Future income annuity

[winnipiseogee]

3) Help ensure that if the spouse who knows how to manage money should pass, the other spouse isn't stuck trying to figure out how everything works and/or makes a big mistake.

Funny but this is a big part of what got me thinking about annuities. My wife is an amazing and wonderful person but she would have a hell of a time managing our money. When we had kids we had to spend time estate planning and I realized the best thing for her (if something happens to me) is to take almost all of the money and annuitize it. Once I realized it was right for her I started asking.... why not for me?

If these people had a million dollar pensions and are broke after 15 years-it is not because they didn't opt for an annuity. It is because they are stupid.

You have no idea how many people I've worked for and known that have gone from multi, multi millionaires to broke. I've watched even the smartest crash and burn. I'm doing pro bono work for a lot of these people and it has convinced me that it can happen to anyone at any time. It is especially likely to happen after age 70 or 80. Life is too short to worry about money when I'm in my 80s!

 

[geekette]

Maybe yes, maybe no. In the case at hand I went to my key employees in the early 80s and asked them if they were willing to make a trade, significantly below market annual raises going forward for enhanced Pension Benefits. They chose the latter and we adopted the policy. It worked for them and it worked for the company. The company was able to retain valuable experienced employees for the next 20 years at below market wages and the employees were able to get big Pensions when they retired.

George

Interesting scenario. certainly depends on your line of work, but no way I'd commit to sticking around for 20 years making less than market in exchange for pension, enhanced or not. Why not save "excess" from paycheck to create your own future pension??

I'm a few years behind you so have not worked in a time where the company was loyal to you in exchange for your loyalty. I live in an At Will State and have survived my share of layoffs. Even if I had planned to keep my end of the 20 yr bargain and endured suppressed wages, I would not rely on any company to make good on a 20 year old promise to an employee. My best friend's mother "lost" her pension when her major company was taken over by another and seniority was basically "cancelled" so her 30 years in meant Nothing. She's past 80 now and still works at JC Penney. Companies don't have hearts, companies do not care about the little guy.

Rely on yourself and mitigate risks involved with relying on anyone else.

 

[Talent312]

I firmly believe that the absence of stress has had a major impact on my longevity.

I find making investment decisions more fun than stressful. While my "nest egg" is a significant part of my retirement plan, it is not the major component, so I'm not as co-dependent on its performance as some might be.
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[rapmarks]

Interesting scenario. certainly depends on your line of work, but no way I'd commit to sticking around for 20 years making less than market in exchange for pension, enhanced or not. Why not save "excess" from paycheck to create your own future pension??

I'm a few years behind you so have not worked in a time where the company was loyal to you in exchange for your loyalty. I live in an At Will State and have survived my share of layoffs. Even if I had planned to keep my end of the 20 yr bargain and endured suppressed wages, I would not rely on any company to make good on a 20 year old promise to an employee. My best friend's mother "lost" her pension when her major company was taken over by another and seniority was basically "cancelled" so her 30 years in meant Nothing. She's past 80 now and still works at JC Penney. Companies don't have hearts, companies do not care about the little guy.

Rely on yourself and mitigate risks involved with relying on anyone else.

this is what we did as teachers, and are now resented for our pensions, and face many attempts to reduce them.

 

[WinniWoman]

Interesting scenario. certainly depends on your line of work, but no way I'd commit to sticking around for 20 years making less than market in exchange for pension, enhanced or not. Why not save "excess" from paycheck to create your own future pension??

I'm a few years behind you so have not worked in a time where the company was loyal to you in exchange for your loyalty. I live in an At Will State and have survived my share of layoffs. Even if I had planned to keep my end of the 20 yr bargain and endured suppressed wages, I would not rely on any company to make good on a 20 year old promise to an employee. My best friend's mother "lost" her pension when her major company was taken over by another and seniority was basically "cancelled" so her 30 years in meant Nothing. She's past 80 now and still works at JC Penney. Companies don't have hearts, companies do not care about the little guy.

Rely on yourself and mitigate risks involved with relying on anyone else.

My husband and I are in your camp here. NY is an At Will state. Been through tons of lay-offs.

I currently haven't had a raise in 3 going on 4 years.- no one in our company has. No pensions here. Husband's company cut up their employee's pensions. It's all about Less, less, less. Just the way it is these days.

We make the best of it. And like you said- we rely on ourselves as much as possible.

Still don't like annuities, but am always open to different ideas to make retirement work.

 

[geekette]

this is what we did as teachers, and are now resented for our pensions, and face many attempts to reduce them.

Is it fair to say that only the ignorant resent teacher pensions? Not sure, but seems that anyone unaware of what teachers actually do, and put up with, would have to be fairly ignorant. Public pensions are at this point just as scary as private. I hope yours continues on, unchopped! To those resenting your collecting a pension, gently remind them that they, too, could have chosen that line of work.

I also made a choice to not be a doctor or a lawyer or attempt pro sports (as if I had any shot!). Life is choice, choices come with "features" and "drawbacks". Resenting what someone else gets because of the path they chose is petty and childish and usually completely ignores the drawbacks.

