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Even if you live to be 100 I have to believe that between the fees and their ability to earn a higher rate than they pay they are winning on every annuity they sell.
with spia's they know pretty much how many folks will die and pay for those who live . they just can't tell us who .
they keep a reserve fund too which is where all the money from the riders and options they sell go . part of that is profit and part used to pay for the higher payments they payout vs what you can get .
Wrong. Insurance companies aren't stupid. Actuaries are fully aware that interest rates are low. They have lowered their promises. There are no good deals with annuities. Never have and never will be any.
What? That chart has nothing to do with actuarial tables and everything to do with simple portfolio theory. It is a standard "efficiency horizon" which uses financial data, not actuarial data, to build it.
If you don't believe me, read the post by Larry Siegel, #325.
wrong again . actuaries get these things wrong all the time , especially the guarantees .
The odds are stacked squarely against people who buy annuities. The odds might be 1 in 99 that you will come out the winner by a small margin. Usually something extreme has to happen, like you die after 1 year and in the prior year the markets did poorly.
It's INSURANCE SALESMEN who go around trying to convince people that there's a good chance that annuitants are going to come out the winner.
Quote:
What? That chart has nothing to do with actuarial tables and everything to do with simple portfolio theory. It is a standard "efficiency horizon" which uses financial data, not actuarial data, to build it.
We are talking about whether annuities are good deals or not. Thread title "Is An Annuity Right for Us?". They are terrible deals. Always have been and always will be. Insurance companies are not playing Santa Claus. Bonds and stocks are better by far if you DIVERSIFY.
There you have it , the definitive answer from someone who has no clue when it comes to retirement planning and just parrots other misinformed people.
He post rediculious charts that have nothing at all to do with spending down portfolio's and sequence risk that makes average returns vary by as much as 15 years but that does not prevent him from posting the same silly charts and comments
Since I created the chart you posted when I was at Ibbotson Associates, let me comment on it.
The 11.6% arithmetic mean return on equities WILL NOT happen again. In 1970 stocks were dirt cheap and interest rates were over 5%. Today stocks are expensive and interest rates are under 3% even for the longest-term bond.
And insurance companies do not always win when they issue an annuity. If you live past the breakeven point, typically age 86-87, you win and the insurance company loses. There is no other way to hedge against living a long time, other than being fabulously wealthy.
Thank you, thank you, thank you...
Some people don't want to give up the idea that the stock market will repeat past history in the future...
The best time to have bought an annuity was when interest rates were paying a nominal 5-7% and you could get a guaranteed annuity--even a delayed start date--that would pay that...Most people in today's climate would be terrifically happy to get that return even with fees associated with the annuity...
My mother in law was a widow and had SS widow's pension and pension from her husband who retired from Texaco after 30 yrs of work...she had Texaco stock as well...and they owned a very small 2/1 frame house she sold and carried the note on...
She tried to put as much money as she could into CDs paying 8-10 % when they were around back in the later 70s (I think)...
She knew that even with inflation getting that kind of return was too good to be true...
And it was...
Location: Was Midvalley Oregon; Now Eastside Seattle area
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So in early 2008, I was thinking about how to control risks and discover the "good deal"
The best I could do is a long straddle on .SPY or VTI. I just didn't want to do the analysis but I could have through an options calculator. I am a novice in options and will be playing against professionals.
JMO:
One of the better times to Buy an GLWB Income deferred annuity is when your equities/bonds are at a near high.
The other time to Buy is when your equities/bonds are at a near low.
YMMV
Ideally you want to buy when stocks are high and bonds are low, but that choice isn't available
Stocks high - so you have a lot of money to spend on an annuity
Bonds low (interest rates high) - so the annuity pays a decent interest rate.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,154 posts, read 7,656,477 times
Reputation: 9947
Quote:
Originally Posted by DaveinMtAiry
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.
Getting back to OP:
we had a legacy motive at time of GLWB purchases. Today we no longer have this motive since the Rental (windfall) will provide the legacy. However, the terms of our GLWB contracts are now so good in comparison to today's offering, that it would be wiser for us to keep what we purchased.
For you, the current GLWB returns may not be sufficient to equal a SPIA or MYGA. Pertinent data for your risk and asset positions are missing.
FYI, I haven't analyze this alternative.
Recommend Bill Bernstein (liability matching portfolio) and Moshe Milevsky (annuities).
As always, YMMV.
The odds are stacked squarely against people who buy annuities. The odds might be 1 in 99 that you will come out the winner by a small margin. Usually something extreme has to happen, like you die after 1 year and in the prior year the markets did poorly.
It's INSURANCE SALESMEN who go around trying to convince people that there's a good chance that annuitants are going to come out the winner.
We are talking about whether annuities are good deals or not. Thread title "Is An Annuity Right for Us?". They are terrible deals. Always have been and always will be. Insurance companies are not playing Santa Claus. Bonds and stocks are better by far if you DIVERSIFY.
In a few years, I am very likely to buy a fixed term annuity to pay me while I delay SS. It will probably offer very little appreciation on my money, though things could change. I will get monthly payments that are all equal and won't incur any fees for disbursements. I could leave the money in an IRA instead and let it ride the whims of the market. There are probably more up periods across 5 year spans than down, but if I factor in sequence it becomes less sure. There could be a really good run up and I might come out way ahead. My gut says odds are I would come out ahead if I don't get the annuity. But I don't feel like gambling. I feel like getting paid the amount I need every month through that period. I think the odds are a lot higher than 1 in 99 that the 5 year period will be flat or have a loss or a bad sequence that would cause me to either run out or spend more than the annuity would cost. I think most scenarios will likely be not far off in either direction.
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