Comments on: Inflation Adjusted Immediate Annuity! http://www.joetaxpayer.com/inflation-adjusted-immediate-annuity/ Financial Commentary For The Average Joe Thu, 09 Feb 2012 00:23:50 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Dave http://www.joetaxpayer.com/inflation-adjusted-immediate-annuity/comment-page-1/#comment-1262 Dave Wed, 10 Sep 2008 16:57:20 +0000 http://www.blog.joetaxpayer.com/?p=421#comment-1262 Inflation-adjusted income annuities are also available from Principal through the Elm Annuity brand (http://www.elmannuity.com/income_annuity/decision_guide.html). For $200K a 65 year old male can get $1067 a month for life, inflation adjusted. It appears to be slightly less than the Vanguard/AIG product. There is some benefit to diversification (in case the underlying insurance company were to default) so it might be worthwhile to put $100K into each. Inflation-adjusted income annuities are also available from Principal through the Elm Annuity brand (http://www.elmannuity.com/income_annuity/decision_guide.html). For $200K a 65 year old male can get $1067 a month for life, inflation adjusted. It appears to be slightly less than the Vanguard/AIG product. There is some benefit to diversification (in case the underlying insurance company were to default) so it might be worthwhile to put $100K into each.

]]> By: JOE http://www.joetaxpayer.com/inflation-adjusted-immediate-annuity/comment-page-1/#comment-1124 JOE Wed, 03 Sep 2008 20:36:56 +0000 http://www.blog.joetaxpayer.com/?p=421#comment-1124 There it is. 6.8% for a 65 year old. Pretty remarkable. I'll read a bit more on their site and add it to my immediate annuity article. Given the focus on the 4% initial withdrawal rate, this annuity can be used so a 65 year old can buy a $40K/yr initial stream with only $588K instead of $1M. Not bad at all. Thanks for the pointer. Joe There it is. 6.8% for a 65 year old. Pretty remarkable. I’ll read a bit more on their site and add it to my immediate annuity article. Given the focus on the 4% initial withdrawal rate, this annuity can be used so a 65 year old can buy a $40K/yr initial stream with only $588K instead of $1M. Not bad at all. Thanks for the pointer.
Joe

]]> By: Dave http://www.joetaxpayer.com/inflation-adjusted-immediate-annuity/comment-page-1/#comment-1108 Dave Wed, 03 Sep 2008 12:54:53 +0000 http://www.blog.joetaxpayer.com/?p=421#comment-1108 https://personal.vanguard.com/us/accounttypes/annuities/ATSAnnuitiesOVContent.jsp Select the Vanguard Lifetime Income link. https://personal.vanguard.com/us/accounttypes/annuities/ATSAnnuitiesOVContent.jsp

Select the Vanguard Lifetime Income link.

]]> By: JOE http://www.joetaxpayer.com/inflation-adjusted-immediate-annuity/comment-page-1/#comment-1078 JOE Tue, 02 Sep 2008 18:52:15 +0000 http://www.blog.joetaxpayer.com/?p=421#comment-1078 A link to the prospectus would be appreciated. Googling for this comes up dry. Thank you for visiting. Joe A link to the prospectus would be appreciated. Googling for this comes up dry.
Thank you for visiting.
Joe

]]> By: Dave http://www.joetaxpayer.com/inflation-adjusted-immediate-annuity/comment-page-1/#comment-1075 Dave Tue, 02 Sep 2008 16:24:42 +0000 http://www.blog.joetaxpayer.com/?p=421#comment-1075 Joe, Vanguard (in partnership with AIG) offers a Fixed Single Life Annuity with inflation adjustments. $200K would buy a monthly payment of $1130 for a 65 yr old male, with yearly inflation adjustments (based on CPI-U). This works out to a 6.8% starting withdrawal rate. The other thing to note is the tax advantages of immediate annuities. Like VAs, immediate annuity payments are only partially taxed (if purchased using after-tax funds). Some of the payment is treated as a return of principle. For the example above, $832 is treated as return of principle, so only $298 a month is taxable income. Contrast this with a ladder of CDs, where 100% of the interest received is taxable. Dave Joe,

Vanguard (in partnership with AIG) offers a Fixed Single Life Annuity with inflation adjustments. $200K would buy a monthly payment of $1130 for a 65 yr old male, with yearly inflation adjustments (based on CPI-U). This works out to a 6.8% starting withdrawal rate.

The other thing to note is the tax advantages of immediate annuities. Like VAs, immediate annuity payments are only partially taxed (if purchased using after-tax funds). Some of the payment is treated as a return of principle. For the example above, $832 is treated as return of principle, so only $298 a month is taxable income. Contrast this with a ladder of CDs, where 100% of the interest received is taxable.

Dave

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