 

[rapmarks]

Is it fair to say that only the ignorant resent teacher pensions? Not sure, but seems that anyone unaware of what teachers actually do, and put up with, would have to be fairly ignorant. Public pensions are at this point just as scary as private. I hope yours continues on, unchopped! To those resenting your collecting a pension, gently remind them that they, too, could have chosen that line of work.

I also made a choice to not be a doctor or a lawyer or attempt pro sports (as if I had any shot!). Life is choice, choices come with "features" and "drawbacks". Resenting what someone else gets because of the path they chose is petty and childish and usually completely ignores the drawbacks.

my school district is on strike . One local person questioned why anyone needs a college degree to teach K thru 5th grade. The curriculum is easy. In fact, I bet that person could teach the kindergarten curriculum in a week, and would be shocked at how poorly the students would do on testing.

 

[Jason245]

One local person questioned why anyone needs a college degree to teach K thru 5th grade. The curriculum is easy.

OMG... I guess this local would be fine giving responsibility of their misbehaving rug rat to someone who works the drive through at the local burger joint. It isn't as if the life or well being of their child matters.

 

[geekette]

my school district is on strike . One local person questioned why anyone needs a college degree to teach K thru 5th grade. The curriculum is easy. In fact, I bet that person could teach the kindergarten curriculum in a week, and would be shocked at how poorly the students would do on testing.

Dang, I don't always like to be right, but sure enough, seems ignorance is alive and well. Sure, teaching easy material should be easy, in an empty room. Might I guess that person was also not a parent???

I'd question why someone would want their kids taught by an uneducated person and most probably that is what happens in some of the home school arrangements.

 

[vacationhopeful]

...... Life is choice, choices come with "features" and "drawbacks". Resenting what someone else gets because of the path they chose is petty and childish and usually completely ignores the drawbacks.

I read comments like those above and remind myself that is the simple version of a complex issue - one many times is not a personal choice by many of us.

 

[geekette]

I read comments like those above and remind myself that is the simple version of a complex issue - one many times is not a personal choice by many of us.

You very clearly made choices. Where is the part where you didn't get a choice?

 

[WinniWoman]

You very clearly made choices. Where is the part where you didn't get a choice?

I think what Linda is saying is that even in making what are good choices at times can backfire on you through no fault of your own as situations change. There are definitely some things one has no control over that just happen to us for whatever reason.

Been through it numerous times as well. Good thing we are strong and we are all survivors and do make alternate choices to try to cope as best we can despite it all.

 

[vacationhopeful]

no further comment ...

 

[geekette]

[Removed at OP's request]

 

[WinniWoman]

Bad things do happen to good people all the time. Good people who make the choices that they thought were best.

No matter what choices you may make- a lot of luck is involved with things also. Take my brother, for example. He is very intelligent and successful financially speaking. And-all his life he has been very lucky. I guess you could argue that maybe he makes his own luck- I don't know. But I do know that he and I, for example, could make the exact same choice on something and it would work out great for him and not for me.

 

[geekette]

Bad things do happen to good people all the time. Good people who make the choices that they thought were best.

No matter what choices you may make- a lot of luck is involved with things also. Take my brother, for example. He is very intelligent and successful financially speaking. And-all his life he has been very lucky. I guess you could argue that maybe he makes his own luck- I don't know. But I do know that he and I, for example, could make the exact same choice on something and it would work out great for him and not for me.

Absolutely, bad crap beyond our control happens, this is life. Some people seem to lead charmed lives, others don't seem to be able to catch a break. Car crashes, illnesses, job loss, all normal stuff. Reference above mention of best friend's mother whose pension was vested and taken from her. This has been normal for over 30 years now and getting worse. I've chosen to not put all my eggs into any employer basket so that if bad crap happens, I still have what's mine to look after myself. Companies change their policies all the time, there are no guarantees. They are in business to profit, not to provide employees anything nor uphold any moral code.

 

[johnrsrq]

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.

Variables= high cost , even higher with riders= not even close to the Op's question.

Fixed Indexed Annuities= a whole slew of good providers with hugh difference and very few who truly understand.

Fixed "plain vanilla" = very low rates reflecting current benchmarks such as the 10 yr treasury and excess yields of company's portfolio.

Most people, including many comments above, do not get how risk is transferred and the "payout" % differ as well as base guarantees. There's so much to this subject however, this forum is not a productive, objective place to dissect the various companies and their policies. I do like Future Income Annuities.

If you strip out the carriers that mainly function in the variable space and the 401k carriers, and just focus on fixed providers- there only 10 or carriers who account for 80% of that business.

I'm actually a little rusty on that segment, time for me to revisit . Thanks.

Good luck.

 

[Tia]

....... They are in business to profit, not to provide employees anything nor uphold any moral code.

