RMD's - Cash-out or activate income stream (payment, benefit, wife)

[mathjak107]

without me going over the exact policies those who rave about their annuities here, i would take any recommendations on anything but a plain vanilla immediate annuity with a grain of salt .


i like annuities when combined with your own investing but there are so few policies that are not simple immediate annuities that actually give you what you think you are getting .

they all look and sound great but the devil is in the details they don't give you or that the policy owner fails to realize

[Perryinva]

I believe he already had the annuity. If you can get $40k/yr lifetime from an annuity worth $360k, dear lord, keep it!

[mathjak107]

once again you need to see the details . longevity annuities pay huge amounts out per year .however they start at older ages where the odds of living long enough even at those rates are against you .

without knowing all the details on this annuity , as usual if it sounds to good you are not understanding something about it . you can throw in different ages for a longevity annuity that kicks in late 70's and 80's that have crazy payouts .

remember too that 360k is the surrender value , maybe it is 1/3 of what he gave them or what his money would be with interest .so we don't actually know what that product has in interest and premium paid in . don't forget the interest you are not getting on that money you gave the insurer is also your cost.

[rjm1cc]

Originally Posted by jghorton

I was only saying that, based on the surrender value of the annuity, $40K represented about 11-percent per year.

The 11% would include the return of part of your money. You also have fees.
I would not expect to earn more than 6% in the next few years but at your death you would still have the original investment.

I think the question is what do you want to do with the money. If you have no plans for it when you die then an annuity would offer a lifetime of income and could be worth it.

If you want to leave the money for college consider a 539 plan. Take the annual RMD and put the money into a 529. You should probably remain as the owner.

Since you seem to have an adequate income I would skip the annuity and invest the RMD in a taxable account. If at some point in the future lifetime income becomes a problem I would look at the annuity then.

[leastprime]

Originally Posted by jghorton

That sounds interesting, but, with the extremely high fees associated with most annuities, I'm wondering how it could be profitable; -- plus, my experience in trying to 'catch market highs and lows' has not been particularly successful. How are you managing these things?

Not everything is profitable to you, to them, or to anyone else.
What does this mean? Ans: At any given moment, is it "profitable"; At the time of purchase, you think and hope that the future of the annuity will be profitable. Economics of time says that no one really knows what the future holds. Look at the years prior to the Great Recession, lots of institutions thought that subprime lending would be good for the client, for the institution, and the nation.

How am I managing these things? Ans: Our annuities are a pension replacement. They are my bond replacement in a balanced portfolio. They are insurance. Annuities allow me to other things in my trading accounts and RE rentals. They allow me to Plan with reasonably good accuracy for our total future income, at least I Know what the minimum Income will be, for spending purposes.

Ideally I should be in Index SP500 or something similiar. But we are retired. My risk is different from our 33 yo son. We went through 2 black swan events at inopportune times. So in a Boglehead scenario, we should be somewhere like 40/60 to 60/40 stock/bond blend. However, in a blended portfolio you are taking a risk in bad movements in both stocks and bonds at the same time, for an unknown amount of time. Also, in a balanced allocated s/b portfolio, you are knowingly taking a discount to a 100% stock portfolio; knowing this I simple said that if I am going to take a discount in a balance portfolio, I rather want to cap that discount by using annuities on the bond side with the possibility for high equity improvements- part of the long straddle.

I hedged and bought insurance in the form of annuities. LGWB annuities let you do another type of "insurance" .

As for fees: I look at the fees as insurance fees and for the most part they are insurance fees. They are also a discount to a 100% stock portfolio with the resulting returns to approximate a balanced portfolio.

I really recommend the short book on annuities to answer your question to keep or surrender or exercise the Income feature. For a longer and detailed explanation, do an primer on Options.

[Perryinva]

What does LGWB mean?

[leastprime]

Lifetime Guarantee Withdrawal Benefits
or combination of these words or similar meaning words. They mimick a PERs as the closest analogy. As a far analogy they are a fractional bank.
JMO

[leastprime]

For the Record: Depending on objectives and expectations, I am ambivalent to either LWGB or to SPIA.
JMO: LWGB is a option on the Market vs SPIA is an option on the mortality of the cohort.

[MI-Roger]

If an IRA contains an annuity only, then there is NO RMD required from that IRA. The IRS considers the regular payments from the Annuity to be an alternative to the RMD.

[mathjak107]

a qlac has rmd's if you delay your payments