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Location: Was Midvalley Oregon; Now Eastside Seattle area
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Quote:
Originally Posted by leastprime
Shop around.
My wife and I have GLWB annuities. She is 71.5yo.
-1)One annuity is 10 years old, took last income step-up a few days ago. It pays 5% for life based on Income value of last policy anniversary (Nov 10 2018). We have not done anything yet, and will probably push the decision forward into 2019.
-2)Another annuity she purchased in August 2108, single life, she has the following options:
-- 5.5% if held for age 72 (May2019);
-- 7% of highest Income Value, age 72, with 4% residual after Actual account runs to $0;
-- 8% of highest Income Value, age 72, with 3% residual after Actual account runs to $0. All annuities have remainder returned to heirs if there is any Actual account value.
-3) A third GLWB annuity that she started taking withdrawals for the 6.5% at age 70, and no reduction when account value =$0.
-4)or hold and take the minimum GLWB 5% simple interest stepups on Income Account, annually until she thinks she will need the funds.
--5)or purchase a SPIA. the rate would be close to 7% of purchased amount @72yo. The payout rate will increase at purchase if she delays purchase. There is no residuals on death, single life.
*I am not sure if we will take the 5% GLWB annuity or move the funds to a SPIA or to something else. We don't need the money-Income, at this time; However 10 years ago, I had envision taking this income from this "income" annuity.
Depends on your circumstances. Be thoroughly versed on your alternatives.
More alternatives.
We just had a small GLWB VA, come out of guaranteed period (10 years). It's unqualified asset.
We just may take this into CD and pay the tax on the gains. May take partial withdrawals in 2018, more
in 2019, and a final amount in 2020. Something we will have to think about and pretty much decide by Christmas.
Thanks for getting my wheels turning on this.
I preferred having my money in my pocket rather than leaving it with my former employer.
When I retired at the age of 60 the company pension had only been accruing for 7 years so there wasn't much to it. I was given the option of $300 per month for life or $190 per month for life and $25,000 lump sum. I took the latter and had it rolled over into my private IRA.
Some years later I got a letter offering me a choice of continuing the $190 or taking another lump sum of $25,000. I took the lump sum and rolled it into my IRA.
I'm happy with my decisions.
Might or might not be right for others. To each his own.
OP said they were single with no heirs. Who should they be saving it for?
Of course you want to try to figure out how to make it last long enough, however long that is, which is always a gamble. But if there is no one OP wants to benefit from the principal being intact at his/her death, there's no real reason to keep it that way.
OP said they were single with no heirs. Who should they be saving it for?
Of course you want to try to figure out how to make it last long enough, however long that is, which is always a gamble. But if there is no one OP wants to benefit from the principal being intact at his/her death, there's no real reason to keep it that way.
I did not mean to imply that the OP had any heirs.
If you draw down your Net Worth every year, you will have fewer options as the years go by.
In a more perfect world, maybe you could predict that you will live to 80 years old, and maybe a 4% drawdown will work just fine.
But that kind of plan is taking way too many things for granted.
What if half-way through this plan some unforeseen crisis hits you?
After having worked hard for years to amass my Net Worth, I am not about to draw it down, hoping that no crisis ever arises.
an annuity does just that... it returns your money for the first 1.5-2 decades... that is essentially your principle by any other name
this is not a "pension" how you think of it from a job, it is an annuity that was bought
it isn't until 2nd-3rd decade that annuity comes out ahead, so if OP is near normal retirement age, he pretty much comes out even based on life expectancy
an annuity does just that... it returns your money for the first 1.5-2 decades... that is essentially your principle by any other name
this is not a "pension" how you think of it from a job, it is an annuity that was bought
it isn't until 2nd-3rd decade that annuity comes out ahead, so if OP is near normal retirement age, he pretty much comes out even based on life expectancy
If you’re in poor health and don’t expect to live long after retirement, taking a lump sum instead of a pension might perhaps make sense. Otherwise, am thinking the pension is a better idea, as you’ll probably do better over the long haul — and people are living longer these days, too.
The only risk you run would be if the company administering your pension is unstable (people with pensions from Polaroid are probably sorry they took them, for example). But that’s a judgement call.
I am leaning towards taking the monthly single annuity payout for the rest of my life, rather than the lump sum, as I am single with no heirs.
The current annual payout, taking the monthly payout option, from the firm managing my company's pension fund equates to 6.2% (annual income divided by lump sum payout).
I ran the 6.2% figure past one of my financial advisors who said that is a good return.
Is that a fair percentage return?....can I get a better rate of return on my lump sum from a different, reputable company without significantly increasing my risk (recognizing I am covered up to $60K annually by PBIC)?....not looking to invest the money in the stock market--looking for my pension to generate a steady and consistent stream of income for the rest of my life.
I am not planning to take my pension income until January 2020 so I have plenty of time to shop around and consider my options.
Thanks
Pensions are for life. Lump sums are based on life expectancy. If your family tends to live into their nineties or upper eighties, you make out better than if you take the lump sum. This longevity also depends on exercise, abstinence from smoking, and moderation from drinking. A few ounces of red wine is considered good for you. My grandfather and my father made their own wine. One lived into his upper nineties, the other died at 106.
Lump sums use a finance term called present value of an annuity to discount the lump sum to the present. It is not widely known just what interest rate that they use to calculate PV (present value). Unless there is a pension law govern PV calculations, be sure that it won't be in your favor.
Lump sums use a finance term called present value of an annuity to discount the lump sum to the present. It is not widely known just what interest rate that they use to calculate PV (present value). Unless there is a pension law govern PV calculations, be sure that it won't be in your favor.
The discount rate used to calculate the Net Present Value of the lump sum pension settlement is set/published by the Pension Benefit Guaranty Board and changes monthly. Taking the Lump Sum can be detrimental during periods of High or rising interest rates as a higher rate decreases the NPV calculation.
These rates are on the PBGC web site and can be seen by anyone. The current/December 2018 interest rate is 1.5% The rate was 0.75% when I collected my lump sum in February 2013.
Companies may promote the Lump Sum option when rates are high as it has the potential to save then money.
I am leaning towards taking the monthly single annuity payout for the rest of my life, rather than the lump sum, as I am single with no heirs.
...
The current annual payout, taking the monthly payout option, from the firm managing my company's pension fund equates to 6.2% (annual income divided by lump sum payout).
Thanks
IMHO, your first inclination was right. I can't tell you how many times I have read about people taking lump sums meant for old age, and blown them. In these matters, let the institutional investment managers do their thing. Less stress, more certainty.
It is unlikely that you will do better than 6.2% as a private citizen over the long haul. You are not privy to the resources available to institutional investment managers, and you do not have access to the vast pool of cash that enables such managers to guarantee a certain payout.
Take the monthly amount and RUN! Best of luck.
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