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What is everyone using for immediate income these days? What steers you in that direction?
Immediate Income
- Thread starter SanDiego619
- Start date
- 8,707
Lottery tickets and bank robberies work for me.
It's called dividends and selling off a portion of your investment (ETF's, stocks) if and as needed.
- Thread starter
- #4
- 148
It's funny. I figured since this was in the annuities section that people would understand I meant for clients looking to trigger income immediately within an annuity.
I know. ETF's = a better choice
- 10,711
Not true. Its all about what you need to achieve. But even with ETFs the max income you will be able to withdraw is 5% per year. Most financial advisors use 4%. And even 4% is being questioned now as too high by many top institutions. (investment geared institutions)
Assuming a 6%-7% return that gives you around 0.5% inflation protection on your income (non-guaranteed).
A SPIA can offer decent inflation protection along with a payout of over 5%. And that is guaranteed no matter what.
Lots of advantages to having a portion of your retirement funds in something like this. Basically it is used to cover basic necessary expenses.
You guarantee the income you need from something like this, then you can actually take more chances and have more fun with the money you have in the market.
Also, if it is non-qualified (not pre-tax money in an IRA or 401k or other Qualified Retirement Plan), you get a tax exclusion ratio on your income. For a 65 year old as much as half of the income can be excluded from income taxes.
So when you consider the higher income, along with the tax benefits, along with the guarantee; a SPIA does what no ETF can ever do.
(also, blind sector based purchases like ETFs make are destroying the foundation of the stock market. go with indexed funds instead out of principle. or at least limit your ETF holdings.... think of it as the market equivalent of going green...)
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Whoever pays the highest.
The fact that they pay a higher income than the competition.
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RetirementHoriz
New Member
- 7
For the purpose of "Guaranteed" lifetime income there are other products that offer additional benefits without annuitizing the funds with an irrevocable decision like using a SPIA. There are fewer reasons in today’s annuity space where boomers or senior clients would benefit by give up future access to their funds when there are true inflation protected options using FIA's with income benefit riders. There are factors that a true advisor will take into consideration such as age, health of the client, beneficiaries that are likely to be involved at the death of the client, additional future access to the money while the client is alive, additional LTC needs that many product now include, and the strength of the carrier is VERY important; not only going with "Who pays the most". They might claim to pay the most, but if the carrier isn't around in 20-30 years and the client is still depending on that income, was it truly the best for that client? I'd also argue that no one should feel that they should have more "fun" with the remaining money by placing it in a product with true risk. Unless the client is foolish they should never take this advice. Maximize the growth potential without compromising un-needed risk. Las Vegas has been around for years if the client wants to go "have fun".
To the other point about the withdrawal rate being 4% in the past, that number is now being researched around 2.9%, which clearly isn't worth taking additional risks when there are FIA's providing increases to a guaranteed income based off of an index gain each year that the client is in the distribution phase. (NOT annuitization of the funds) The income will not only be paid to the client for their lifetime, but those payments never stop growing even if the accumulation value is exhausted.
I'd be glad to help explain this to you further is you're unaware of this type of options for your clients.
- Thread starter
- #8
- 148
Can't say I understood 100% of this, but it seems to make sense.... haha. Welcome to the forum!
- 10,711
Im well aware of the Income Rider Options out there and the benefits they have. It just seemed like a question geared more towards SPIAs. So that is how I answered it.
And no, it is not just about the total amount of income, features and carrier strength are important. But there are plenty of extremely strong SPIA carriers who have been in the top 10 over the past 6 months.
Most of the top SPIA rates recently have been from A rated carriers. So the company strength issue is usually a non-issue in the spia space. ANICO, Guardian, Met, LFG, ING, Pac, NYL; all of these have had strong spia rates over the past 6 months.
I used the term "fun" loosely. But it seems (from previous threads) that the poster I responded to enjoys researching his investments and directing his investment decisions. Which is why in his case I used the word fun.
But also from a total risk tolerance perspective, if you decrease risk in one bucket, it gives you the potential opportunity to increase the risk in another bucket. That is assuming that you want to keep your total risk at the same level. As most of us know though, many people are looking to decrease overall risk, and use a SPIA or GLWB Rider to achieve that.
There is also the pure numbers side of the comment... if it takes less of your assets to produce X amount of income, then that leaves a greater portion to be used to meet other goals. Those were my main points.
And if you would like to share what products you feel are best for immediate income Im sure the forum members would much rather you share with everybody here on this thread!
