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I can't really comment on the US annuity prices, as I am based in the UK - but I find it unlikely that an $80k annuity at 55 is purchasable for a million dollar

by Ntrails 12y ago

I can't really comment on the US annuity prices, as I am based in the UK - but I find it unlikely that an $80k annuity at 55 is purchasable for a million dollars given where yields are atm. I mean cripes, right now you would be lucky to find a 5k inflation linked joint life-annuity with 100k retiring at 65. The annuity market is in no way optimised for emotion. It is priced based on capital retirements, mortality numbers, longevity trends, investment returns, bond yields, and a bunch of other things - before you even get to the insurer then trying to be competitive in the market. You are buying insurance. Same as medical insurance, plenty of people get less than they pay in - that's the whole point. Risk pooling means redistribution of wealth, always. If you want to run the numbers on drawdown and argue it's better than annuitisation, feel free. Just make sure you price in your 40% drop in equities scenario.

declan 12y ago
Ahem! This is really an empirical question with an easy Google search answer. :) If you go to http://www.immediateannuities.com/ http://www.immediateannuities.com/ and say you're a 50-year old man (the age at which at least in some CA cities a police/fire municipal worker can retire with 90% pension), with a 40-year old wife, and you invest $2 million, you'll get an immediate income annuity of $88,560 a year. That's in the ballpark of what the Forbes article was saying ($80,000 a year). The numbers don't change that much if the age of the wife approaches 50. So <ntrails> has the better of the argument, I think: There's no evidence you can buy an $80K annuity for $1M. And I suspect it would cost even more if it were indexed for inflation, as many municipal pension benefits are.
- parennoob 12y ago
  patio11 / others, do you know of any specific annuities (that you can link to) that would guarantee ~$80,000 a year for $1 million? I would be strongly interested in following them.

by Ntrails 12y ago

declan 12y ago

Ahem! This is really an empirical question with an easy Google search answer. :) If you go to http://www.immediateannuities.com/ http://www.immediateannuities.com/ and say you're a 50-year old man (the age at which at least in some CA cities a police/fire municipal worker can retire with 90% pension), with a 40-year old wife, and you invest $2 million, you'll get an immediate income annuity of $88,560 a year. That's in the ballpark of what the Forbes article was saying ($80,000 a year). The numbers don't change that much if the age of the wife approaches 50. So <ntrails> has the better of the argument, I think: There's no evidence you can buy an $80K annuity for $1M. And I suspect it would cost even more if it were indexed for inflation, as many municipal pension benefits are.

parennoob 12y ago
patio11 / others, do you know of any specific annuities (that you can link to) that would guarantee ~$80,000 a year for $1 million? I would be strongly interested in following them.