Quote:
Originally Posted by RRGuyNJ
All good points but in the end, does anyone have a crystal ball?
Sure thing is most annuities have large fees attached.
CD's to me are a bit old fasioned but hey, 5% is 5% at today's rates.
For me, I stick with a balanced stock fund with a reputable mutual fund company and enjoy the good market days and growl about the bad market days. I have to admit, I've been doing a fair amount of growling the past couple of years.
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No crystal ball, that's why guaranteed for life is attractive.
If the annuity comes with a fixed payout for life then I don't care about fees. If the company's investments work out and they make money then good for them but if they don't then their income drops while mine stays the same. All I care is that I am getting a good fixed payout for the purchase price.
5% is good but 5% is new. While I don't have a crystal ball I do have a good short-term memory and we haven't seen 5% for quite a while. Perhaps rates will go higher or maybe they will drop again in the next 20 years. Back to that crystal ball.
If that amount is put into a CD Ladder at 5% then it should last 20-22 years at the $1,625/month draw rate as long as the 5% holds for the entire time. At the end of the 22 years I would have $0. If the amount is put into the annuity and I live to 100 then the amount would last 30 years. At the end of the 30 years I would have $0.
Big consideration: If there is a growth period between the time the annuity is purchased and when it begins to pay then that would make a difference. That 30 years of annuity payout might then be from age 80 to 110. The money in the CD would pay out immediately or it would grow and extend the time it was available. I don't want to bet on when I will die but I'm pretty comfortable with the idea that I won't live to 110.
I'm not in a hurry to purchase an annuity but I am thinking about it. Sure, my money might grow if I kept it in the market and I would have something to leave to my heirs but there is always the chance that it would not. Having some left over for heirs is nice but having a guaranteed source of income is nice too.