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Old 04-22-2016, 09:16 AM
 
Location: Mount Airy, Maryland
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I know there are a lot of threads over the years about annuities and after seeing many it's clear that like every other investment question the answer is always "it depends on your situation". Well here is our situation:

No kids, no reason to preserve our estate. Part of our retirement planning is to downsize and move to a less expensive area. I had always planned on using the proceeds of this downsize to fund our big out of pocket costs such as taxes, home insurance, medical out of pockets, car repairs etc. Money for 2 new cars has already been set aside in 2 Roths. The plan was to invest in equities/bonds etc with an anticipated withdraw rate of 4%.

Now I'm thinking about taking say $100,000 of this money and purchasing a fixed rate annuity that will transfer to the surviving spouse when one of us dies. This will produce a much higher return, today it's looking at 5.65% or so, which again could be funneled into an account specifically to help pay for the big ticket items described above without the worry of a market downturn effecting this money. I would take the balance of the money realized, maybe $50,000-$100,000 depending on a lot of things, and put that with our existing brokerage account and invest this semi-conservatively.

Does this plan make sense? Thanks for your input.

Last edited by DaveinMtAiry; 04-22-2016 at 09:26 AM..
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Old 04-22-2016, 09:25 AM
 
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so hard to say . i think i would wait and ladder the spia's as i got older as well as look in to the difference between a joint annuity and a single annuity with a single premium life policy making up some of the difference . the tax free aspect is huge compared to a joint annuity .

early death with the annuity by you and your wife could be a bummer but the life insurance component aspect negates that . but the real reason is tax free money for your spouse
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Old 04-22-2016, 09:29 AM
 
Location: Out in the Badlands
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Bob Brinker's Land of Critical Mass : bobbrinker.com Marketimer Moneytalk Bob Brinker
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Old 04-22-2016, 09:31 AM
 
Location: Idaho
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You're going to have to talk to a fee-only financial adviser for the best, most accurate answer and advice for your specific financial situation. However, I can tell you what I plan to do when I retire at the beginning of next year.

I too will be downsizing and moving to a lower cost-of-living state/area. The equity I realize from my current home will be dumped into my retirement home. From my 403(b) funds, I will withdraw enough to pay off the mortgage. Whether that is at a single time, (resulting in a big tax hit), or over several years. Within short order I will be mortgage free.

I plan to purchase an immediate annuity with $200k, which will give me somewhere around $1,100-$1,300 per month, (depending on the rates at the time of the purchase). Haven't decided if I want a guarantee period or not. As with you, I have no heirs to consider.

The balance of the 403(b) will remain, allocated as now, and will serve as the emergency/slush fund. With Social Security and the annuity along with no mortgage, I should have a fairly comfortable retirement with enough discretionary funds to go 'play' from time to time.
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Old 04-22-2016, 09:33 AM
 
Location: NC Piedmont
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my .02 is that I am considering a short fixed term annuity just because the difference in returns on a declining balance over just a few years when comparing an annuity to a more aggressively managed account may not be worth the risk and trouble to me. If I were to look at a lifetime one, I would take the mindset of viewing it as insurance, not as an investment. In other words I would not be counting on the returns for income as much as a guarantee that it would not ever run out, rolling the dice hoping I will be one of the lucky ones to live a very long time. It will rarely if ever be the best choice if viewed purely as an investment.

Last edited by ReachTheBeach; 04-22-2016 at 09:42 AM.. Reason: should have said lifetime instead of longer term
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Old 04-22-2016, 09:35 AM
 
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lifetime annuity's should never be judged on roi . their benefits even at zero roi is they can provide higher intitial cash flow then you can safely draw that amount from yourself .

drawing from yourself you need to keep a lot of powder dry for poor outcomes and sequence risk . annuity's have no sequence risk allowing much higher safe spending rates . .
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Old 04-22-2016, 10:00 AM
Status: "Re-edit status" (set 25 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,208 posts, read 1,917,589 times
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Quote:
Originally Posted by ReachTheBeach View Post
my .02 is that I am considering a short fixed term annuity just because the difference in returns on a declining balance over just a few years when comparing an annuity to a more aggressively managed account may not be worth the risk and trouble to me. If I were to look at a lifetime one, I would take the mindset of viewing it as insurance, not as an investment. In other words I would not be counting on the returns for income as much as a guarantee that it would not ever run out, rolling the dice hoping I will be one of the lucky ones to live a very long time. It will rarely if ever be the best choice if viewed purely as an investment.
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Old 04-22-2016, 10:17 AM
 
Location: Mount Airy, Maryland
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I totally agree with those last comments. This is not an investment, it's insurance that we can always have a revenue stream on top of our investments that is protected. That's why I started this thread here and not on the investment board.

I'm not sure I understand your suggestion MJ. Are you saying purchase this for only me, then add an insurance component that will transfer the lump sum to my wife should I die? Will that really accomplish what I'm trying to do, specifically preserve this revenue stream without adding more cost?
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Old 04-22-2016, 10:26 AM
 
Location: Prescott AZ
6,131 posts, read 9,098,506 times
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I just gave $100000 to my NY Life financial advisor for an annuity that will give me $900 a month for 10 years. I am happy with this because it will replace the annuity I inherited from my Mom which is ending in June. Takes alot of guts to take all that cash out and give it to someone else !!! Have another plan in place when the 10 years are up, if I am still here.
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Old 04-22-2016, 10:47 AM
 
Location: Gilbert, AZ
3,194 posts, read 1,967,999 times
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Quote:
Originally Posted by DaveinMtAiry View Post
Now I'm thinking about taking say $100,000 of this money and purchasing a fixed rate annuity that will transfer to the surviving spouse when one of us dies. This will produce a much higher return, today it's looking at 5.65% or so, which again could be funneled into an account specifically to help pay for the big ticket items
I'm a little stumped on this part. If you want a slush fund to use for big-ticket items just put the $100K into something fairly safe.
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