Buy a SPIA now (64 years old and retiring) Or MYGA and buy in 5 years?

[JeffRome2023]

Sort of a catch 22 here--I am considering buying a SPIA now as annuity payout are higher than past. And I am retiring. I had originally considered buying a deferred INCOME annuity and starting payout in 5 to 10 years. But someone recommended instead I MYGA then transition the MYGA payout to a SPIA.
All viable options. I guess my question is--if I MYGA, and rates go down, will I lose out on income from purchasing the SPIA at a lower rate environment, even with the extra money from a 5-6% MYGA?
Thanks.
Not interested in indexed annuities!

 

[Tahoe Ray]

Sort of a catch 22 here--I am considering buying a SPIA now as annuity payout are higher than past. And I am retiring. I had originally considered buying a deferred INCOME annuity and starting payout in 5 to 10 years. But someone recommended instead I MYGA then transition the MYGA payout to a SPIA.
All viable options. I guess my question is--if I MYGA, and rates go down, will I lose out on income from purchasing the SPIA at a lower rate environment, even with the extra money from a 5-6% MYGA?
Thanks.
Not interested in indexed annuities!

SPIAs are based as much on mortality as they are on interest rates.

So you'll be 5 years older which should mitigate the lower rates in 5 years. There's no way to truly predict but keep in mind that these products are all intertwined (meaning that the same carriers who offer DIAs also offer MYGAs/SPIAs so they are all priced together in essence)

You can also buy MYGAs with income riders that have the best of both worlds, but aren't the top of class for either. They are good for people who are unsure of which option (MYGA/SPIA vs. DIA) may be best, though.

 

[JeffRome2023]

thank you!

 

[Allen Trent]

Guessing locking in a DIA with income to start in 5 years would be better than MYGA now & rolling dice on SPIA rates in 5 years. DIA can have a bit of boost too as you are irrevocably making the selection now & if you were to die before payments begin, beneficiary might only get refund of premium, etc.

Rates have dropped a bit in recent weeks & many predict they could further drop over the next 11 months as government prepares for improved pre election mortgage rates, etc.

 

[Tahoe Ray]

Guessing locking in a DIA with income to start in 5 years would be better than MYGA now & rolling dice on SPIA rates in 5 years. DIA can have a bit of boost too as you are irrevocably making the selection now & if you were to die before payments begin, beneficiary might only get refund of premium, etc.

Rates have dropped a bit in recent weeks & many predict they could further drop over the next 11 months as government prepares for improved pre election mortgage rates, etc.

I agree but you could make a case either way.

OP doesn't want an index, and that's fine so I didn't mention it. But for others looking at the thread, a DIA will get absolutely smoked by the better indexed products with lifetime benefits (ignoring the indexing completely, just looking at the guaranteed income).

I just did a case on Thursday for a client. DIA on a 10 year deferral vs. and FIA on 10 year deferral. The FIA generated 24% more lifetime income. This is not using any crediting multipliers, stacking, or other unicorn/rainbow promises that some of these products use. It's on the guaranteed side of the ledger. And, if circumstances change for the client, they can get out and aren't stuck to the terms of the contract (like the DIA).

Even on a shorter deferral/older age (vs the case I mentioned) like OP, FIA will still beat DIA by 8-10%.

 

[Allen Trent]

OP doesn't want an index, and that's fine so I didn't mention it. But for others looking at the thread, a DIA will get absolutely smoked by the better indexed products with lifetime benefits (ignoring the indexing completely, just looking at the guaranteed income).

100% agree. Yup, still surprised by any SPIA & DIA sales the last decade or 2 with income riders available on other products. Understand why someone with old outdated existing annuity or life products with old shorter mortality tables & older higher guarantees might annuitize their old contract, but income riders provide more flexibility & potential for beneficiaries to get something too if index performs compared to irrevocable SPIA/DIA

 

[JeffRome2023]

But then with Indexed annuities they can change the game on their whim at pretty much anytime--yield and rate caps, participation rates. At least with income annuities you get what you are guaranteed. But yes, no upside with market increases.

 

[Tahoe Ray]

But then with Indexed annuities they can change the game on their whim at pretty much anytime--yield and rate caps, participation rates. At least with income annuities you get what you are guaranteed. But yes, no upside with market increases.

Not true.

Indexed products have guaranteed income options. You don't need to have stacking and/or multipliers (Allianz) to get your income 100% guaranteed.

Athene and Corebridge will both destroy an income annuity (SPIA/DIA) in many cases on a guaranteed basis. The only factor is for NQ money and taxes, but even then the math is pretty equal.

 

[JeffRome2023]

well, anyone interested in indexed should at least read this:
[EXTERNAL LINK] - The Complicated Risks and Rewards of Indexed Annuities | FINRA.org.

And this:
https://www.kiplinger.com/article/r...know-before-getting-annuity-income-rider.html

I'm not saying they are not good products. They provide good commissions, can be pretty complicated, and should be understood though.

 

[scagnt83]

well, anyone interested in indexed should at least read this:
[EXTERNAL LINK] - The Complicated Risks and Rewards of Indexed Annuities | FINRA.org.

And this:
https://www.kiplinger.com/article/r...know-before-getting-annuity-income-rider.html

I'm not saying they are not good products. They provide good commissions, can be pretty complicated, and should be understood though.

If you want to maximize income, FIA Riders pay a higher income on a Guaranteed basis than most SPIAs or DIAs.

Comp has nothing to do with it.

Numbers dont lie. And the Guarantee on the FIA Rider is no different than the Guarantee on the SPIA.

---

In regards to the article. The fees are meaningless when compared to a SPIA.... because the Fee (using Guaranteed rollups) has zero impact on the Income Payout.

And the "real life" example they used..... a 5% rollup rate... is 50% less than what most rollup at. You can get 10%+ guaranteed rollups.

Numbers dont lie.

But articles that derive ad dollars from mutual fund companies certainly can lie about the "real life" numbers involved.