (PFS)
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Old 04-11-2014, 12:54 PM
 
Location: North Idaho
2,172 posts, read 2,082,324 times
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Due to the low interest rates today, annuities are not particularly attractive at the moment. Also, many recommend you wait until 70-75 before taking an annuity as the mortality credits at that age will lead to a better payback on your money.

OTOH, these decisions have to be made in the context of an individuals specific situation. If your anticipated retirement income from sources such as SS and any pensions taken together with your savings are marginal in terms of their ability to support your desired lifestyle, then it may be prudent to insure some base level of income through purchasing an annuity.
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Old 04-11-2014, 01:54 PM
 
Location: Northern panhandle WV
3,007 posts, read 2,169,984 times
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It would be good to wait for SS if you can since you get a lot less at 62. However while your benefits increase each year you wait, I believe the 8% a year is only after you reach full retirement age, 66 for you, it increases 8% a year from 66 to age 70. But I don't imagine you will want to wait that long either, hopefully you both can get new jobs with better pay and benefits and keep slogging along.
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Old 04-11-2014, 02:01 PM
 
71,520 posts, read 71,694,121 times
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Quote:
Originally Posted by Cnynrat View Post
Due to the low interest rates today, annuities are not particularly attractive at the moment. Also, many recommend you wait until 70-75 before taking an annuity as the mortality credits at that age will lead to a better payback on your money.

OTOH, these decisions have to be made in the context of an individuals specific situation. If your anticipated retirement income from sources such as SS and any pensions taken together with your savings are marginal in terms of their ability to support your desired lifestyle, then it may be prudent to insure some base level of income through purchasing an annuity.
a 65 year old couple can get at this moment almost a 6% withdrawal rate that passes to a spouse. for singles it is over 7%. not to shabby by todays standards.

if you can hold out the sweet spot is around 70. the amount goes up as you age and with interest rates this low the returns will rise too but not as much as you think.

a lot of what an annuity pays out is based on mortality credits from those who have died and not totally on where rates are.
.
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Old 04-11-2014, 02:08 PM
 
5,617 posts, read 13,758,098 times
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Quote:
Originally Posted by Jkgourmet View Post
I'd suggest hiring a new financial planner. The type that doesn't sell ANYTHING except his/her knowledge and expertise.

Of course the Fidelity guy is trying to get you to buy annuities. He'll get a big, fat commission on that deal.

I'm not saying that annuities are always a bad idea. But just remember - it's a big, big financial decision, and basically irrevocable.

You're financial situation has dramatically changed. You and your husband are probably a bit shell shocked. This is the PERFECT opportunity to get a fresh, new look through a new pair of OBJECTIVE eyes. Find someone you pay by the hour who does not sell products. Look for a Certified Financial Planner (CFP) or Personal Financial Specialist (PFS)
correct. Listen to Sundays radio show at 10 am Ric Edelman. He is on WOR 77.0 am. You can listen on the internet. Maybe even call his firm. The guy is great! Marilyn My opinion is from what I have learned on his shows and advise and he is great is annunities are not the way to go.
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Old 04-11-2014, 02:25 PM
 
71,520 posts, read 71,694,121 times
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without the type of annuities he is talking about that statement means little.
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Old 04-11-2014, 02:26 PM
 
Location: Florida -
8,763 posts, read 10,837,755 times
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Since we DO have one pension, plus SS, I committed to a sizable annuity a few years ago ... as both a future inflation hedge and a lifetime 'security blanket.' (We also have some significant equities and a mortgage-free home). The interest rates seem reasonable and I believe the annuity will work out for us in the long-run. Still, I've had some serious second-thoughts about the commitment and wonder if it will ultimately turn-out to have been the best thing, for a number of reasons:

1). One gives-up the use of the money for either personal investments or other uses, in exchange for a future income.
2). The associated costs/fees are high and seriously reduce the overall income value.
3). The ROI depends almost entirely on one's longevity (and we are probably more optimistic than warranted)
4). Once one locks-into an income stream, one pretty much loses all future flexibility.
5). If interest rates go up (which they probably will), one might do better with more conventional investments.
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Old 04-11-2014, 02:29 PM
 
Location: North Idaho
2,172 posts, read 2,082,324 times
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Quote:
Originally Posted by mathjak107 View Post
a 65 year old couple can get at this moment almost a 6% withdrawal rate that passes to a spouse. for singles it is over 7%. not to shabby by todays standards.

if you can hold out the sweet spot is around 70. the amount goes up as you age and with interest rates this low the returns will rise too but not as much as you think.

a lot of what an annuity pays out is based on mortality credits from those who have died and not totally on where rates are.
.

It really depends on the individual situation. True, a 6% withdrawal rate looks good compared to the commonly suggested 4% safe withdrawal rate from savings.

OTOH, if you look at the effective NOMINAL return on the money put in an annuity at those withdrawal rates, it's about 3.75% if the annuitant lives for 20 years, and about 5% if they live to 90. Compare that to the common view that a balanced portfolio should achieve 3-4% REAL return over 30 years, and the annuity looks less attractive particularly if inflation rears it's head.

If the fixed income sources and savings are marginal to support the needed income, then an annuity can be a good way to insure against the risk of outliving one's savings. In a less marginal situation that insurance may not be the best approach. I don't think the OP has provided enough information to make any really clear recommendations one way or the other.

Dave
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