Retirement Annuity Questions and Comments Answered!

[@patbattipaglia2636]

Thank you very informative

[@joe92]

Some people are just biased against annuities because of things they've heard from other people or what they think they know. They have a place in most people's portfolio. Given the performance of the market and the fact that I just retired, I'm really thankful I bought this product. I wish I'd put more into it.

[@jdgolf499]

Troy, thank you for answering my question. However, maybe the question wasn't completely clear. The answer you gave was very informative, but my question was more about how the annuity I would purchase with my lump sum is determined. Example. When I started investigating the lump sum option back in February, I was using the Fidelity guarenteed income calculator to find a payment. With the $117,000 lump sum, starting payments in January, 2023, with a joint annuity, monthly payments would be $524 a month. Now, in June, with the same amount and payment start date, the monthly payment would be $555, an increase of $31 a month. Question is what impacts those payments? Thank you, and keep up the great work.

[@mr.j2776]

I have several annuities and faced the same situation with the lump sum. I suspect that the insurance companies have found suitable bonds that they could invest in. The income they earn allows them to pay the annuity benefits. The bond market looks dismal now, but the bonds they manage to find can be quite lucrative for them. Plus: YOU are now 5 or 6 months older - but probably have the same life expectancy as compared to when you started your research.

[@Mr._Rick]

What drives the increases in income payments. Are the DIA, QLAC and FIA income rider have the same driver. Is it just your age vs life expectancy?

[@jpg7616]

Actuaries at the insurance company calculate your age vs life expectancy and factor in interest rates and internal costs. Simple example. Say healthy person age 67 has avg life expectancy to 87 (20 years) $100k / 20 years = $5k per year + interest rates - a little for profits = what they’re willing to pay So they may say, if we made $0 we could afford to pay $7k/year at current interest rates, but to account for profit, internal costs, and risk - we’ll pay $6500/year. The only diff with a DIA or QLAC is that when you delay the start, you shrink the window of life expectancy. In my example, if starts income at 72 instead, that’s now a 15 year window. $100k/15=$6,667/yr + interest - costs, etc. Each insurance company has their own formula based on their life expectations, interest rate assumptions, and cost structure.

[@jpg7616]

Avg retirees: “In markets like this, I really wish I had more guaranteed income coming in.” Also avg retirees: “I hate annuities!”