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Encore
A blog about living in and planning for retirement

Interest in Advanced Life Deferred Annuities?

    • Why in the world do financial writers like yourself never seem to include the negatives to fixed annuities? The two most important negatives are:
      * there is no inflation adjusted increase in the income stream, so the longer you live, the fixed cashflow becomes less and less valuable, adjusted for inflation
      * if you die early, there may be no assets for your heirs or charities?

    • these things are poison….there’s no need to turn your assets over to fee-mongers when you can easily keep your money and enjoy continuous income. consolidated edison has paid dividends for over 100 years running and has increased the dividend payout for several consecutive decades. your original investment grows and the yearly payout grows; don’t need a fancy devious insurance product to do this. look up the performance for consolidated edison(ed) keep things simple and better yet keep your money!

    • ALDAs have been around for a while and have not been very popular. I am a big believer in incorporating some form of an annuitized solution because the economics are compelling. When you purchase an immediate annuity you are “swapping” the estate that you would have left if you died before your life expectancy for income that you will get if you live beyond your life expectancy. This, on the surface, seems like a fair exchange, particularly when you probe the concerns about retirees (usually at the top of the list is to not be a burden on their children, not to leave them an estate). Further, you can purchase a fixed immediate annuity at age 65 that grows at 3% per year that pays an initial benefit of 5.5% of premium, which is much higher than the 4% rule used for systematic withdrawals, and the reason is fairly simple – because when you “self insure” under a systematic withdrawal strategy, you have to hold back on your spending to keep a reserve in case you live beyond your life expectancy – under an immediate annuity, you don’t have to do this because you benefit from those annuitants that did not reach their life expectancy.

      I wrote a blog on this point if anyone is interested http://bit.ly/Hbm9ou

    • This type of annuity is not the best annuity product. If you die before 85, you lose all your investment. Many company offer a hybrid annuity–you can withdraw certain percentage(usually 10%)per year and your beneficiery still receive full death benefit when you die

    • Lydia

      The problem with the annuities you are referring to is that the 10% is not guaranteed for life – once the cash value is drawn down to zero there is no more income. There is another type of annuity that is similar to the one that you describe that does provide a lifetime guarantee, but the guaranteed income is significantly less than what you can get from an ALDA or a conventional immediate annuity.

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