ANNUITY Users with Real Life/Practical Experience - Advice Please !!

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mholdi1540
Posts: 101
Joined: Tue Sep 06, 2011 10:21 am

ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by mholdi1540 »

Hi and thanks for advice in advance. Approaching 67 y/o and have been saving in Vanguard Balanced Annuity for just over 30 years and accumulated low 7 figure number and ready to put it to use. The $$ has already been saved so plan to put it to use exactly what it was intended for in a series of annuities at $250,000 (state insurance limit per contract)/annuity insurance company. Plan to buy one per year from a different highly rated company until completed. So my questions to current annuity holders/users are: #1.) what has been your experience with this process. #2) The only source I have looked at thus far is IMMEDIATE ANNUTIES on the internet to get estimates and names of insurance companies - have you tried this and used it and what did you think???? #3) The contract would be in both myself and wife's name with beneficiary to living children. #4) WILL NOT get life only and die the next week. Looking at A.) 20 year guarantee with life survivor thereafter AND/OR B.) combination of 25 year (30 years if they still exist) guarantee and if die before the contract expires children will be beneficiary Maybe a combination of both depending upon payout and other factors yet to be determined.. NOT at all interested in purchasing a deferred annuity that starts at 85 years of age and will not consider. So - does anyone out there have any real life/practical experience in this area. Would love to hear from you and if you would have done something different and what insurance companies you recommend such that we may look into in the future !!!!
Topic Author
mholdi1540
Posts: 101
Joined: Tue Sep 06, 2011 10:21 am

Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by mholdi1540 »

P.S. - Forgot to add to the above but with what I have studied, thusfar, I do not feel we need a bunch of riders especially for inflation. We have other assests and probably will not spend all we take home from annuities anyway. Any excess at the end of the year will just be placed in safe investments like CD's and US Treasuries. However, your thoughts, criticism and practical experience is truly appreciated !!!
Rex66
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by Rex66 »

There are tons of spia posts here. Might want to search them.

In regards to people who have purchased them, many who have done so years ago did so during periods of low inflation and an overall declining interest rate environment do in essence what they got was higher than they could get years later not taking age into the equation. These factors would contribute to one’s happiness with a product. Will you be as satisfied under different conditions? Hard to know even though the product did as expected.

The ratings today of any insurance company don’t really predict far in advance. Most recommend staying under state guarantee association limits.
Tom_T
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by Tom_T »

mholdi1540 wrote: Sat Jun 10, 2023 3:28 pm Hi and thanks for advice in advance. Approaching 67 y/o and have been saving in Vanguard Balanced Annuity for just over 30 years and accumulated low 7 figure number and ready to put it to use. The $$ has already been saved so plan to put it to use exactly what it was intended for in a series of annuities at $250,000 (state insurance limit per contract)/annuity insurance company. Plan to buy one per year from a different highly rated company until completed. So my questions to current annuity holders/users are: #1.) what has been your experience with this process. #2) The only source I have looked at thus far is IMMEDIATE ANNUTIES on the internet to get estimates and names of insurance companies - have you tried this and used it and what did you think???? #3) The contract would be in both myself and wife's name with beneficiary to living children. #4) WILL NOT get life only and die the next week. Looking at A.) 20 year guarantee with life survivor thereafter AND/OR B.) combination of 25 year (30 years if they still exist) guarantee and if die before the contract expires children will be beneficiary Maybe a combination of both depending upon payout and other factors yet to be determined.. NOT at all interested in purchasing a deferred annuity that starts at 85 years of age and will not consider. So - does anyone out there have any real life/practical experience in this area. Would love to hear from you and if you would have done something different and what insurance companies you recommend such that we may look into in the future !!!!
This is a crazy long thread, but it's the place to ask questions about annuities.


https://bogleheads.org/forum/viewtopic.php?t=334589
ralph124cf
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by ralph124cf »

Eight years ago my DW (age 66) put her entire TIAA balance ( I don't have the exact number but it was about $380K) into a variable annuity at TIAA. The payout started at $2,400, and has since risen to about 2,800.

That said, I don't think that age 67 is a good age to start buying SPIAs. Most posters seem to think that age 75 is the sweet spot to start laddering SPIAs.

Interest rates of the bonds that annuity companies buy to counter the payouts that they will have to pay out each month, but SPIA payouts have not changed in response. Assuming many people choose to buy bonds instead of SPIAs, the insurance companies will need to raise their payout rates.

