Annuities for a fixed lifetime income

[Sir Henry]

I’m at a crossroads of what to do with my lifetime of savings. I don’t have anyone that I need to take care of after my passing and I don’t expect that to change. I took higher risks when I was younger and weathered several market downturns only to come back stronger. I’m 73 now and don’t want to go through another downturn. I cashed in my mutual funds and sold my real estate at the peak. Now I’m sitting on a pile of cash and don’t know what to do with it.

I think I was spoiled by high rates of return for taking the risks. Now that I don’t want to take the risks I’m seeing the rates much lower. I’m looking at annuities but have found the brake even point is about 12 years down the road. I’ll be 85 when I brake even. I guess I have to ask myself how long I expect to live. My neighbor is 97 and if I live that long it would be an excellent investment. If I die in 5 years it would be a terrible investment. But then I would be dead and it wouldn’t really matter.

I guess I could have worse problems.

[cooperhawk]

I guess I could have worse problems.

You never know what time will bring so I guess I would want to keep investing.
You'll be surprised how fast 85 will sneak up on you. I'm 82 and it was just yesterday
that I was 60.
Yes, we are well set as well, but we do find charities that we give to and we want for nothing.
BTW, my Wife is still frugal.

[GeoBoy]

My feeling is that if your happy with what your doing and where you live, then just enjoy the ride. Why do you care if you leave a pile of money behind, enjoy your life.

[Oldbrass]

My feeling is that if your happy with what your doing and where you live, then just enjoy the ride. Why do you care if you leave a pile of money behind, enjoy your life.

Nailed it

[JEBar]

we went through that same thinking process several years ago .... what we decided is irrelevant but on thing that really helped us in making a decision might be worth considering .... if you can find a couple of different independent financial advisors, it might be worth speaking with them .... by independent I mean ones not affiliated with a company that markets any retirement products .... further, if you happen to walk into a meeting with a advisor who doesn't do a good bit of listening to your desires before making a recommendation, walk out and find another one

[Sir Henry]

My feeling is that if your happy with what your doing and where you live, then just enjoy the ride. Why do you care if you leave a pile of money behind, enjoy your life.

It’s not about what I leave behind. It’s about whether it’s a good investment. Say you loan a stranger $100 with repayment of $2 a year for the rest of your life. You would have to live 50 years just to get your principal back. With most annuities at my age I have to live 12 years just to get my principal back and 16 years to get it back with 3% interest. The mortality tables say I’ll only live 12 years. Now if I live 20 years I’m way ahead.

[Sir Henry]

we went through that same thinking process several years ago .... what we decided is irrelevant but on thing that really helped us in making a decision might be worth considering .... if you can find a couple of different independent financial advisors, it might be worth speaking with them .... by independent I mean ones not affiliated with a company that markets any retirement products .... further, if you happen to walk into a meeting with a advisor who doesn't do a good bit of listening to your desires before making a recommendation, walk out and find another one

I’ve spoken with three and all listened to me. Annuities are insurance and not investments although if you buy car insurance and make one $100 payment and total you car and get $40K it’s a good investment. On the other hand if you pay $100 a month for 40 years and never wreck your car before dying it wasn’t a good investment.

No one knows better than me about how long I will live. I think that is what is troubling me. I now have to think about how many years I have left. If I needed heart surgery and had cancer that would be a clear indication of how long I’ll live. If I get the annuity I’m betting the insurance company I will live longer than they are betting I will live. It’s like going to Vegas and trying to beat the house.

So what did you do?

[PBSnooker]

What's the break even point on an annuity? I have varying length annuities. There is only a penalty for early withdrawal.

[cooperhawk]

Most folks think that govt retirement is free. Well, it depends how you look at it. In my case I paid about 10 % of my gross income into the retirement fund. Over 35 years that amounts to quite a bit of money, but invested in interest bearing items it would accrue much more capitol. The govt does not pay interest. I have now been paid many time the amount I paid in. So I guess it worked out OK.
My neighbor started his own company back in the early 80s and now he wants to sell out and retire. His house is paid for, his ex wife's house is paid for, his children are well educated and doing well, and he has money to spend.
So he wanted a Bob Cat. He just bought a $100,000.00 unit and then put a snow blower on it. Just to do his half mile drive. It's his toy. He loves it.
I'm just saying, lay back, live well, buy your toys, enjoy while you can.

