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Thanks for the replies. I think I have my answer. Convert the 401 to an IRA, then purchase the annuity from the IRA and pay taxes on the annuity payout as ordinary income. Of course I'm still working, i assume you can only roll over a 401 after you leave.
MJ It is true delaying SS pays better than any annuity. But we won't have the funds to support us until 70 without taking the balances lower than I feel comfortable, especially as I consider retiring earlier than the projected 65 I had planned on all along.
well before you commit any funds to an spia , i would commit the same amount to delaying ss . you would be buying a far better product for the same dollars.
it makes no sense to ever spend a penny on an spia before you committed those same dollars to delaying , you are buying far more by delaying then any spia will give you for the same dollars spent . the best spia's still give you less than delaying ss does with it's higher cash flow , cola adjusted , and passing to a spouse as well as being tax advantaged . many states do not tax ss as well as at the max only 85% of ss i taxable .
so i would allocate whatever i was going to spend to delaying first
Last edited by mathjak107; 12-03-2018 at 04:42 AM..
well before you commit any funds to an spia , i would commit the same amount to delaying ss . you would be buying a far better product for the same dollars.
it makes no sense to ever spend a penny on an spia before you committed those same dollars to delaying , you are buying far more by delaying then any spia will give you for the same dollars spent . the best spia's still give you less than delaying ss does with it's higher cash flow , cola adjusted , and passing to a spouse as well as being tax advantaged . many states do not tax ss as well as at the max only 85% of ss i taxable .
so i would allocate whatever i was going to spend to delaying first
This is an interesting thought, thanks. I'll have to bang out the numbers, SS benefits increase about 5% at 62 and go up gradually from there, not sure what the payout for a SPIA is now but I believe it's a bit over that. $100,000 could last me about 5 years with other income, it's just so hard to spend that money and take your balance dangerously low when you know a SS check is just sitting there waiting for you. But you are right, the math does kind of show you are correct.
it averages about 6% from 62 to fra , plus colas , plus passes to a spouse plus worst case is only 85% gets taxed . price all that up and ss is a far better deal
This is an interesting thought, thanks. I'll have to bang out the numbers, SS benefits increase about 5% at 62 and go up gradually from there, not sure what the payout for a SPIA is now but I believe it's a bit over that. $100,000 could last me about 5 years with other income, it's just so hard to spend that money and take your balance dangerously low when you know a SS check is just sitting there waiting for you. But you are right, the math does kind of show you are correct.
You said you planned to retire at 65. If you are delaying SS for those three years it will cost you. Using your annuity money or 401k. Once again calculate how long it would take for you too catch for that SS money you didn’t take for those three years. But as long as you are working you won’t be using it up. So you need to ask when are you stopping work and when do you collect SS or use up other funding
Location: Was Midvalley Oregon; Now Eastside Seattle area
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^Be mindful of "sequence of returns and risks"
In 2010 (64) and 2012 (62), we desperately needed our investment portfolios to grow from the Great Recession. Thus we took early SS and jobless. We needed the SS Income in 2010 and 2012.
Today with relatively high Markets and possibility of strong Market corrections, one may think hard to whether a guaranteed accrual in SS to age 70 is better than taking risks in the Equity & Bond Markets.
PS: Be ever mindful of your health. Wife diagnosed with stage 1. I have prostate issues and now on hormone treatments and this is after early detection, prostectomy and proton radiation ; I also have a stent, bouts of lightheadedness and gout. I have an appointment to see my cardiologist to see about my fluctuating BP, slight chest aches, and a more noticeable heart murmur. The minor aliments are knee and sciatic nerve issues where I can sometimes barely walk. We live a healthy life style, always have, BTW. Slightly above ideal BMI for age. Based on our current health, we made the right decision in taking early SS. Currently 68/71.
Last edited by leastprime; 12-03-2018 at 03:00 PM..
^Be mindful of "sequence of returns and risks"
In 2010 (64) and 2012 (62), we desperately needed our investment portfolios to grow from the Great Recession. Thus we took early SS and jobless. We needed the SS Income in 2010 and 2012.
Today with relatively high Markets and possibility of strong Market corrections, one may think hard to whether a guaranteed accrual in SS to age 70 is better than taking risks in the Equity & Bond Markets.
Correct. Everyone has to weigh their options and decide what is best. You could also hold out to 70 and die earlier and not collect a penny if single.
^Be mindful of "sequence of returns and risks"
In 2010 (64) and 2012 (62), we desperately needed our investment portfolios to grow from the Great Recession. Thus we took early SS and jobless. We needed the SS Income in 2010 and 2012.
Today with relatively high Markets and possibility of strong Market corrections, one may think hard to whether a guaranteed accrual in SS to age 70 is better than taking risks in the Equity & Bond Markets.
in this case it is a wash . dave wants to hypothetically take a small portion of his portfolio , lets say it is 100k and buy an spia with it .
for that exact same 100k he can delay ss a few years. that 100k buys a better deal from ss even if he delays just 100k worth of years . in both cases the 100k is gone . he just gets more cash flow and better terms from ss than the insurer for that 100k
looking at the numbers on immediate annuity.com , a joint annuity today pays 480 a month or 5760.00 a year on 100k for a 65 year old couple . . that is 5.70% but has zero inflation protection at that level . it is taxed as regular income too .
at 62 it is 457 a month or 5484.00 a year , that is 5.48%
ss averages about 6% , is inflation protected which is a biggie and taxes can range from zero to only being taxed on 85% of the amount .
most states do not tax ss but most will tax the annuity income.
in short it rarely if ever really makes sense to buy any life annuity product and not delay an equivalent amount in dollars of ss first . that is an amateur mistake where they get scared of markets , look for an alternative and with limited knowledge jump in to an annuity that is less then what they could have had from ss .
Last edited by mathjak107; 12-03-2018 at 04:06 PM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,071 posts, read 7,505,741 times
Reputation: 9796
^ a possible option.
My recent investigation for SPIA in a 1035 rollover from our expiring GLWB guarantees, shows that a male @68 will get more money than a female @71. Single life. Our very recent medical issues is making SPIA less attractive. We don't need all that Income. We have a moderate legacy motive.
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