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Old 02-24-2016, 04:21 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
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My father bought his annuities when he was 80. He was never a very talented investor before he was 80 - and figured he wouldn't improve with age .

It is very easy for those of us who are a lot younger to talk about hypotheticals - but I for one can't tell you how I'll feel when I'm 80 (if I'm even alive then).

I think someone like my husband would profit from a fairly big slug of SPIAs (charitable or otherwise) if I predeceased him (or lost my marbles). Robyn
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Old 02-26-2016, 06:10 AM
 
Location: Columbia SC
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Quote:
Originally Posted by Robyn55 View Post
My father bought his annuities when he was 80. He was never a very talented investor before he was 80 - and figured he wouldn't improve with age .

It is very easy for those of us who are a lot younger to talk about hypotheticals - but I for one can't tell you how I'll feel when I'm 80 (if I'm even alive then).

I think someone like my husband would profit from a fairly big slug of SPIAs (charitable or otherwise) if I predeceased him (or lost my marbles). Robyn
What type annuity did he buy? Sorry if you mentioned it earlier and I missed it.
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Old 02-26-2016, 05:28 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
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Quote:
Originally Posted by johngolf View Post
What type annuity did he buy? Sorry if you mentioned it earlier and I missed it.
They were single premium immediate annuities. Very plain vanilla. When my father bought - he got better returns than one could get today. Because interest rates were higher and life expectancy was lower. They haven't been a bad investment for him (especially because he is now 97 and doesn't seem close to dying anytime soon). Which kind of comports with what people have observed about annuities in generations past:

people always live for ever when there is an annuity to be paid them

Jane Austen - Sense and Sensibility - circa 1800. Robyn
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Old 02-26-2016, 08:57 PM
 
Location: Columbia SC
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One major company Single Life Immediate Annuity with a 2% Annual Increase that I recently looked at was $1583 per month with $250K upfront which basically says after about 12 years you are getting their money. Less then 12 years and they have simply used yours to pay you back. Even figuring that one might have done 5% growth a year on their own, the 12 years might out to about 15 years but I do not have a financial calculator to run the numbers..

Even with a better rate (I assume not appreciably better) your Dad (17 years into it) is still into their "panties". Couple of more years and he really kicks their financial model in the ass. Power to him.
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Old 02-27-2016, 05:07 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
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Quote:
Originally Posted by johngolf View Post
One major company Single Life Immediate Annuity with a 2% Annual Increase that I recently looked at was $1583 per month with $250K upfront which basically says after about 12 years you are getting their money. Less then 12 years and they have simply used yours to pay you back. Even figuring that one might have done 5% growth a year on their own, the 12 years might out to about 15 years but I do not have a financial calculator to run the numbers..

Even with a better rate (I assume not appreciably better) your Dad (17 years into it) is still into their "panties". Couple of more years and he really kicks their financial model in the ass. Power to him.
Took a look - and your computations about return of principal seem about right (I get "can't compute negative rates of interest" until about 14 or so years out). So this particular SPIA doesn't make any sense to me at all. Better just to divide up your own money - and pay it to yourself over the years.

My father - at 97 - has now gotten about 4%/year on the SPIAs he bought at age 80. Not great. Not bad either. Especially considering the investing environment since 2000. I personally consider a 5% return an ambitious one these days. And there is certainly no safe/secure 5% to be had. Robyn
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Old 02-27-2016, 09:22 PM
 
Location: Columbia SC
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Quote:
Originally Posted by Robyn55 View Post
Took a look - and your computations about return of principal seem about right (I get "can't compute negative rates of interest" until about 14 or so years out).

My father - at 97 - has now gotten about 4%/year on the SPIAs he bought at age 80. Not great. Not bad either. Especially considering the investing environment since 2000. I personally consider a 5% return an ambitious one these days. And there is certainly no safe/secure 5% to be had. Robyn
So this particular SPIA doesn't make any sense to me at all. Better just to divide up your own money - and pay it to yourself over the years.

I am not defending them but at present the numbers/amounts are fairly common among the major providers.

