I am no expert, this is just something I am considering for myself also. Your post piqued my interest as it sounds like the salesman is trying to sell complex products (that I would never consider buying) 'cause he makes a large commission on those, and hasn't even offered a simple SPIA 'cause he probably doesn't make much on those.My deepest apologies for not responding sooner, got a family to feed.I am no expert by any means but I've read over and over that any annuity that is even worth considering is an SPIA. Did you discuss SPIAs and not those complex products?
Anyway, I dont know what an SPIA is. I looked it up and it seems a bit complex. Would you mind giving me the cliff notes on what it is in a nutshell and how it operates?
It's basically an annuity in its simplest form without all the "creative" stuff you mentioned.
The most simple version is like this: You pay a certain amount and you're guaranteed a certain monthly income for life. For each $100k you get ~$500-550 a month, depending on your age.
Those insurance companies have an army of actuaries that sit there all day and calculate this stuff
For me it's more of a psychological thing. For example, if my monthly expenses are $3000 a month and SS is gonna pay $1500 a month, I might buy a $150k SPIA to cover the other $1500 and "not touch the portfolio".
Or, someone's expenses might be $6000/Mo, SS pays $2000/Mo, Interest/dividends pay $2000/Mo(suppose they go straight into a bank acct), so that person buys into an SPIA to get $2000/Mo and doesn't need to sell anything to cover living expenses.
As discussed many times on the forum it's more of a psychological thing because you can always sell shares, which is no different from *not* reinvesting interest/dividends/capital gains.
Some things to keep in mind:
- There's no inflation protection, you get a fixed amount for life.
- Personally I don't like all the "period certain" offers or the ones where heirs get the money, just a simple fixed SPIA.
- As discussed above, there's some sort of penalty if you buy it and start taking payments before you're 59.5 yrs old but I am not sure what it is, someone more experienced can comment. Also it probably doesn't make sense to take any payments before that age, especially in your situation where you need to limit reportable income.
In general, there's a wealth of information on the Internet and on this forum on SPIAs.
This could be a great deal if you live 'til 100 and don't care about leaving any money behind you.
Otherwise, it's just mediocre. Remember, you never get the principal back.
Statistics: Posted by Alex GR — Wed Sep 18, 2024 2:49 am — Replies 47 — Views 3707