I would look at it the other way around. The planning is based on how much (guaranteed) income you want or need and if you can afford to pay the price. You shouldn't look at it as I have X dollars to spend on an annuity.It isn’t just the risk of the investment itself. Maybe you buy an annuity today on the advice of an advisor. But it turns out that if you’d waited 9 months, you’d have received a 10% higher monthly payment. That’s the kind of uncertainty we all have to accept.
(As an aside, someone with a 7-figure TSP probably has a large pension plus Social Security and doesn’t need a purchased annuity.)
Well, almost. I purchased an annuity based on the income I wanted, but then decided if the purchase price I was willing to accept came close enough. In my case I was projecting how much inflation I wanted to account for. The inflation itself was an estimate so I didn't have a hard and fast objective. I rounded up to overshoot the goal a bit. I already had SS and a decent pension but was still dependent on investment returns to cover inflation. I thought "buy some income now (at a know cost and known return, both of which were acceptable) instead of waiting tor the ravages of inflation." I used a deferred annuity to start payments at the time I guessed they would be needed.
So yes, you are right. There was some uncertainty: A) How much will I need and B) When will I need it? But what I paid and what I got were not all all uncertain.
Statistics: Posted by bertilak — Sun Jul 14, 2024 11:20 am — Replies 24 — Views 1411