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Old 04-28-2015, 09:40 AM
 
Location: Eastern UP of Michigan
1,202 posts, read 682,251 times
Reputation: 1271

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The recent thread on annuities has really got me thinking, and making some of our final steps towards my getting off the carousel in 2016 or 2017 at the latest.

The discussion on annuities is leading me towards purchasing a SPIA, in an amount that would roughly equal the difference between when I retire and my FRA. I am also thinking about making it in an amount that would equal the difference in Jims CSRS pension(he's already retired) and what we are going to set-up for my survivors pension from CSRS. That amount is still pending, as we are a couple weeks away from the 9 months married requirement. The survivors annuity is so I can retain FEHB benefits if he dies first.

The amount of the SPIA would be modest, only 100K to cover my SS. Not certain yet on the CSRS amount. The 100K would be 20% of deferred retirement account total. Total deferred amount is 540ish.

No kids to leave money to, although we really tried

Sure I will be asking other questions as people make suggestions and post opinions (hint, hint).

Thanks.
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Old 04-28-2015, 09:52 AM
 
1,226 posts, read 1,258,991 times
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Hi JimandThom,

The SPIA is a single premium immediate annuity. You give the insurance company the premium and they begin paying out immediately. It is a low-commission & no monthly fee product. Because it starts immediately and there is no time for the premium to compound, the initial premium is higher than a Deferred Income Annuity.

The Deferred Income Annuity is modeled on the SPIA. It is also a low-commission & no monthly fee product. However, there is time for the premium to grow because payouts begin at a date of your choosing in the future.

I know of a really wonderful annuity agent. He only sells the low commission, no monthly fee products, he writes a national column on annuities, he will send you his book explaining all annuity types for free, and he is very patient answering questions. If you are interested in talking to him, I can DM you his telephone number. He would be the best person to ask questions of.

As a disclaimer, I do not work for this person or receive a commission, or any other compensation for letting people know about him. I give out his information because I believe he is a good source.
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Old 04-28-2015, 12:16 PM
 
130 posts, read 101,276 times
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I personally am not opposed to a SPIA, came close to purchasing one myself when I retired under FERS. There are some things to consider, however:

1. Unless you add a rider to the policy (which costs money), there is no COLA on a SPIA. What you get at the beginning is what you'll get 25 years from now;

2. Are you or Jim going to be named first on the policy? Men get more money upfront than women. Why? Because women live longer. If Jim is named as the owner with you as the beneficiary, he will receive a larger annuity than if it was reversed;

3. If I understand it correctly, you have $540K in an IRA? If so, you can always purchase second SPIA at age 70 or 75 for another $100K.

There are tons of sites on the Internet that discusses annuities and their pros and cons. The biggest con is the fact that you will lose total control of the money used to purchase an annuity. Therefore, always leave yourself plenty in reserves for emergencies later in life.

The biggest pro, in my opinion, is the peace of mind knowing this money will be there for you until the day you die. If the company goes belly up, there is a dollar amount that is insured by the state. Michigan guarantees $100K (Annuity State Guaranty Protection Limits - Find Out How Much Your Annuity Is Covered For)

You can always google "is an annuity right for me?" for more info. Problem is, everyone's circumstances are different. Since it looks like you and Jim are going to each have a good retirement income, do you really need an annuity right away? Whatever you do, research, research, research this. Talk to a financial planner who isn't in the market to sell you anything but charges by the hour. Once you sign the paperwork there's no going back.
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Old 04-28-2015, 04:13 PM
 
Location: Eastern UP of Michigan
1,202 posts, read 682,251 times
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Lookingat FL-- I'm pretty much open to any idea, I'll do a bit more reading. Thanks


Mark--- thanks for the link on the state annuity protections. That was one of my concerns. I'm not horribly concerned about COLA on the annuity as the CSRS and SS will have such. On the ownership of the annuity, we are both male and were married in August after a 39 year courtship. The 540K is in multiple IRAs and also in the TSP. I have called our lawyer for a suggestion of someone to talk with.

I've pretty much done the internet reading of "Should I/we" category. We will have pretty reasonable income from SS(year or so), CSRS(presently) and a small pension held at PBGC until age 65. Some articles suggested that if you have a decent income stream a SPIA really isn't needed.

For me to retire at 62-63 I feel more comfortable having the "guaranteed" amount. I've already talked to my employer about going part-time next year and that's all good to go. If I take the jump and stop working full time, adding the SPIA, estimated part-time income(20 hours a week), reduced SS and CSRS would exceed our present income.

Thanks.
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Old 04-28-2015, 04:15 PM
 
71,511 posts, read 71,674,131 times
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for best results an spia should be used with your own investing used as inflation protection and legacy money.
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Old 04-28-2015, 08:34 PM
 
Location: Eastern UP of Michigan
1,202 posts, read 682,251 times
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Quote:
Originally Posted by mathjak107 View Post
for best results an spia should be used with your own investing used as inflation protection and legacy money.
Mathjak, by "own investing" are you referring to setting it up as an enhancement to what would come from IRAs etc, rather than an enhancement to the income stream provided by pensions and SS? Guess I'm a bit confused.

Thanks.
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Old 04-29-2015, 02:31 AM
 
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in other words use equity funds and the spia's to replace some of the bonds and cash portion.

that is when spia's really shine since they offer higher draw rates than cash or bonds can.

that means you need to liquidate less equities to refill when cash runs low from spending down.

typically you spend cash first then bonds then equities. at these low rates the cash and bonds will be spent down to zero not to far off in the future.

the spia typically pays 25% more income and unlike your cash and bonds does not generate less and less each year as it is spent down

that means you can leave more equities to grow .

ideally you would lock in non discretionary bills with the annuity and use your own equities for growth and inflation proofing.

http://money.usnews.com/money/blogs/...-in-retirement

Last edited by mathjak107; 04-29-2015 at 02:50 AM..
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Old 04-29-2015, 05:45 AM
 
Location: Eastern UP of Michigan
1,202 posts, read 682,251 times
Reputation: 1271
Thanks Mathjak


This is all starting to make some more sense.

Also realizing that with the SPIA, and as long as I keep working part-time we won't have to touch anything until 70 1/2 years old.

I intend to work part-time for a number of years. I work at the local hardware, and the employee discount is 2% over cost on almost everything. That's a major savings on paint, dog food, lawn care products etc.
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