Ralph
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Stinky
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by Stinky »

mholdi1540 wrote: Sat Jun 10, 2023 3:28 pm Hi and thanks for advice in advance. Approaching 67 y/o and have been saving in Vanguard Balanced Annuity for just over 30 years and accumulated low 7 figure number and ready to put it to use. The $$ has already been saved so plan to put it to use exactly what it was intended for in a series of annuities at $250,000 (state insurance limit per contract)/annuity insurance company. Plan to buy one per year from a different highly rated company until completed. So my questions to current annuity holders/users are: #1.) what has been your experience with this process. #2) The only source I have looked at thus far is IMMEDIATE ANNUTIES on the internet to get estimates and names of insurance companies - have you tried this and used it and what did you think???? #3) The contract would be in both myself and wife's name with beneficiary to living children. #4) WILL NOT get life only and die the next week. Looking at A.) 20 year guarantee with life survivor thereafter AND/OR B.) combination of 25 year (30 years if they still exist) guarantee and if die before the contract expires children will be beneficiary Maybe a combination of both depending upon payout and other factors yet to be determined.. NOT at all interested in purchasing a deferred annuity that starts at 85 years of age and will not consider. So - does anyone out there have any real life/practical experience in this area. Would love to hear from you and if you would have done something different and what insurance companies you recommend such that we may look into in the future !!!!
I don't have real life experience in buying SPIAs. But I do have a good bit of familiarity with annuities accumulated during my working lifetime.

I understand your concern about buying a SPIA and dying the next week. But that risk is substantially mitigated if you purchase a SPIA which pays out at 100% so long as either you or your wife is alive. If you want to go ahead and slap a 20 or 25 year "guaranteed period" on top of that, it's just fine, but that will reduce your monthly benefit somewhat.

All in all, I think that your plan is fine. Look at a source like immediateannuities.com or stantheannuityman.com to get quotes and make your purchase.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Chardo
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by Chardo »

Why buy an annuity that provides more income than you need, only to reinvest the excess? Just keep that excess in your portfolio instead of locking it up in an annuity.
billfromct
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by billfromct »

Are you saying that you have a Vanguard variable annuity (administered by Transamerica) & you originally purchased it back in the mid-1990s?

If you did, I believe you are grandfathered to receive a 4% interest rate while you annuitize in a “term certain” (10 year, 15 year, etc) or lifetime annuity.

This isn’t a great deal now with interest rates (short & intermediate) about 5%, but before 2022 when interest rates were 2%-3% over the past 10 years it was a great deal & could be in the future if interest rates move down back to the 2%-3% range.

If you do have that old Vanguard annuity with Transamerica, you may want to check with them about their “term certain” & lifetime annuity distributions. This would be good to compare it with other annuity providers.

My mother gave my kids, her grandchildren, $5,000 in the mid-1990s & I put that money in the Vanguard annuity. I have recommended to my kids, yes, they asked for my advice, to use this Transamerica annuity (the “term certain” provision) as a bridge between retirement & delayed SS distributions at age 70.

Edit: You can also take money out of the old Vanguard variable annuity after age 59.5 without doing the “term certain” distribution or without annuitizing. All (100%) of the proceeds will be state (if your state has an income tax) & Federal taxable until you get down to the contribution amount. Then the distribution of contributions are tax free.

bill
Last edited by billfromct on Sun Jun 11, 2023 12:40 pm, edited 1 time in total.
crefwatch
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by crefwatch »

mholdi, there's nothing wrong with your plan, but it is unclear that you NEED an annuity. Why can't you just live off the RMDs from your savings (assuming it's a tax-deferred retirement plan) and name the children as Contingent Beneficiaries? I'm not opposed to annuities for people who don't have enough money saved to get the monthly income number they NEED to live. But it sounds like you might have enough saved.

Note that one post here mentions a Variable Annuity. That can also be fine, but when the word Annuity is used on this newsboard, (including "SPIA"), it almost always means FIXED Annuity. Some people put some of their money in a Variable Annuity as an inflation hedge. But anything that can go up can go down. The question is whether you have the stomach, and the cash on hand, to handle those year(s)?

It sounds like you have taken at face value that retirees must get an annuity payout. That's not something that applies to every person or family.
backpacker61
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by backpacker61 »

Chardo wrote: Sun Jun 11, 2023 5:00 am Why buy an annuity that provides more income than you need, only to reinvest the excess? Just keep that excess in your portfolio instead of locking it up in an annuity.
+1
Had the same thought. This would be a dramatically more efficient approach.
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bertilak
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by bertilak »

Chardo wrote: Sun Jun 11, 2023 5:00 am Why buy an annuity that provides more income than you need, only to reinvest the excess? Just keep that excess in your portfolio instead of locking it up in an annuity.
Well, I did this because, due to inflation, I don't know exactly how much I will need! I did try to plan ahead a little by buying a Deferred Income Annuity (DIA) with a 5-year deferral. By investing any extra or buying more to cover a shortfall, I can adjust either way.

