Hi Bob:

In the past 3 years we have purchased two lifetime income annuities.  One from Aviva and the other from Genworth through ImmediateAnnuities.  We wanted to purchase an AIG annuity with Vanguard, but the two we bought provided a larger lifetime income from strong insurance companies..

Rates change constantly so it is advisable to get current quotes from several companies.  Check with Vanguard but also here:

www.immediateannuities.com

 In my opinion, it is usually not advisable to purchase an immediate lifetime annuity before age 70.  Also, in my opinion, this is the only type annuity most of us should consider.

Best wishes.
Taylor

Single Life Income with Up to 15 Years Paid to Beneficiaries ("15CC")
You receive this income for your lifetime, which means, you can never outlive this income, even after the specified period has ended. If you should die during the first 15 years your beneficiaries will continue to receive this income until the end of the 15th policy year.

Using the site provided and using 70(my age in less that 4 years & my wife's age(62) at the time I reach 70 the monthly payment on 100k would be $667.00.

Better to tie up 100k in a lifetime annuity or go the reverse mortgage route????? With us it will be one or the other when my wife reaches 62.

Tim

Hi Tim:

Better to tie up 100k in a lifetime annuity or go the reverse mortgage route????? With us it will be one or the other when my wife reaches 62.

 It is usually an obvious decision:

 Lifetime annuities are purchased by retirees with ample cash.   Reverse mortgagas are purchased by retirees who need cash.  

 Best wishes.
Taylor

Hi Bob:

A few points:

1. Payouts on immediate annuities are normally lower when interest rates are low (like now) and higher when interest rates are higher. They're set for life when you buy the annuity, so hopefully the rates will be higher when you're ready to buy.

2. Most states have some sort of backup payment guarantee should the insurance company go belly-up. Many states will cover up to $100K, but you'll have to check your own state to be sure. So, if you plan to buy a larger policy than covered by your state's guarantee, it would probably be wise to buy several smaller annuities from different insurers for less than your state's guarantee, rather than one larger policy.

3. Since your immediate annuity money is co-mingled with the insurance company's assets, you want to make sure you're invested with a highly-rated company.

4. You may not wish to purchase the annuity with the entire amount of your assets. Many recommend only using perhaps half of your assets for the immediate annuity.

Regards,

Mel

We saw an article in Money magazine Feb 2008 about Longevity annuity. You deposit 50K at age 65then can get annual payments of 10K at age 75 or deposit 24K at age 65 and can get annual payments of 12K per year at age 85.

I have not been able to find much information about this type of annuity, nothing from Vanguard. I only found Hardford and Met Life offer this type of annuity. Some sites called it an Advanced Life Deferred Annuity (ALDA). I did a web search for Advanced Life Deferred Annuity and found

http://www.dummies.com/WileyCDA/DummiesArticle/Examining-Advanced-Life-Deferred-Annuities-ALDAs-.id-5791.html

GaryL

Using the Amazon dot com "Search This Book" link, pages 139 through  143 of the "Annuities For Dummies" identifies 3 insurance companies that offer ALDA products.

1: MetLife Personal Income Builder.

2: The Hartford Income Security.

3: New York Life LifeStages Longevity Benefit Variable Annuity.

I would love to hear Taylor's and Mel's take on the ALDA concept.

Nelson 

I don't think whether you begin annuitization at age 64 or age 70 or an age above 70  makes much difference. What is important is that the annuities be real and not nominal. If you buy a nominal annuity at age 64 and inflation averages only 3% over the next 24 years, then by the time you are 88 the annuity will have lost half its value.

  Whether to buy a real annuity at age 64 vs age 70 partially depends on the level of interest rates when you are 64. If a 64 year old can get a real annuity yielding 6% or better, why not take it. A guaranteed real return of 6% is 50% more annual income than a non-guaranteed SWR of 4% from a portfolio!

Another consideration of when to start annuitization is gender. Men get about the same deal at 63 as women get at 65. This is both good news and bad news for the boys. :-) Lastly annuitization certainly does not have to be a onetime event. Dollar cost averaging your annuity purchases over several years may be the most prudent approach for many investors.