Again not defending them, but in dividing up your own the catch is figuring how many years does one have.

My father - at 97 - has now gotten about 4%/year on the SPIAs he bought at age 80. Not great. Not bad either. Especially considering the investing environment since 2000. I personally consider a 5% return an ambitious one these days. And there is certainly no safe/secure 5% to be had.

As I said, every time he collects he is in their panties and the rewards only get better. He may well surpass your 5% return acceptance level. I wish him the best.

Your Dad started at 80 and is just beginning to beat them. I say the older one becomes the less of a good investment they become. I believe many would say/advise at 80, they are not a good bet. Looking to retire at a young age (say 62), they might well be part of a sound financial package. My issue is I am closer to 80 (at 74) than 62 which is the age I retired at so I might well be between a rock and a hard spot but I am enjoying it.

My leaning at my age and in my situation is to divide up what I have and pay myself but I am posting/questioning to learn.

All are helping and I hope others are being helped.

Last edited by johngolf; 02-27-2016 at 09:37 PM..
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Old 02-28-2016, 05:21 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
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My father's family has an exceptional history of longevity (people routinely living into their late 90's) - so the bet seemed like a good one for him. Also - I guess annuities have really taken it on the chin in terms of returns due to the current low interest rate/low investment return environment. A person whose longevity is "normal" isn't going to get 4-5% from an insurance company today - because insurance companies simply can't generate a safe 4-5% return on their investments.

Perhaps the better option today if someone is looking for "longevity insurance" might be a deferred annuity. Say one that starts paying when you're 80-85. You might look into the numbers on those. Robyn
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Old 02-28-2016, 08:30 AM
 
71,464 posts, read 71,652,652 times
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The best annuity can be social security. For someone who actually lives to 95 they can see a 6% REAL RETURN just delaying until 70. that is after inflation . That is amazing for what amounts to a gov't bond.

As far as what annuity'return , the fact a good portion of your money is based on dead body's adds quite a kicker to it in some plans.

Over at annuity gator he does nice reviews of some with great spread sheets showing actual returns ar the variuos ages.

But annuity's are not about returns annymore then your home insurance is.

It is income insurance and it pays you a higher draw rate then you can safely pull from cash and bonds under all but the best out comes
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Old 03-01-2016, 09:51 AM
 
Location: Los Angeles
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Originally Posted by elizabeth224 View Post
Our financial planner suggested this saying it had a guaranteed 5% interest. Fees are 2 1/2%. Has anyone had any experience with this? We just recently retired and want to try to avoid anything high risk. Thanks
Your "financial planner" is actually a salesman.... a COMMISSION-HUNGRY salesman trying to sell you a product that earns himself a big, fat commission. Annuities are all smoke and mirrors. Avoid!

You want to avoid risk? Then you simply need to do what insurance companies that sell annuities do: invest more on the bond side. Have you studied the historical returns of a bond heavy portfolio?
Don't expect your "adviser" to show you this chart that has historical returns of 72% ten-year treasury bonds and 28% in the S&P 500 index.
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Old 03-01-2016, 09:54 AM
 
Location: Los Angeles
2,919 posts, read 1,957,883 times
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Quote:
Originally Posted by Robyn55 View Post
Took a look - and your computations about return of principal seem about right (I get "can't compute negative rates of interest" until about 14 or so years out). So this particular SPIA doesn't make any sense to me at all. Better just to divide up your own money - and pay it to yourself over the years.

My father - at 97 - has now gotten about 4%/year on the SPIAs he bought at age 80. Not great. Not bad either. Especially considering the investing environment since 2000. I personally consider a 5% return an ambitious one these days. And there is certainly no safe/secure 5% to be had. Robyn
The problem with that 5% is that it has stayed fixed since the day he started taking payments. And what happens to his original principal after he dies? It's gone! POOF!
Did the markets do bad in the 2000's????? Nope. http://yourinvestmentadvise.com/images/28-72-year.jpg
For anyone who thinks a SPIA is a good idea, I suggest watching this video.

https://www.youtube.com/watch?v=bqabsWE_V_c
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