annuity question

[LivingAlmostLarge]

There was that article about https://finance.yahoo.com/news/annui...093041180.html

Annuities are going to fund retirement, and I get that people don't have money to buy annuity. But doesn't it cost fees and money to buy and keep an annuity? They aren't just taking the lump sum and paying you out without some sort of cost beyond investing your money.

[disneysteve]

I think the annuity industry has a bad reputation, largely deserved, for sleazy sales practices and high expenses. Add in the fact that once you hand over the money, it's gone. Yes, you get a monthly check forever, but once you die, the payments stop and the principal you paid in is retained by the insurance company. There's a gambling factor involved. Live long and you come out ahead. Die early and you lose the bet.

Immediate fixed annuities can be just fine if you're in good health and want to secure some guaranteed income. You just need to do your homework and make sure you go with a trustworthy firm. I don't know a lot about the process but I'm sure there are sites where you can find out the best issuers with the lowest costs.

[srblanco7]

I think the annuity industry has a bad reputation, largely deserved, for sleazy sales practices and high expenses. Add in the fact that once you hand over the money, it's gone. Yes, you get a monthly check forever, but once you die, the payments stop and the principal you paid in is retained by the insurance company. There's a gambling factor involved. Live long and you come out ahead. Die early and you lose the bet.

I was messing around - looking at annuities out of vague interest. There are versions that guarantee a minimum of a number of years of payments (e.g., 20 years of payments) to either your spouse or heirs should you pass. What I couldn't wrap my head around was an annuity rate of around 6%, where you sacrifice your initial investment vs simply buying a 20 or 30 year t-bond - currently a 30 year is at 4.655% - with the return of principal and exemption from State taxes.