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SPIAs are a good choice. QLACs mentioned in the thread are also effective. I think the most important thing is to work with a fiduciary financial planner to ensure you are buying the right product at the right price for your situation.
Annuities are perhaps among the riskiest products, but not for the risks we often talk about. Annuities’ risk lies in buying the wrong type — and that’s easy to do given the complexity of the products.
Ensuring an individual does not outlive their money is very important. That’s where a good annuity can show its mettle. In addition to delaying taking Social Security to age 70, the right annuity can bolster financial security later in life.
Some experts such as Dr Wade Pfau, recently wrote a book about Safety First Retirement Planning. He suggests that in the era of low interest rates, single premium immediate annuities (SIPA) could supply the income normally generated by a bond component of a retirement portfolio. This will allow you to take the risk of overall total market index funds to hedge the inflation component of your retirement portfolio.
He provides some very keen observations on sequence risks and how using a bucket strategy for retirement income disbursements can be tripped up in executing the bucket strategy.
I highly recommend his book for safety conscious retirees who are considering annuities.
Thanks for posting the link to this book!
Regarding retirement savings – after saving and investing diligently for so many years, and now being on the cusp of early retirement, I am very nervous about snatching defeat from the jaws of victory by leaving too much in stocks. Maybe a SIPA is right for us. Hopefully I can learn enough from the book that I can get over my aversion to handing a huge chunk of our savings to an insurance company.
If you need additional, guaranteed, inflation-protected monthly income in retirement, I always recommend you consider/evaluate deferring social security benefit commencement – either to full retirement age or to age 70 (be careful, remember to consider spouse’s benefits, GPO, WEP, age/health and life expectancy differences, etc.) You can fill income gap with ad hoc distributions from retirement savings, income from part time employment, income from a second career, a spouse’s income, pension benefits, savings, etc.
And, of course, today, most of us have near-zero risk free after-inflation rates of return.
For most middle-class Americans, it is a valuable alternative – fairly priced, incorporating a surviving spouse benefit, inflation indexed benefits and guarantees that all but avoid default and insolvency risks.
One of my near term goals is to get a better “real world” understanding of annuities. I think I understand them conceptually, but I don’t have real world experience of what is available, what they cost, who to buy one form, and what funds (taxable or pre-tax) to use. I’m thinking of an immediate, short term annuity as a bridge between retirement and Social Security at 70.
I like longevity annuities- QLAC’s (Qualified Longevity Annuity Contracts). I use IRA money and can postpone RMD’s as I wait to collect income. I also earn higher returns than a bond since I earn “mortality credits”-additional income earned as a survivor from other deceased annuitants who earn nothing. They also give me an incentive to live longer and collect more income. They can be easily compared and are not convoluted like variabl annuities.