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There is no place to get interest to fund a retirement, maybe someday in the distant future. All you can do now is withdraw 3-4% of your savings to add to your pension and social security. I would stay far away from annuities.
Dirk Cotton and Jim Otar say SPIAs (single premium immediate annuities) are transparent, competitive, and give good value. Dirk Cotton (of "Retirement Café" fame) advocates QLACs (deferred annuities held inside the 401K wrapper). He says the only thing bad about them is that the permissible amounts are capped at $125K. Meaning, he can't say enough good about them. I find him wise and insightful, and am seriously considering a QLAC when the time comes.
Dirk Cotton and Jim Otar say SPIAs (single premium immediate annuities) are transparent, competitive, and give good value. Dirk Cotton (of "Retirement Café" fame) advocates QLACs (deferred annuities held inside the 401K wrapper). He says the only thing bad about them is that the permissible amounts are capped at $125K. Meaning, he can't say enough good about them. I find him wise and insightful, and am seriously considering a QLAC when the time comes.
QLACS MAY NOT BE A GOOD IDEA AT ALL FOR A FEW REASONS :
the first is , the good thing about the QLACS is you can delay rmds unil 85 .
the bad thing is you can delay rmds until 85 .
the qlacs go on an accelerated rmd schedule that can really hurt and requires far bigger distributions to be taken then even regular rmds .
the fact you can delay to 85 also makes the chances of even getting back enough back to break even statistically poor .
gotta give it a thumbs down for usefulness , an spia is likely a better idea ... in fact if a couple an spia for a single and tax free single premium life insurance policy with no rmd's may be a better choice for the spouse than even a joint annuity .
michael kitces looked under the hood at them .
Executive Summary
The longevity annuity has become increasingly popular in recent years as a potential new vehicle for retirement income, as its ability to delay payments to an advanced age like 85 allows for a significant accumulation of mortality credits. And since the introduction of last year’s Treasury Regulations, a so-called “Qualified Longevity Annuity Contract” (QLAC) can even be purchased inside of an IRA or other retirement account, allowing a portion of a retiree’s RMDs to be deferred from 70 ½ to as late as age 85!
However, as it turns out the unique nature of a longevity annuity’s payment structure is not very hospitable as an RMD deferral strategy. The fact that it can take until a retiree’s late 80s just to break even and recover principal means the retiree risks significant foregone growth by trying to merely defer RMDs through the use of a QLAC.
And of course, the RMDs will still eventually happen anyway, as the QLAC merely defers when payments begin. In fact, ironically, if the retiree does live, the accelerated payments of a QLAC in the later years can actually deplete an IRA even faster than normal IRA RMDs would have anyway!
Ultimately, this doesn’t mean that the longevity annuity (or a QLAC inside an IRA) is a bad deal. The ability to accumulate mortality credits still means it can be very effective as a fixed income alternative for those who fear they may not have enough money to fund a retirement well beyond their life expectancy.
And if retiree intends to spend all of his/her assets anyway, and the only available dollars for retirement are held in an IRA or other retirement account, the QLAC is an effective means to engage in such a strategy.
Nonetheless, the bottom line is that while a QLAC may be a valid way to use a retirement account to hedge against longevity – and defer RMDs along the way – it’s still not very effective as an RMD avoidance or deferral strategy! Just because you can buy a longevity annuity inside a retirement account as a QLAC doesn’t mean you should!
Dirk Cotton and Jim Otar say SPIAs (single premium immediate annuities) are transparent, competitive, and give good value. Dirk Cotton (of "Retirement Café" fame) advocates QLACs (deferred annuities held inside the 401K wrapper). He says the only thing bad about them is that the permissible amounts are capped at $125K. Meaning, he can't say enough good about them. I find him wise and insightful, and am seriously considering a QLAC when the time comes.
usually the financial writers who lump all annuities together are clueless .
there are good annuities and bad annuities and some are no different then purchasing a cd they are so simple and they add a level of diversification away from stocks and bonds which we can never buy .
they invest in dead bodies and mortality credits from those who die add far greater payouts to those who live .
usually the anti articles are a waste of time because those writers are clueless as to differences and uses .
I have money in CD's but at 2.5% I am treading water there.
While the official inflation rate sits at 2.1% for the 12 months ended November 2019, economists agree the official numbers have an upward bias because of they way they are calculated. The true inflation rate is likely lower and hovering around zero.
usually the financial writers who lump all annuities together are clueless .
there are good annuities and bad annuities and some are no different then purchasing a cd they are so simple and they add a level of diversification away from stocks and bonds which we can never buy .
they invest in dead bodies and mortality credits from those who die add far greater payouts to those who live .
usually the anti articles are a waste of time because those writers are clueless as to differences and uses .
Has anybody constructed an income stream for retirement that never runs out (like an annuity?)
My mother's income stream is setup so on top of SS she is getting monthly dividends and that forms the bulk of her income. She didn't set it up herself, her investments are managed by an advisor.
It definitely can be done, although many folks will tell you it's too risky or won't end well. Investors fall into two camps: total return (TR) seekers or dividend-growth investors (DGI). People in one camp routinely denigrate the other approach, so just stick to your guns.
