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Rin has changed his mind, use annuities if you have already taxed cash

By Rin following x   2019 Mar 21, 12:38pm 586 views   9 comments   watch   nsfw   quote     share    


In the past, I've railed against annuities but then it dawned on me ... I'm not really using all of my post-tax cash, on a day to day basis.

And thus, isn't it better to let that cash grow, tax deferred, on an annuity vehicle, with the idea that at the age of 59.5, I can get a steady paycheck "for life" or let's say a 20 year distribution.

Sure, a huge chunk of one's post-tax portfolio should be in dividend investment (DRIP) equities, however, sometimes, it's better to lower one's annual tax burden and risk, by not playing at all.

The thing here is that insurance companies are heavily legislated and each state has its own rules for receivership, if an insurance company were to go bust. And so if you follow your state's rules, you should be able to create an annuity profile which is 100% backed by your vicinity.
1   Rin   ignore (3)   2019 Mar 21, 12:39pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

The idea here is that the annuity should at most, pay for your daily expenses, not living large.

That's the whole point of having dividend stocks. That's where one can live like a king and enjoy the good times.
2   rocketjoe79   ignore (0)   2019 Mar 21, 1:34pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

No Inflation protection?
3   willywonka   ignore (3)   2019 Mar 21, 1:46pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

As long as the annuity company doesn’t go balls up. Annuities are not insured.
4   rdm   ignore (1)   2019 Mar 21, 1:58pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

The way they sell these is to print out a sheet giving you returns that look really good. But these are based on assumptions not guarantees. Always look and see what the guaranteed rate of return is, typically it quite low.
5   Rin   ignore (3)   2019 Mar 21, 2:16pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

willywonka says
As long as the annuity company doesn’t go balls up. Annuities are not insured.


Most of these products are insured by your state, up to $100K, per firm. And thus, use that as your guideline for insurance.
6   Rin   ignore (3)   2019 Mar 21, 2:17pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

rdm says
Always look and see what the guaranteed rate of return is, typically it quite low.


In reality, annuities are not a 'great' investment. At best, they're the equivalent of having a tax deferred CD, for money which you don't need for another let's say 15 to 20 years.

For the most part, I stick with dividend stocks.
7   MrMagic   ignore (11)   2019 Mar 21, 3:38pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rin says
In reality, annuities are not a 'great' investment. At best, they're the equivalent of having a tax deferred CD, for money which you don't need for another let's say 15 to 20 years.


It also takes the place of safer invested bond money, so if someone has a portion of their portfolio in bonds, place that portion in an annuity which will give a guaranteed payout.

Rin says
I'm not really using all of my post-tax cash, on a day to day basis.

And thus, isn't it better to let that cash grow, tax deferred, on an annuity vehicle, with the idea that at the age of 59.5, I can get a steady paycheck "for life" or let's say a 20 year distribution.


Exactly, for money not anticipated being needed for a major purchase, it can be a better strategy to have a known, fixed monthly check coming in. Plus, if you get the right annuity, it can have a "out clause" where you can pull your money back out after a certain period of time, if needed, just like a CD.
8   B.A.C.A.H.   ignore (0)   2019 Mar 21, 7:08pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

I get annuity quotes from time to time to benchmark my self directed retirement accounts.

That said, I am skeptical. So much can change, including the tax laws. And if I lived in Illinois or Puerto Rico I would not be so sure about that state (or commonwealth) backstop. I know, you live in a different state. But shakey state finances could become a contagion.

Besides, you have an annuity with inflation protection (such as it is) and the flexibility to figure out late in the game, when to start drawing on it: social security. Backed up with pitchforks and the printing press. I'll take that over any state "guarantees".
9   Rin   ignore (3)   2019 Mar 21, 8:00pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

An annuity is like the cash version of precious metals.

So if one has let's say $500K, at most $50K should be in some annuity vehicle, with another $50K in PMs. The rest can be among dividend stocks, bonds, etc.

B.A.C.A.H. says
So much can change, including the tax laws


I think it's possible to buy a policy, while temporarily being domiciled in a state with good finances, before moving to Puerto Rico or even abroad.

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