About "locking it up." Locking up the income is the purpose. This is instead of depending on an uncertain return from the amount if left invested.
Last edited by bertilak on Sun Jun 11, 2023 12:33 pm, edited 1 time in total.
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AlwaysLearningMore
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by AlwaysLearningMore »

mholdi1540 wrote: Sat Jun 10, 2023 3:28 pm Hi and thanks for advice in advance. Approaching 67 y/o and have been saving in Vanguard Balanced Annuity for just over 30 years and accumulated low 7 figure number and ready to put it to use. The $$ has already been saved so plan to put it to use exactly what it was intended for in a series of annuities at $250,000 (state insurance limit per contract)/annuity insurance company. Plan to buy one per year from a different highly rated company until completed. So my questions to current annuity holders/users are: #1.) what has been your experience with this process. #2) The only source I have looked at thus far is IMMEDIATE ANNUTIES on the internet to get estimates and names of insurance companies - have you tried this and used it and what did you think???? #3) The contract would be in both myself and wife's name with beneficiary to living children. #4) WILL NOT get life only and die the next week. Looking at A.) 20 year guarantee with life survivor thereafter AND/OR B.) combination of 25 year (30 years if they still exist) guarantee and if die before the contract expires children will be beneficiary Maybe a combination of both depending upon payout and other factors yet to be determined.. NOT at all interested in purchasing a deferred annuity that starts at 85 years of age and will not consider. So - does anyone out there have any real life/practical experience in this area. Would love to hear from you and if you would have done something different and what insurance companies you recommend such that we may look into in the future !!!!
If I'm correctly understanding your post, you have a sum held in Variable Insurance Fund - Balanced Portfolio https://advisors.vanguard.com/investmen ... -portfolio Is that correct?

I'm somewhat familiar with this annuity (helping family, and for our household). You can contact TransAmerica at 800-462-2391, or email them at annuities.customerservice@transamerica dot com They can go through your annuitization options (and 1035 exchange process) with you.

Now, in terms of practical advice (if the above assumptions are correct), I was able to fairly easily request a partial surrender from the Transamerica Value Variable Annuity (formerly the Vanguard Variable Annuity) through a 1035 exchange which as I recall was initiated by the SPIA issuer. (I contacted TA to help smooth the process, IIRC another form on their end also had to be filled out.)

Suggestions for your consideration:
Carefully review your contract for guaranteed rates and terms. Carefully review the annuity tables and what they guarantee vs. other providers.
Review TA's Comdex score, AM Best rating (and other ratings) and see if they meet your criteria for stability.
Contact TA about their current 1035 process and how you can help facilitate (any required paperwork on your end).
Ensure your agent and the SPIA issuer follows up with TA. (If you think Vanguard is slow, wait until you work with TA.)
Shop for the best rates. We looked at immediateannuities dot com; incomesolutions dot com; blueprintincome dot com; stantheannuityman dot com.
Suggest that you carefully double- and triple-check your SPIA applications for accuracy before they are submitted.
Your idea about staggering SPIA purchases is a good consideration, but of course rates change and no one knows what $250k will buy in monthly SPIA income next year, let alone in 2-4 years.

(In terms of TA offerings, we may consider using TA's "variable payments" option when we get older. It would be in the Balanced Fund -- essentially the Vanguard Wellington Fund -- and payout for our lifetimes. This way we could add one more lifetime income stream, admittedly fluctuating, that will hopefully inch upwards with time and hopefully provide some buffer against inflation, but there's no guarantee of that. For only about 50 bp all-in, it's a relatively small price to pay for another lifetime income stream I know will be there for my spouse. It would be set-and-forget, and useful if I start to forget :D )
Last edited by AlwaysLearningMore on Sun Jun 11, 2023 2:00 pm, edited 1 time in total.
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
rgs92
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Re: ANNUITY Users with Real Life/Practical Experience - Advice Please !!

Post by rgs92 »

My understanding is that this is a Variable Annuity that was common back when you bought it.
The only advantage to this (vs. a regular mutual fund investment) is the life-insurance aspect where, if you die, the original investment amount will go the beneficiary even if the account value has gone down.

That is how Fidelity's variable annuity funds work, known as their "Fidelity Advisor" funds at the time.

You are charged an additional expense-ratio amount for this insurance component. I believe Vanguard's insurance fee was .41%, and Fidelity's was 1%.

This is over and above the fund management ER (.21% apparently for the Vanguard fund mentioned by the OP).

This is just from memory, so please correct this if this is inaccurate. Thank you.

Edit: there is also the income deferral aspect that allowed you to invest more than you could ordinarily in conventional tax deferred vehicles like 401Ks/403Bs, but often these VAs were sold as places for rollovers from existing 401Ks/403Bs, so that advantage was lost.

But this usage for rollovers into VAs was common simply for the life-insurance aspect alone. That's why they became unpopular attained a bad reputation and led to Fixed Index Annuities, which were always advertised as "Not Variable Annuities".
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