1. Sunday, September 9, 2012 - 9:17 PM
True, but the real question is ... are they good for anyone other than the insurance company?
Acording to the SSA Life Expectancy Calculator, the 70 year old man has a life expectency of 15 years, and his wife has a life expectency of 16.7 years.
The rate of return on the example annuity is ZERO at the life expectancy of the wife.
(This excludes the "opportunity cost" of the money, or the interest / dividends it could have earned.)
The current yield on 30 year treasury bonds is 2.86%.
At 2.86%, their $ 500K would provide $ 25000 / year for ~ 29.75 years.
At 3.00%, as mentioned in the article (not specified, but must be something other than treasuries or a bank/CU), the 500K would last ~ 30.5 years.
At 5.00% (high quality preferreds) the $ 500K would last forever, never touching the principal!
I also question why a financial advisor would suggest any annuity purchase in today's low interest rate environment, as all the risk of inflation or rising interest rates is transferred to the buyer.
One more item that struck me as funny ...on the annuity quote website mentioned in the article, a 5 year annuity paying $ 1250 / month or $ 15K per year costs $ 75,757. This is a NEGATIVE 1% return!
Acording to the SSA Life Expectancy Calculator, the 70 year old man has a life expectency of 15 years, and his wife has a life expectency of 16.7 years.
The rate of return on the example annuity is ZERO at the life expectancy of the wife.
(This excludes the "opportunity cost" of the money, or the interest / dividends it could have earned.)
The current yield on 30 year treasury bonds is 2.86%.
At 2.86%, their $ 500K would provide $ 25000 / year for ~ 29.75 years.
At 3.00%, as mentioned in the article (not specified, but must be something other than treasuries or a bank/CU), the 500K would last ~ 30.5 years.
At 5.00% (high quality preferreds) the $ 500K would last forever, never touching the principal!
I also question why a financial advisor would suggest any annuity purchase in today's low interest rate environment, as all the risk of inflation or rising interest rates is transferred to the buyer.
One more item that struck me as funny ...on the annuity quote website mentioned in the article, a 5 year annuity paying $ 1250 / month or $ 15K per year costs $ 75,757. This is a NEGATIVE 1% return!
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