Bob K  

Hi Nelson:

"I would love to hear Taylor's and Mel's take on the ALDA concept."

The Advanced-Life Delayed Annuity (ALDA) is a new type of annuity being promoted by the insurance companies.  If you go to Google (as I did) and put in "ALDA Annuity" (without the quotations marks) you will find many articles and a few studies about this type annuity. 

The insurance industry, like the financial industry, are experts at devising and marketing complex financial products with the primary purpose of increasing their profits--often at the expense of unsuspecting and confused buyers.

 Complex financial products, contain many good and bad features.  Nearly all annuities are different between companies.  Most have add-on bells and whistles,  Premiums are constantly changing. All this makes it nearly impossible to compare benefits and premiums.  Result--no real competition. 

 Salesmen are tempted to stress the benefits and ignore the downsides.  Few salesmen understand  the tax consequences.  Behind all this is the insurance company requirement to make a profit and inflate premiums for worst case scenarios.  For all these reasons,  I am not enthused about most annuity products. 

An ALDA annuity may make sense for those without a defined pension plan or inadequte social security benefits.  However, I'd be inclined to wait for higher interest rates (on which premiums are based)  and more competition in the industry. 

I hope these few ideas are useful.

Best wishes.
Taylor

Mel Lindauer:

2. Most states have some sort of backup payment guarantee should the insurance company go belly-up. Many states will cover up to $100K, but you'll have to check your own state to be sure. So, if you plan to buy a larger policy than covered by your state's guarantee, it would probably be wise to buy several smaller annuities from different insurers for less than your state's guarantee, rather than one larger policy.

Regards,

Mel

Mel: Is the State guarantee from the annuity owner's state of residence or from the state the insurance company is headquartered?  If I live in New York and my annuity is from a California insurance company, is the guarantee from New York of California?

Thank you

Newsgrouper:

Mel: Is the State guarantee from the annuity owner's state of residence or from the state the insurance company is headquartered?  If I live in New York and my annuity is from a California insurance company, is the guarantee from New York of California?

Thank you

Hi Ng:

That's an excellent question. On the one hand, it would make sense if it was your state or residence, since it's protecting the state's residents and the insurance company has to be registered in any state it wants to do business in. On the other hand, since policyholders could move to a state where the company isn't licensed after purchasing the annuity in a state where they were licensed, the state where the insurance company is based would seem to make sense.

Since I'm not positive, I'd suggest you check into that some more to be sure. If you don't have any luck with a google search or elsewhere, you might just call Vanguard's annuity folks for a definitive answer. And, once you get that definitive answer, hopefully you'll post it here on this thread so we can all learn.

Regards,

Mel

Another reason to consider annuities; in many states, including mine (Florida), they are protected accounts, like IRAs, 401Ks, etc.

And, some issuers will adjust your rating age if you have health issues. So, lard up and smoke like a chimney until you get your quote, then slim down and stop smoking, buff up and take the insurance company for a ride! ;-)

Rick

I hate to admit buying an annuity without doing the research everyone else seems to have done. My deal was for a single life annuity with a 20 yr guaranteed period where I receive $1320/mo from a $192,000 investment. The amount could be higher than $1320 but not lower. After the 20 year guaranteed period, I'll continue to receive an annuity based on what's left of my investment for my lifetime. If I die during the guaranteed period, my wife will continue to receive $1320 for the entire 20 years, but not afterwards.

I'm 66 and this seemed to fit my needs.

Comments? Jim

linlew:

How about the split annuities. Sales people do not mention them much for obvious reasons. You give the company 100k. It is split usually 60/40. you begin to receive about 400-500 per month for five years then th other amount left from the 100k is invested in a time annuity. at the end of the five year term you get back your 100k. aprx 80% of the monthly amount is  non taxable . Split annuities is the way to receive money monthly and at the end of the term. not a bad deal??

