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Future income annuity

VacationForever

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I looked at this type of product a few years ago and I got interested again this week. Any suggestions for good companies to buy from - New York Life...etc?

Interest rates are very low currently, does it affect the rates of the offered products, should one wait for rates to recover some before buying?

Thank you very much!
 

raygo123

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Depending on your age, has alot to do with you choice

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Passepartout

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I today's environment, annuities are probably not where I'd be looking. I get 7% From a Prudential annuity I own from about 2007, but that is not do-able today. Probably best to keep your money in something else for a while until interest rates go up. With todays yields in 1-2% And the gyrations of the equity markets, I can't suggest what to do.
 

VacationForever

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Reading the history of this, future income annuity was introduced by New York Life in 2011. Basically you buy ahead. If you are 55, you can buy a product that pays at 65, 75... up to 85 yo. The longer you put in and the later the age you want the income to start the higher the amount. My guess would be that the rates should be fairly stable since it is over a longer period of time. Back in 2011, a 10-year rate (buy at 55, pay out starting at 65) was about 12 percent.
 

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Annuities do not have a reputation for a decent payout. The only thing good is they offer a guaranteed payout, but not sure if anything is guaranteed. You would do better putting your money in a managed account and letting it grow. When you get ready to retire, you can ask the brokerage firm to send a monthly check and dollar cost average out of the fund until it is gone. Lots can happen with returns in the next 10 years and the amount might not be what you wanted, but in the long run you will be better off. Charles Schwab has Windhaven and Thomas Partners managers as well as their own management team for amounts less than $100,000.

With the annuity, if we get into an inflationary environment, the return they promised might be there, but that future value amount might be worth a lot less.
 

Talent312

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A primary issue with annuities are the management or discount you are charged, heaped on top of the fees charged by the mutual funds in which annuities are typically invested. This significantly reduces the return you could get had you invested the $$ directly and managed it yourself. But of course, the guaranteed return provides a level of comfort you cannot get on your own.

Check out Vanguard's starter page for info on low-cost, fixed+variable annuities:
https://investor.vanguard.com/annuity/?WT.srch=1
.
 
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Annuities aren't quite my bag, but for which company, look at Moody's or Standard and Poors for safety ratings. You want a company rated highly as their solvency has everything to do with the safety of your payouts. Do not rely on friends that have something thru this company or that, you need objective ratings.

I otherwise agree with others that this could be a terrible time to buy given the lowest of low interest rates today. It's worth doing the research now so that you are positioned to buy when tides turn, at least to narrow the field to only the best companies.
 

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The concept is interesting. If I were going to retire with a lump sum and had a concern I might outlive it, I would definitely look into a Future Income Annuity. I would look at it as buying insurance if I were to outlive my nest egg.

George

Note that I am not speaking for my own situation as I am already retired and living on an Annuity (a Defined Benefit Pension) and Social Security.
 

VacationForever

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I have managed accounts with a wealth management institution and looking at hedging income through different sources. I read that the happiest retirees are not people with a comfortable amount of savings that are invested, but people who rely on a steady stream of income of SS and pension. Since I do not have pension I am looking at creating my own pension through future income annuity by putting 10 percent of savings into a future income annuity. I am terrible with managing my own money and have lost a substantial sum, like half a million, before handing money over to a wealth management institution.
 

Passepartout

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Note that I am not speaking for my own situation as I am already retired and living on an Annuity (a Defined Benefit Pension) and Social Security.

Note that Social Security is for all intents and purposes a Future Income Annuity. I am 'struggling' along on that and a couple of 'Instant Annuities' I bought about the time I retired with a portion of my taxable savings. The rest- tax deferred IRAs and the like continue to grow in various markets under (mostly) my guidance.

So far, so good.

Jim

I think the important thing to be concerned about re: annuities is the financial health of the institution selling it. Most are well known insurance companies, but there are some risky bit players to be wary of.
 

WinniWoman

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Note that Social Security is for all intents and purposes a Future Income Annuity. I am 'struggling' along on that and a couple of 'Instant Annuities' I bought about the time I retired with a portion of my taxable savings. The rest- tax deferred IRAs and the like continue to grow in various markets under (mostly) my guidance.

So far, so good.

Jim

I think the important thing to be concerned about re: annuities is the financial health of the institution selling it. Most are well known insurance companies, but there are some risky bit players to be wary of.

Exactly. Social Security IS like an annuity. I would not tie any more of my money up in an annuity. I would have it invested for income as best as possible these days. But at least if you needed some of the money for something- like medical bills or whatever- you can access it. Also, outside an annuity, should you pass away, your heirs will get the money. That doesn't happen with an annuity. I hate insurance companies. For the most part, annuities benefit them- not you. Otherwise they wouldn't sell them.The government already has all your money tied up. Why tie up more?
 

