So… Interest rates are up, I’m getting older, and i wonder if it might possibly make sense to buy annuities. Some of your might know something about that market, right?
Does it ever make sense? How does one even shop for annuities?
I believe most of the market in the US is for deferred annuities, which are primarily an accumulation product. Relatively few convert to lifetime periodic payments.
If you want lifetime periodic payments (and I’m extremely glad we did for my mother, who turns 97 this year; she bought the products in her 80’s) it’s primarily a commodity business (in the US). You should verify before buying, but I think these are covered by state guarantee associations (though there may also be limits on amounts). If covered by state guarantee associations, credit risk of the insurer is not a critical consideration.
There was a while that Vanguard sold them, but no more. I believe you can easily get quotes online from major carriers. Whether there is a good single source for quotes from many companies, I don’t know.
While interest rates are up, which will reduce the premium for a given level of benefit, inflation is also up, which will reduce the value of those benefits. (There are variable payout annuities, where underlying stock appreciation may (or may not) offset some inflation. I think there are also some inflation-indexed annuities, but unless real interest rates are up significantly those may not be much cheaper. They also may have limits on the inflation adjustments.)
Who are “major carriers” in this field? I know who major players are in p&c insurance, but honestly know almost nothing about the annuity market.
My mother’s annuities are from Brighthouse financial (the new company which was much of MetLife’s US annuity business until around 2017). It wasn’t Brighthouse when she bought the annuities. (Disclosure: I worked for a MetLife sub, not related to US annuity business, until I retired. My employment was not a factor in her choice of annuities.) Maybe Pacific Life too. My mother has a deferred annuty from them, and I know they sell SPIAs too. Lincoln National maybe. or TIAA.
There are loads of online quotes rankings available. (Many likely only with limited companies where they get some kind of payments). This one Best Annuity Rates of 2023 recommended USAA, but I couldn’t tell why, nor did I see rate comparisons there.
I think you’re eligible if you fail a physical.
I might know some things - it’s just a game of cashflow timing. You win if you live longer than average you lose if you don’t. If you find a Guaranteed Lifetime Withdrawal Benefit buy it and run (the US doesn’t know what they’re doing in terms of pricing and probably still sells these at some places - Canadian companies know better now.)
Lol. The certainly do. Now.
So many insurance related products that I wish I had my time back to my 20’s and 30s. I’d be broke now I’d have bought so much stuff.
This feels like a good deal. Outliving my assets would be a major problem for me. But if i die sooner than expected, well, i guess i didn’t need that money.
Exactly what we thought. Some were advising to at least get an annuity with 10 years certain, lest my mother lose so much of what she put into it. That wasn’t a risk we were concerned about. The inflation risk was a significantly bigger concern, but fortunately that didn’t develop until now, and she’s already won on the annuity, even if inflation cuts her future proceeds. (Won vs not buying it. Won on outliving her assets? TBD. Still, a favorite to do that, and raised children who could and would support her if necessary.)
They used to do a back to back. Buy an annuity and guarantee the term certain with a life insurance policy. At one point it was cheaper than getting it all through an annuity but I’ve no idea what that looks like now.
Also it worked well for joint stuff. Buy an annuity plus life insurance in one person, so higher annuity payout. If they die second, they have lifetime payments. If they die first, the survivor gets a death benefit and buys a new annuity on just themselves at their now older age. Again, no idea if that still works today.
There’s also some actuarial work done around annuities as an asset class. Get an annuity for the minimum amount of income you need for life, then the remainder can go into higher returning investments. Mosche milevsky is the name of the actuary that I saw present on this.
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I don’t even know where to start shopping for and annuity. You guys are taking about optimization when I’m looking for very basics.
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You can reach out to these folks: http://www.conwellassociates.com/ . I know them and have worked with them in the past. There’s two gordon conwell’s there, you want the younger one, but when they ask which one you want, I always just say the good looking one. Which upon reflection may not be so bright because the older one is the receptionists husband.
Use my name when you speak to him, he knows who I am. And yep, they’ll get you up to speed on this stuff without any sales expectation.
Might as well speak to someone who’s up to speed on the current applications, which is less likely on this forum.
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protip: They or may not recognize “SpaceLobster”
Generally you go through an advisor to purchase these things - some companies have their own salesforce (which is cheaper for you), but most use 3rd party agents (will try to maximize commission). I don’t know off the top of my head how many (if any) companies sell direct to client.
Generally ‘the guy from Canada’ is actually sufficient.
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i did this last year for some term purchasing. was happy with the info i got and how quickly everything came together.
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Im triggered. Just had an underwriter tell me ‘the doctors report is 350 pages. Its gonna be a while lol.’
the alias i used had a very clean health history.
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New York Life!
The fees take out such a huge chunk (both, right off the bat and slowly every year as well) that I’d honestly never buy one unless I had millions in the bank already and millions more coming in the door.
If you want a steady stream of cash in retirement an annuity could be an attractive option but as an investment I find them to be very meh. Kinda like homeownership. Maybe not the best way to maximize your money invested but owning a home is nice, beats renting and the associated uncertainty.