My retirement income is substantial ($120,000 per year) and I have not yet begun taking SS. I created a portfolio consisting of 22 different income streams. 10 of these are real estate, but we won't get into that now. There are two small pensions, which I cannot begin for another 4 years.
Specific to your question, I have Roth and Traditional IRAs set up to provide 6% yield from which I draw monthly income. These are invested in various common stocks, preferred stocks and baby bonds (ETD) as follows:
31% "Growth" stocks- common stocks, paying at least 2% dividends, many paying 4-5%. Avg yield 4.2%
18% high yield common stocks, like BDC REIT and mREIT. There are 12 stocks in there, so individual exposure is 1.5% of portfolio. Avg yield 7.7%
41% fixed income preferreds and baby bonds avg yield 7.0%
10% cash - just enough to fund monthly distributions and provide a small safety cushion.
42 holdings total
$4308 monthly earnings on average in dividends and interest.
My largest exposure to any one issue is 5.2% in T, but I'm planning to reap some cap gains and reduce that holding.
I have many under 1% but which provide a lot of income due to their high dividends or interest. Losing the income from one or more of these would not be a catastrophe.
It's getting harder to get this kind of return, since so many people have been seeking yield lately. Last December, the prices of many preferreds and baby bonds fell quite a lot and I bought heavily. They are call-protected for at least another 3 years. Now the prices are too high and new issues yield too little. I've been crafting this portfolio for several years now. Back in 2014, all the forecasts were for slow growth, so I wanted something which would generate the income I needed without relying on price appreciation. I still got some of the growth that we actually did experience since then, plus now I'm set up for whatever may come in the stock market. No one knows which approach (TR or DGI) will actually be able to meet your needs through the rest of your life, but I'm comfortable with my approach. It's increased by 15% YTD, even after pulling $50k out for my Vette, but I won't see this growth going forward. The preferreds and baby bonds trade in a narrow range. I bought them low last year, so they've increased, but that won't happen again for a while.
It's hard to model this kind of portfolio using any of the conventional tools. I estimate the portfolio return at 8% (6% yield and 2% growth) when modelling, but who knows? My own forecasts show I'll be fine for many years to come and can reduce my reliance on this portfolio once I start SS. It currently provides about 40% of my income and this ratio will drop when I start SS.
Sorry for the long reply, but it's not a simple subject. Reply or PM me for more info if needed. Good luck to all and God Bless the USA!
i posted that article above already , do you not read the threads ? ... i would never get a qlac .... but there are loads of different products out there and some like an spia i endorse using.
see below what i posted
Quote:
Originally Posted by mathjak107
QLACS MAY NOT BE A GOOD IDEA AT ALL FOR A FEW REASONS :
the first is , the good thing about the QLACS is you can delay rmds unil 85 .
the bad thing is you can delay rmds until 85 .
the qlacs go on an accelerated rmd schedule that can really hurt and requires far bigger distributions to be taken then even regular rmds .
the fact you can delay to 85 also makes the chances of even getting back enough back to break even statistically poor .
gotta give it a thumbs down for usefulness , an spia is likely a better idea ... in fact if a couple an spia for a single and tax free single premium life insurance policy with no rmd's may be a better choice for the spouse than even a joint annuity .
michael kitces looked under the hood at them .
Executive Summary
The longevity annuity has become increasingly popular in recent years as a potential new vehicle for retirement income, as its ability to delay payments to an advanced age like 85 allows for a significant accumulation of mortality credits. And since the introduction of last year’s Treasury Regulations, a so-called “Qualified Longevity Annuity Contract” (QLAC) can even be purchased inside of an IRA or other retirement account, allowing a portion of a retiree’s RMDs to be deferred from 70 ½ to as late as age 85!
However, as it turns out the unique nature of a longevity annuity’s payment structure is not very hospitable as an RMD deferral strategy. The fact that it can take until a retiree’s late 80s just to break even and recover principal means the retiree risks significant foregone growth by trying to merely defer RMDs through the use of a QLAC.
And of course, the RMDs will still eventually happen anyway, as the QLAC merely defers when payments begin. In fact, ironically, if the retiree does live, the accelerated payments of a QLAC in the later years can actually deplete an IRA even faster than normal IRA RMDs would have anyway!
Ultimately, this doesn’t mean that the longevity annuity (or a QLAC inside an IRA) is a bad deal. The ability to accumulate mortality credits still means it can be very effective as a fixed income alternative for those who fear they may not have enough money to fund a retirement well beyond their life expectancy.
And if retiree intends to spend all of his/her assets anyway, and the only available dollars for retirement are held in an IRA or other retirement account, the QLAC is an effective means to engage in such a strategy.
Nonetheless, the bottom line is that while a QLAC may be a valid way to use a retirement account to hedge against longevity – and defer RMDs along the way – it’s still not very effective as an RMD avoidance or deferral strategy! Just because you can buy a longevity annuity inside a retirement account as a QLAC doesn’t mean you should!
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