I wanted to add one more note on inflation and I realize now that I forgot to conclude my previous post.
-Inflation is likely mean reverting. So, the adjustment to the annualized return needed for delay and SPIA to beat the DIA is likely smaller for longer deferral periods than shorter ones.
Concluding Remarks
-A 5.84% return is still a difficult target to beat, implying a real cost to delaying for the 70 year old couple.
-This 5.84% figure is incomplete. After adjustments, the figure could go up or down, depending on one's circumstances and preferences.
-The loss of optionality for married couples, combined with the smaller cost to delaying, may make the age 85 (or 90 where available) SPIA a sort of attraction point which makes sense for a large percentage of those considering annuitization. This seems less likely to be true in the case of an individual since the cost for delaying is much higher and the loss of optionality much smaller.
-The argument is still just the case for the age 85 (or 90) SPIA being special since it is the last age offered and the market for SPIAs is more competitive. The analysis should still be made under the assumption that the DIA is the default annuity which to analyze, but it just so happens the DIA often turns into a SPIA due to the lack of availability to defer to even later ages.
-Inflation is likely mean reverting. So, the adjustment to the annualized return needed for delay and SPIA to beat the DIA is likely smaller for longer deferral periods than shorter ones.
Concluding Remarks
-A 5.84% return is still a difficult target to beat, implying a real cost to delaying for the 70 year old couple.
-This 5.84% figure is incomplete. After adjustments, the figure could go up or down, depending on one's circumstances and preferences.
-The loss of optionality for married couples, combined with the smaller cost to delaying, may make the age 85 (or 90 where available) SPIA a sort of attraction point which makes sense for a large percentage of those considering annuitization. This seems less likely to be true in the case of an individual since the cost for delaying is much higher and the loss of optionality much smaller.
-The argument is still just the case for the age 85 (or 90) SPIA being special since it is the last age offered and the market for SPIAs is more competitive. The analysis should still be made under the assumption that the DIA is the default annuity which to analyze, but it just so happens the DIA often turns into a SPIA due to the lack of availability to defer to even later ages.
Statistics: Posted by GoWithTheCashFlow — Tue Jun 18, 2024 6:35 am — Replies 124 — Views 7313