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I'm glad to see annuities mentioned as a component of retirement income. And she correctly (IMHO) groups annuities and social security together. I'm not sure I see where the article says that one should consider an annuity part of one's fixed income allocation. (Could be; I can also make the case for considering it a cash allocation.)
In any case, a couple of observations about the article:
- She asserts that most annuities start paying out at age 80-85. That's misleading. Most annuities are written so that if you still have them at that age, you must annuitize. But the fact is that somewhere around 96%-98% of annuities are never annuitized. That means that the annuities are not paying out at all, at least not in the traditional sense of the article. There are guaranteed income riders that will allow you to withdraw money without annuitizing, and those are often designed for withdrawals in your 70s or even earlier.
- I'm inferring from the terminology "deferred income annuity", she is talking about "fixed income" annuities, as opposed to variable annuities.
- With interest rates so low, now may not be a great time to buy a deferred annuity. A possible strategy is to diversify by buying at different times (years). Or if one can afford the risk, keep the money invested a little longer until rates start their inevitable ascent, before buying.
Comments
In any case, a couple of observations about the article:
- She asserts that most annuities start paying out at age 80-85. That's misleading. Most annuities are written so that if you still have them at that age, you must annuitize. But the fact is that somewhere around 96%-98% of annuities are never annuitized. That means that the annuities are not paying out at all, at least not in the traditional sense of the article. There are guaranteed income riders that will allow you to withdraw money without annuitizing, and those are often designed for withdrawals in your 70s or even earlier.
- I'm inferring from the terminology "deferred income annuity", she is talking about "fixed income" annuities, as opposed to variable annuities.
- With interest rates so low, now may not be a great time to buy a deferred annuity. A possible strategy is to diversify by buying at different times (years). Or if one can afford the risk, keep the money invested a little longer until rates start their inevitable ascent, before buying.