[cooperhawk]

I'll give you an example of enjoying money. Well, first of all we're big tippers. If we get good friendly service, we tip generously.
Wherever we go now we really get taken care of well.
A half dozen of old Air Traffic Supervisors had breakfast together this morning at the local Cracker Barrel.
We were discussing a certain small town Supper Club when I mentioned that the old service station and creamery across the road were owned by former Viking Purple People Eater, Paul Krause and it was his Man Cave with lots of old cars stored there. I said that I'd met him and he was a really nice guy.
As we prepared to go we asked the waitress for our bills and she told us that a gentleman at a table behind us had paid all our bills.
We asked who he was and she said she didn't know, but he was wearing a Vikings jacket. I suspect it was Paul who overheard us and liked what was said.

Having some money to spend can be a fun thing.

[Mags]

I’m at a crossroads ...

For the interim you could park the funds in a money market fund. Good ones at the moment are paying 3% plus interest. Your stash would continue to grow a little while you figure out what you want to do.

[daytime dave]

I always lived paycheck to paycheck. After my divorce, the money vacuum seemed to slow down. I raised my children on my own with no child support and still pay my maintenance without fail.
I've been able to reach a point where I feel secure.
Problems like yours are dreams for others.
I know a couple of money managers. If I were you (just daydreaming), I'd diversify my portfolio and not get too much of it tied up in annuities. My father lost most of his retirement savings putting faith in a financial adviser's advice of an annuity. I've always been a bit leery of them since learning that. He managed to do all right on what was left as my parents were frugal.
Not having to worry about leaving something for someone would seem to simplify things.
Keep enjoying what you have, you've earned it. Now that you live in the country, remember not to put all your eggs into one basket.

[John E Davies]

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Spokane WA

[JEBar]

If I get the annuity I’m betting the insurance company I will live longer than they are betting I will live. It’s like going to Vegas and trying to beat the house.

no insurance company will write any sort of policy or other product that their legions of bean counters don't believe has a high probability of making money for them ....

So what did you do?

we've been retired for 16 years .... we were fortunate to sell all of our stocks and other such market linked investments at times beneficial to us .... we did so with the help of a tax attorney whose advice was worth its weight in gold .... we both based our retirement dates based on our guaranteed income from our state retirement and social security incomes .... together they provide us with a stable income that we are very comfortable with ....

[cooperhawk]

I always lived paycheck to paycheck. After my divorce, the money vacuum seemed to slow down. I raised my children on my own with no child support and still pay my maintenance without fail.
I've been able to reach a point where I feel secure.

I also went through a rather nasty divorce. I too ended up with my children and raised them with no child support. (She couldn't have provided any anyway), and I don't owe her any money at all. The children are all raised and on their own now and I remarried after seventeen years to a lady who is just like me. Frugal. It is funny how down and out you can be and a few years later doing OK again.
We, or I should say Carol, have several investments in 401Ks and other accounts. She being an attorney, handles it and I trust her enough that I only ask about it occasionally.

[GFK]

I guess I could have worse problems.

Yes, we are well set as well, but we do find charities that we give to and we want for nothing.

My thought is similar. If there is a group our cause that you would like to continue, that might be an option. I am aware of some colleges that have some type of annuity program. They pay interest while you are alive, and keep the balance upon death. I suspect that there are other organizations with a similar program.

[Bake]

Maybe you should put some of your cash into building a CD ladder . . .

[Sir Henry]

I’m at a crossroads ...

For the interim you could park the funds in a money market fund. Good ones at the moment are paying 3% plus interest. Your stash would continue to grow a little while you figure out what you want to do.

Thats where its at now.