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Interesting web site, Big-Bucks, but very biased. Throughout their pages, they are fond of quoting Clark Howard, but only quotes taken out of context to support their point of view that all annuities are bad.
Going to the Clark Howard web site, via a Google search with the keywords "clark howard immediate annuity", the second link, (past the paid advertisement links), is "2 Kinds of Annuities That Actually Make Sense for Your Wallet". His opening quote on that page is:
Quote:
If you think I hate all annuities, that's not exactly correct. There are 2 kinds of annuities I love, but that you'll almost never hear anyone discuss: Life or immediate annuities and longevity annuities.
TIAA-CREF, where my retirement account money resides, is also the only 403(b) that Clark Howard likes. I respect his opinions and he usually always gives a balanced opinion. The web site you link to does not present a balanced opinion, but I will go ahead and go through it, in the interest of being better informed. Thank you for providing it.
Real estate is one area where you can shop hard and make what may be small compromises for big differences in price; it's all about what your priorities are IMO. In my area, suburban homes a few decades old with car ports instead of garages, master bathrooms that aren't all that different than others (no big walk in and possibly sharing a bathroom) on curbless streets in neigborhoods that aren't all that strict about appearances can cost half of what a similar home in a newer neighborhood nearby would. That is just an example; lots of other tradeoffs can be made. I think being very picky about every detail of your life ends up costing a lot of money. It is worth it to some people and that's fine.
When I looked at houses in the Johnson City Tennessee metro area in the $150k price range - well they wouldn't be small compromises for me. They were basically worse than my late inlaws' house in Southern Pines - and often older.
Perhaps it is a "woman" thing - but I wouldn't want to move into a 40+ year old tract house with an old cheap kitchen (I suppose you can renovate these places - but it doubt it makes sense to pour a fair amount of money into any house in this price range). Nor would I want to live in a lower class neighborhood where people didn't care about the maintenance/appearance of their houses. Also - the people who live in those houses might not exactly be my cup of tea in terms of neighbors (in Tennessee as in Florida - they're likely to be "white trash").
Nicer newer houses in the area under 3000 sf seem to run about $300-400k+ - even on rather undistinguished pieces of land.
Note that I think retirees have to be careful about older places - unless they are really handy do-it-your selfers/fans of "This Old House". Because they can easily turn into "money pits" (a new heat pump there - a new roof there).
Here's a brand new smaller house in the area that seems "right-sized" for a retired couple. $322,900.
These are basically the kind of prices you'd pay for a new Del Webb place where I live. IOW - this area isn't cheap at all. It just has pockets of old cheap dumpy houses.
FWIW - if you want an old dumpy house in a relatively dumpy area - they're easy to find in many places. Both in the south and in the north. In the JAX metro area (in Duval County) - near where I live - you can easily find them for < $100k.
Note that if the Mt. Airy in question where the OP lives is in Philadelphia - well I grew up near there. And recall houses like this:
It was a pretty nice area - but don't have a clue what it's like today (haven't been there for decades). And - while some of the old more interesting houses in this area might be worth spending some renovation $$$ on - that isn't the case when it comes to many neighborhoods elsewhere.
BTW - one thing that might not be apparent to someone who hasn't retired yet is you spend a lot more time in your house after you retire than when you're working. So your house becomes more important to you. For me and my husband - that meant moving out of a smaller high rise condo to a larger single family house (which we built). Where we had a larger kitchen (we cook a lot now) - and separate "home offices" where we can pursue our individual interests. For some people - it also means being near friendly neighbors in terms of socializing (we are just about the last remaining older people in our immediate neighborhood - all of our new neighbors are much younger - but what little socializing we do is elsewhere - like through our golf club).
I realize all people aren't like me - but I hope to give some people some "food for thought". Robyn
Age 74, widower, no heirs, home could easily sell for $135K, no mortgage on it.
What would the upfront costs be for a Reverse Mortgage be and the amount per month it would pay?
Thanks
I looked at that little calculator that was linked - and the "closing costs" for my house (which I valued conservatively at $500k) were $17k. Yikes! Looked at the other numbers - and they made absolutely no sense to me at all either. Without doing any detailed analysis - if I needed to take equity out of my house - I think I'd be better off today getting a conventional mortgage (don't have any mortgage now). And - if I needed extra cash flow to pay it off that I didn't think I could generate on my own - I might look into a SPIA to help with the payments.
Overall - that reverse mortgage looked like a pretty terrible deal to me. Robyn
Interesting web site, Big-Bucks, but very biased. Throughout their pages, they are fond of quoting Clark Howard, but only quotes taken out of context to support their point of view that all annuities are bad...
I think I am pretty level headed about most financial matters - including annuities. The only kind that make any sense at all IMO are SPIAs. Of the "life/joint life variety". And only for certain people. Like older people (minimum age 70 and preferably older). Who expect to live a long time. Who don't care about leaving money to heirs. And who perhaps think they will lose their ability to manage their money (if they ever had the ability in the first place). SPIAs are in the back of my mind as a possible investment when I am 75-80 or even older. When I think I'm starting to "lose it". I may consider a charitable SPIA from the charity that is the main beneficiary of our estate down the road.
My father bought his SPIAs when he was 80 - and they have worked out ok for him. Not great. Even though he is now 97. And bought his annuities when life expectancy tables were shorter and interest rates were higher. Still - he was always a pretty terrible investor. So his SPIAs probably worked out better for him than he probably would have done on his own.