Sadly so ........ and not necessarily a good thing imo

 

[Jason245]

Sadly so ........ and not necessarily a good thing imo

I would argue that there are several companies that are for profit and take care of their employees (one example would be Costco).

The reality is that for many businesses, short term thinking often takes control of the planning instead of long term (especially when you have revolving door CEOs who stay for 3-5 years, collect huge severance packages and move onto the next 3-5 year stint).

Payroll and payroll related expenses are generally the largest expense in direct control of the company. When costs of materials go up, and the company is scared to raise prices, or unable to, they squeeze the easiest line first, and that is payroll... long term it is a terrible strategy, but when you plan on only sticking around for 3-5 years to "turn around" the company... well you get the idea.

 

[Pathways]

sptung

Most of this thread is really discussing annuities as a whole, which by %, most agree are not a good deal. (Shall we say bad?)

The 'Future Income Annuity' however, can be a great product. I'm making a buying decision on one right now.

Unlike you, I am not interested in income from it until 80-85. SS will last until death, but if one's other income is a 401k or the like there is always a risk of stupid decisions, soft heart bailing out a relative etc. (most pension's, even some gov. have a risk, just ask a lot of workers from some Fortune 50 companies and some state/local workers)

The hardest part of retiring is knowing how much I think I can afford to spend each year. It's a crap-shoot since I don't know how long I will live, and what my health will be, so I would need to try to spend just the investment return dollars.

With the future income annuity, I know I can essentially run out of money the year it kicks in at 85, and then new income stream will supplement my SS until my death. No Worries! No health care cost concerns! No poor stock market or investment concerns!

If I have money left at 85, that can go to my kids or whatever right then, or I will enjoy charitable giving. The only downside is the cash I put into it is gone with no return if I don't live beyond 85. I say so what, if I don't live that long, I didn't need the cash anyway.

My only reason to wait to pull the trigger is the rules have changed and it appears I can use cash directly from my retirement account to fund a future retirement annuity, so I am triple checking that option. If so, that's a 25% discount for me.

 

[isisdave]

Perhaps I've missed it, but in this thread I don't think I've seen anyone mention that the amount paid by annuities is based at least in part on interest rates. Companies anticipate what they'll earn in at least the short term on new investors' money.

So, right now you can expect about the lowest return you'll ever see for a particular age annuitant. If you're not needing it right now, you might see a better plan when interest rates finally are allowed out of the sub-basement. And of course if you can wait, you'll be a little older and get a better rate just for that.

 

[VacationForever]

winnipiseogee, Johnrsrq, Pathways..., Thank you. I just ignore the responses who either didn't understand my question or thought they knew the answers the a different question

I like the concept of deferred income annuities. Everyone's financial situation and needs is different and takes on a strategy that best fits their goal, sometimes doing so without having knowledge of all the instruments in the market. In our case we should be financially comfortable and we are simply looking at creating our own pension / income stream by transferring risk to an annuity company on the portion of asset that we are setting aside to create this income stream. The rest of the assets can continue to grow and ride the market and hopefully not used in our lifetime.

Due to the forced increased in MRD each year (percentage keeps going up), the withdrawal $ will keep increasing until the age of 90 or something like that - based on the table that one can obtain from any of the investment company websites. That itself should take care of much of the inflation element, as well as SS. We don't see increased financial needs in later years as we have LTCI.

 

[VacationForever]

Perhaps I've missed it, but in this thread I don't think I've seen anyone mention that the amount paid by annuities is based at least in part on interest rates. Companies anticipate what they'll earn in at least the short term on new investors' money.

So, right now you can expect about the lowest return you'll ever see for a particular age annuitant. If you're not needing it right now, you might see a better plan when interest rates finally are allowed out of the sub-basement. And of course if you can wait, you'll be a little older and get a better rate just for that.

With deferred/future income annuities, you actually get a better rate when you are younger, all else remaining the same, because you have more years to reach the year that you want to income stream to start. More years for the insurance company to grow on the $ and increased chance that the person may keel over before the insurance company needs to pay.

 

[Pathways]

In our case we should be financially comfortable and we are simply looking at creating our own pension / income stream by transferring risk to an annuity company on the portion of asset that we are setting aside to create this income stream. The rest of the assets can continue to grow and ride the market and hopefully not used in our lifetime. .

Exactly! Since this type of annuity has a fixed return, I (actually my actuary son) figured the probable worst case basis at 85 yo in a nursing home with future dollars, and that (plus a little) is the amount I want from the FIA. Then I can travel guilt free.

As he said to me 'Dad, even if you spend ALL of your money, I know I will only need to support you until you are 85!

Giving my kids that financial peace of mind might be a bigger inheritance than all the cash, which may or may not be there someday!

 

[am1]

Does not look good for a lot of people counting on pensions.

http://www.msn.com/en-us/money/reti...ew-law/ar-AAfbeQN?li=AAa0dzB&ocid=mailsignout

Not in favor of bailouts for this. I am thankfull that I will not have to worry about a pension being or not being there. I am 100% responsible for my retirement. I do feel for those affected and wish them well.