Icc5

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Expensive for what you get

I am retired with a pension and SS just so you know where I'm coming from and I had an annuity at one time. We had the annuity set up years ago but for our kids education not our retirement. I did this because we had extra money and I figured to cover their education if I passed away early. Neither one decided to go to college so we cashed it in after paying in for about 18 years. We pretty much got out what we put in and had to pay taxes on the distribution.
Most annuities are a insurance program that you pay high fees on. I personally feel you are better off in some good stock investments that pay a good dividend.
Please do the research including paying an investment advisor to help make the decision. Go to a fee only advisor that doesn't sell product so you don't get pressured to buy a product that isn't what you really need or want. Also please come back and post your decision. Best of luck to you.
Bart
 

bogey21

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I think the important thing to be concerned about re: annuities is the financial health of the institution selling it. Most are well known insurance companies, but there are some risky bit players to be wary of.

I agree. Another risk is inflation (not in today's world though). I manage both risks by monitoring the provider of my Pension (annuity) like a hawk and with an accumulation of gold and silver as my potential inflation hedge.

George
 

VacationForever

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Most annuities are a insurance program that you pay high fees on. I personally feel you are better off in some good stock investments that pay a good dividend.
Please do the research including paying an investment advisor to help make the decision. Go to a fee only advisor that doesn't sell product so you don't get pressured to buy a product that isn't what you really need or want. Also please come back and post your decision. Best of luck to you.
Bart

Through wealth management I already have an advisor and he is totally against annuities.
 

Jason245

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Through wealth management I already have an advisor and he is totally against annuities.
Most annuities are a bad deal. Most ordinary people should stay away from all but one kind. Old age insurance (where you pay some flat amount (at say 55 or 60)and if you live past a certain age (like 85) you get a guaranteed monthly income until you die. When you die, amount paid is forfeit(or is payable until spouse dies).

It isnt sexy, and people don't like the idea of it being lost upon death. . But it is an insurance product..turn it into anything else and it is not what it was intended to be.



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VacationForever

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Most annuities are a bad deal. Most ordinary people should stay away from all but one kind. Old age insurance (where you pay some flat amount (at say 55 or 60)and if you live past a certain age (like 85) you get a guaranteed monthly income until you die. When you die, amount paid is forfeit(or is payable until spouse dies).

This is the product that I am referring to, it is called future income annuity.
 

Jason245

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This is the product that I am referring to, it is called future income annuity.
If you didn't save enough for retirement then it may be a necessary option. Just don't buy any of the bells and whistles that they offer (principal protection etc. ).

Most people significantly underestimate how much they will need, especially if they live to 90+. . Many overspend during the first years of retirement and are fully depleted of savings before 85..social security and food stamps exist, but is that how anyone really wants to live at 85+...

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VacationForever

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If you didn't save enough for retirement then it may be a necessary option. Just don't buy any of the bells and whistles that they offer (principal protection etc. ).

Most people significantly underestimate how much they will need, especially if they live to 90+. . Many overspend during the first years of retirement and are fully depleted of savings before 85..social security and food stamps exist, but is that how anyone really wants to live at 85+...

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I am actually looking at it in reverse. Continue to grow my investments and not draw on them. Keep about 5 years expenses in savings account/cds to cover short term expenses or market downturn, I take SS at 62, spouse (he is older) takes SS and MRD at 70, draw on my future income annuity at my 65 and MRD at 70. All other investments don't get drawn on at all, pass on to dependent.
 

Jason245

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I am actually looking at it in reverse. Continue to grow my investments and not draw on them. Keep about 5 years expenses in savings account/cds to cover short term expenses or market downturn, I take SS at 62, spouse (he is older) takes SS and MRD at 70, draw on my future income annuity at my 65 and MRD at 70. All other investments don't get drawn on at all, pass on to dependent.
Generally, if you have the cash already, it is almost always less expensive to self insure. .

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Jason245

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There is something call insurance to allow one to sleep better.
That is why it is more expensive then self insuring. If you need it, you shouldn't be focused on passing money down, instead use your money for the purpose you saved it. .to spend upwards of 40 years retired.

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tompalm

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Fidelity and Vanguard are rated the best or most cost effective annuities. I have been in a variable annuity with Fidelity for years that has worked well. They offer a lot of mutual funds to invest in. There is no RMD at age 70, so you never have to take it out. But, if I wanted to set up a payment plan, Fidelity would send a check for $1000 per month or whatever I wanted until the money is gone. The reason I went into it is for tax deferred growth. I had maxed out my IRA and wanted to save more and never had to pay tax on the gains.
 

VacationForever

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That is why it is more expensive then self insuring. If you need it, you shouldn't be focused on passing money down, instead use your money for the purpose you saved it. .to spend upwards of 40 years retired.

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Our MRDs and SS should be sufficient to cover our needs for the rest of our lives. Annuity wiil be an added assurance of income although not pegged to inflation. I see our income stream as a step increase through the years from different income sources. Our non-IRA will be passed on to the next generation, which actually will be a need in my case.
 

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New York Life is suffering from the low interest environment we have been in for the last 10 years. Although they have managed to keep a good portfolio of investments, they are indeed struggling in this market.

I will send you a PM for further details
 
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