I don't think SPIAs are appropriate at all for people who are < 70.
Finally - if you part with a fair chunk of principal when you're 80 or so for annuities (or younger) - you'll have to keep a fair amount of "ammo" in reserve to pay for any long term care expenses you might need. Robyn
First - the notion of selling a house (presumably up north) for say $400-600k and finding a wonderful cheap ($100-150k) place (somewhere) in the south is pretty much a pipe dream. Unless you're content to live in a smaller cheaply built place in "the middle of nowhere" (or in a lower end senior community in the middle of nowhere). Because our property values have been going up. Take this house:
Heed this and here is a real life example:
2000, sold a home in the Boston area for $475K and paid off a $180K mortgage.
2000, bought a new build home in the Charleston SC area for $200K.
2006, the home in Charleston reached a high of $350K and prices started dropping.
2006, the home in Boston reached a high of $525K and prices started dropping.
2010, sold the Charleston home for $280K.
2010, the house in Boston fell to $425K.
2015, the house in Charleston now selling for about $310K.
2015, the house in Boston now selling for about $450K.
The Boston house was a 1200sq ft, two levels, two bedroom, 2.5 baths, one car garage, townhouse.
The Charleston house was 2400sq ft, one level, 4 bedroom, 3.5 baths, two car garage, single house.
In many parts of SC one can easily find new construction, 1800sq ft, for $180K but gone are the days it will be on/near the beach, a lake, river, etc. For homes, the south is not nearly as cheap as many think it is.
Amen. When I look at a place like Johnson City Tennessee - $150k gets you an old/small/crummy house. If you want to move into an old/small/crummy house - you can find them almost everywhere (except perhaps in very large expensive major metro areas - where there isn't much single family housing to start with).
But how will you feel living in a hillbilly white trash neighborhood (no particular offense to Tennessee - we have them in my metro area too)? Certainly isn't my cup of tea. Never has been.
My basic rule of thumb is newer construction just about everywhere has cost > $100 sf for at least a couple of decades now. And you have to add land costs to that. As well as the costs of development (putting in sewers and water) - and various other fees too ("impact fees" in my county run from $9k to $13k today depending on the size of the house).
Like I've said many times before - and will reiterate. Don't move to a new area without taking it for a "test drive" (i.e., renting) first. Robyn
Interesting web site, Big-Bucks, but very biased. Throughout their pages, they are fond of quoting Clark Howard, but only quotes taken out of context to support their point of view that all annuities are bad.
It is 6.29% for single life only and 5.84% with 20 years certain.
When I turn 65, I have several options for my pension (not a huge amount since it was for only 1/3 of my work years. The pension plan was replaced by 401K for the remaining 2/3) :
1. lump sum
2. 100% annuity
3. some combinations of annuity/cash.
The annuity is 'enhanced', i.e., a bit higher than the market rate or 7.6% (I hope that it will be higher if the interest rate goes up).
We will do fine with just SS but if I get this annuity, it will give us some discretionary spending money (~ $13K/year).
I just ran a spreadsheet comparing getting the lump sum vs 100% annuity. The break even point is at 76 years old. If I live to be 85 years old, I will receive 1.66x the lump sum. If I live to be 90 (my mother's age - she is still quite healthy), I will get 2x the lump sum.
It is not so much as how much money that I will receive but I think having an additional source of fixed income besides SS sort of giving you a peace of mind. You don't have to worry about how to invest, market fluctuations, how much to withdraw etc.. when all the spending needs are covered by the fixed income.
You come down on the South a bit hard. As a former Yankee myself, the South can be pretty diverse.
Here is an example of what $150K can buy in the Columbia SC area:
PS: McGuinn built my present home. They offer great value for the dollar. Granted their homes can be a bit tight/close to a neighbor's home, but for a retiree who wants a big lot to maintain?
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Remember, only Half of those at 65yo will live to their mid 80's. Them are poor odds for the future dying. For pretty good chance that I'd be dead sooner than later, why would I buy an SPIA? IMO, a SPIA in our 60's is a poor bet both in the short term (early death) and the long term (inflation). Yet, I bought LI in our 30's for the slim (number here) chance of dying before 55 (house paid off, Only thru college).
When we bought the deferred VA, in Nov 2008, TARP was a month old. Three possibilities could occur, IMO: 1) Massive inflation. 2) Further collapse of bubble. 3) Regaining control of the credit/banking system and a recovery. At the edge of retirement ("The RedZone", Prudential) I felt that I needed to keep my options open, so I bought a deferred, giving us the options to get most of a market recovery, protect the downside, and if I wanted, take Income, or exit or any combination. It was and still is primarily an Insurance plan on Income, if I so wanted.
YMoneyMV.
Look at ALL alternatives and discover their advantages and disadvantages to Your needs. Take the time to understand how things work. I have noticed that the more exit opportunities that you have, the more money it will cost. The opposite holds true too. The exception is if you are DIY person, holding only S/B/C allocation, you are taking the on, all of the many Risks. In effect becoming a market trader for yourself. that includes, Indexing.
Disclaimer: Only 20% of our retirement assets are directly exposed to the Markets. That 20% is discretionary, and 85% of that is cash. CD rates and like are too risky for the ROI. MyMoneyMV.
GL
Last edited by leastprime; 04-23-2016 at 06:13 PM..
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