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Thread: annuities

  1. #11
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    retirementoptimizerdotcom and yes i have written to jim.

    thanks everyone. LOTS to read and learn.

    on this forum i seem to have to enter the verification several times. hope they remove it soon. nobody else has them.


  2. #12
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    Quote Originally Posted by asker1 View Post
    on this forum i seem to have to enter the verification several times. hope they remove it soon. nobody else has them.
    Once you have built up enough posts it stops asking.

  3. #13
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    Asker1: you might also be interested in the book "Pensionizing your nest egg" by Milevsky & Macqueen (our own MoneyGal), see here: http://ca.wiley.com/WileyCDA/WileyTi...470952288.html

    A full chapter is dedicated to annuities.

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  5. #14
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    GreatLaker, thank you for your excellent reply on 2017-01-22 to this thread. Your synopsis really helped me.
    Last edited by jimbob.seeker; 2017-05-16 at 01:21 PM. Reason: Typo

  6. #15
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    Here's another article about why annuities are a bad idea.

    http://wealthyretirement.com/how-to-create-your-own-annuity/Create your own annuity

    Currently, the average annual fee is around 2.28%. That’s astronomical. And a lot of it has to do with the fact that annuity salespeople receive high commissions.

  7. #16
    Senior Member NorthernRaven's Avatar
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    Quote Originally Posted by MrsPartridge View Post
    Here's another article about why annuities are a bad idea.

    http://wealthyretirement.com/how-to-create-your-own-annuity/Create your own annuity

    Currently, the average annual fee is around 2.28%. That’s astronomical. And a lot of it has to do with the fact that annuity salespeople receive high commissions.
    That's an American blog, and presumably talking about some sort of variable or equity annuity, which I believe are more common down there than in Canada. A vanilla fixed annuity takes an initial payment, and pays a defined income stream, but the risk and profit between the two belong to the annuity issuer and their mortality guesses. They will set the rates in their favour, and may be paying the originating agent something from their end, but the concept of an "average annual fee" being sliced off the top of annual returns of a portfolio as in a variable annuity don't really apply.

    As mentioned, if one is lucky enough to already have a lot of annuity-like income (CPP, other work pensions, OAS, etc) then including annuities may not be necessary. But if one just has an investment portfolio, turning some of that into guaranteed income without the worries of providing a steady cash flow in the face of market gyrations and other adverse conditions can be useful.

  8. #17
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    One potential use I've seen is to help bridge the gap for those dreaming of living on dividend income while also filling in for the "fixed income" component.

    Say you have $1,000,000 and you want $50K (on top of any government pensions) per year in retirement at age 65 while still preserving some capital. If your portfolio is going to yield 3.5% in dividends, it's going to fall short. But if you take half of it and buy an annuity which has an effective yield of 6.5%, you now get $32,500 from the annuity and your remaining portfolio can generate dividends of $17,500 while letting you preserve your remaining capital.

    Those numbers were somewhat arbitrary to make the example work by the way (before anyone argues with me over the yields )

  9. #18
    Senior Member olivaw's Avatar
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    Quote Originally Posted by balexis View Post
    Asker1: you might also be interested in the book "Pensionizing your nest egg" by Milevsky & Macqueen (our own MoneyGal), see here: http://ca.wiley.com/WileyCDA/WileyTi...470952288.html

    A full chapter is dedicated to annuities.
    +1. Excellent book.
    If you have something to say - then say.

  10. #19
    Senior Member GreatLaker's Avatar
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    Quote Originally Posted by jimbob.seeker View Post
    GreatLaker, thank you for your excellent reply on 2017-01-22 to this thread. Your synopsis really helped me.
    Glad you found it helpful.

    Couple more quick comments. Shop carefully. As others have said, agents will push variable annuities that track stock indexes... these tend to be very lucrative for the agent and full of fine print that in many cases are best avoided. I was referring to simple annuities where the insurance company takes a lump sum and commits to paying a fixed monthly payment for life, optionally with a survivor benefit. These are sometimes known as a SPIA (Single Premium Immediate Annuity) although that may be a term that is more common in the USA. With annuities you lose control of your money in return for guaranteed lifetime income... make sure you can live with that.
    Eschew obfuscation. Espouse elucidation

  11. #20
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    Annuities can be advantageous for some. Milveskys book Pensionize your Nest Egg provides some good examples.

    We have looked into annuities. Not for us at the moment. Perhaps later. But we do not care about management fees. We only care about how much guaranteed dollars we would get each month. Yes, there is an implicit ROI and management costs built into that. I sometimes look at the Hughes trustco site to see what the competitve rates are.

    Read an article that suggested one way to overcome an objection. Buy term life insurance. Buy the annuity. You could win here IF the comparison holding the money in a GIC. There are tax advantages to this. There is potential that your net after tax cash flow could be higher and you still have whatever life insurance policy amount you select at time of death.

    http://business.financialpost.com/pe...ured-annuities

    Last edited by ian; 2017-05-19 at 01:25 PM.

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