Hi linlew,

I am not one to answer any questions about annuities, as I am just getting into looking at them myself, so take my words only with a few grains of salt.

For someone who has all their money sitting in a taxable fixed income account, this would be attractive. I like the tax ramifications, but be careful on the thoughts all your money is regained. I'm sure you recognize this is non-inflation adjusted

Here's an example of how it works;

I'm not saying it will happen again, but considering the inflation of the late 70s and early 80s, you could be looking at $100K that is actually worth less than you started with in the deferred annuity part of the portfolio. Even at the historical 3.4% inflation, you are looking at only 75% of the beginning balance inflation adjusted.

The $400 - $500 dollars a month you receive can end up inflation adjusted at 75% or less of its original worth.

And, yes, I know I am not offering a solution _just the problem_ but I'm hoping someone else can help with the solution part.

Hi Mel ;), . . . Taylor?

Is yours inflation adjusted Jim?

Chin

jimd71:

I hate to admit buying an annuity without doing the research everyone else seems to have done. My deal was for a single life annuity with a 20 yr guaranteed period where I receive $1320/mo from a $192,000 investment. The amount could be higher than $1320 but not lower. After the 20 year guaranteed period, I'll continue to receive an annuity based on what's left of my investment for my lifetime. If I die during the guaranteed period, my wife will continue to receive $1320 for the entire 20 years, but not afterwards.

I'm 66 and this seemed to fit my needs.

Comments? Jim

Hi Jim:

One of the most important things to establish when buying an immediate annuity is the financial health of the insurer, since the continuity of your payments is tied directly to the insurer's financial well-being. Remember, unlike a variable annuity, where your investment is separate from the insurance company's general assets, immediate annuity payments are co-mingled with the insurance company's general operating assets.

Hopefully the company you purchased your annuity from is a top-rated company, since there's little you can do about it at this point in time, and the amount of your purchase may well be greater than your state's guarantee.

Regards,

Mel

Hopefully the company you purchased your annuity from is a top-rated company, since there's little you can do about it at this point in time, and the amount of your purchase may well be greater than your state's guarantee.

Regards,

Mel

I should have mentioned I was dealing with TIAA-CREF so I don't expect there to be a problem.

Everything seems fine, but I should have shopped around a little.

Thanks! Jim

jimd71:

Hopefully the company you purchased your annuity from is a top-rated company, since there's little you can do about it at this point in time, and the amount of your purchase may well be greater than your state's guarantee.

Regards,

Mel

I should have mentioned I was dealing with TIAA-CREF so I don't expect there to be a problem.

Everything seems fine, but I should have shopped around a little.

 

Thanks! Jim

Hi Again Jim:

I agree that you don't have anything to worry about, since you're dealing with an excellent company in TIAA-CREF.

Regards,

Mel

Immediate annuities are the "term insurance" (AKA the transparent, competitive, and generally appropriate version) of annuities.  The more bells and whistles you add on, the less transparent and competitive the products become and the more difficult they become for joe consumer to evaluate.  At a certain level of complexity, even the experts can't make comparisons.

 The only additional things I would consider paying for would be a COLA adjustment and payments for a surviving spouse. 

 
Delayed annuities suffer from the same issues as permanent life insurance.  Money back schemes or guaranteed payouts for 15 years or whatever just lower your monthly payment and make the product less transparent.  If you want some money back, don't annuitize it all and invest the stuff you don't annuitize yourself.  If you want guaranteed payments for your heirs, perhaps you're better off not annuitizing it all so you can be sure to leave something behind.  

linlew:

Thank you for your comment,suggestion, and advise. Answer me this question??  what investment instrument guarantees to match or keep up with inflation on the original investment. every investment is a gamble and one is hoping to keep even, if im incorect let me know. Thank you, once again-linlew

Hi linlew:

TIPS (Treasury Inflation Protected Securities) guarantee a real return over and above inflation. I Bonds also offer a fixed return over and above inflation for up to 30 years. Both are issued by the US Treasury.

Regards,

Mel