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except insurers have a constant flow of dead body's on the annuity side contributing their money paying for those who live as well as almost 97% of term life policy's that go unpaid as well as 75-85% of whole life policy's cancelled and they make lots on them .
they also risk pool . all the riders and options they sell on policy's have the money going in to a reserve fund ..
they have a whole lot going for them that we don't .
i forget to mention the biggest part , they have premiums coming in as well . in fact every whole life policy is figured so that the interest over decades , dividends if any and your premiums equal the death benefit plus fees by usually age 100 .
based on just the fact they take in a lot more then they pay out from all this certainly gives them big advantages to us .
I see another opportunity to put my gift for oversimplification to work...
The ups and downs of the market and inflation mean that you can't count on an average because if you get hit with some low returns and/or high inflation in the early years it will be compounded by what you withdraw for income and even though things may bounce back so average returns come out okay you won't catch up. What you need for some security is for someone to create a large fund that can even that out for you, but of course they will take a cut and over the long haul the numbers won't look as good; that's the price of safety. You can mix it up and have some guaranteed and some not and history shows this works pretty well if you have enough to properly fund your retirement. I think pushing the edge on returns and using that as your expected income is a bad plan. It will work sometimes; heck, lots of times. But the chance it will not is too high for me to consider it. YMMV...
Just for the record I never planned on using an annuity as my primary form of income, just a supplement that would be banked and then used for major purchases, unexpected car or home repair etc. I can't imagine using these checks as a major source for putting food on the table.
they are great for locking in non discretionary things like a mortgage which is fixed . but with inflation proofing assets like equity's they can pretty much lock in any of the non discretionary stuff . food is a discretionary spending item so i would not include that .
Just for the record I never planned on using an annuity as my primary form of income, just a supplement that would be banked and then used for major purchases, unexpected car or home repair etc. I can't imagine using these checks as a major source for putting food on the table.
Interesting. I am actually the reverse. I bought my annuities so that they would be the primary source of income and plan to use investment accounts for major or unexpected purchases.
Actualy, loves2read, my attitude was always the same, even in my 20s and 30s when I was dirt poor. I always start from what I want to do (where to travel, where to hike), and then look at how much money I have to cover it. When I was dirt poor, I would rent a VHS about the Himalayas from the library, and was enthralled thinking how great it would be to go there; when I was 52 looking at the enormous peaks all around me, I was enthralled to be there hanging off a rock, with quietly tremendous Mother of the Universe looming up above a cloud. Even if I lost everything in a highly improbable Annuity Armageddon that Robyn55 is predicting everywhere, I would still have the same attitude :-). Money is just what you get from people if you perform some useful service for them; it can give you a certain nice comfortable sensation, but it is not the reason for living. Nevertheless, I have had annuities for 14 years now, there has been no sign of any problems ever with them (including in 2008) , they continue to give me a feeling of security, and I never worry about them.
Losing a lot or everything isn't the same when you're older as when you're younger. When you are incapable of going back to work for a living (at anything other than perhaps minimum wage or perhaps even for minimum wage). I can say that our point of view started to change in our early to mid-60's or so. Before then - we always thought (actually knew) we had "go back to work" alternatives in case financial things went sour. Now - there are lots of avenues that are closed to us. When it comes to people my father's age (85-100+) - all of their non-passive income doors are closed.
It's always good to have a great attitude - but if you've ever run across seniors who have to make choices when it comes to paying their rent/putting food on the table/buying their meds - they're not a particularly cheerful group.
I try to achieve a balance between living today - and planning for tomorrow - and 10-20 years down the road. Seems like the sensible thing to do. And I don't take large or even medium size risks with large amounts of capital. Especially for low yields. Couldn't care less about a "guarantee" some company writes me on a piece of paper.
And even companies that have good credit ratings today might not have them tomorrow. Note that today is not like 2008. Now - in 2016 - 8 years later - insurance companies are dealing with worse interest rate environments than we had back then - and have been dealing with them for longer periods of time. And these interest rate environments will seemingly extend in the future for an indefinite period of time. I am honestly more worried about insurance and other financial companies today than I was 8 years ago. Especially because I can't see the light at the end of the tunnel. Robyn
One other point about a fixed term annuity (I am likely to do a 5 year while delaying SS) is that if I have little or no other income, I can get some of my tax deferred money nearly tax-free. If I am living mortgage and debt free and could pay all my bills with $25K (I am probably dreaming, but maybe not ) then I might still have it pay out around $40k and put the extra in savings or investments. From not having paid taxes initially and paying very little on it as income the % return that would match that is probably better than I could get in anything else safely.
One other point about a fixed term annuity (I am likely to do a 5 year while delaying SS) is that if I have little or no other income, I can get some of my tax deferred money nearly tax-free. If I am living mortgage and debt free and could pay all my bills with $25K (I am probably dreaming, but maybe not ) then I might still have it pay out around $40k and put the extra in savings or investments. From not having paid taxes initially and paying very little on it as income the % return that would match that is probably better than I could get in anything else safely.
This is an interesting point of view. While not a liker of annuities, at 74 I can live well within my present income. I do have a "pile of stuff" (IRA's, mutual funds, stock) stock that was set aside for retirement that I do not presently need to support myself thus I ask myself, why just sit on it? Why not kick my lifestyle up a notch or two. I am considering starting to spend it down but yet the idea of buying an annuity just in case I outlive spending the rest down happens.
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Yeah, I know you mean the budget can be grown or shrunk depending on available funds, but I couldn't help chuckling at that.
