Suitability for Annuities plan

Have a Life/health client that called me to discuss annuities. She has about $100K in cash and wanted to put at least half in an annuity. She doesn't work, and has no income. She is drawing a minimum of $1500 a month out of this cash bucket just to pay her living expenses, and sometimes more..I told her that we needed to wait, until she began drawing SS, before discussing an annuity again.

IMEO, I didn't think that an annuity for her was suitable, but curious if any of you that write a lot of annuities would have done it.
 
How many years till 65? Can she go early? What is expected SS payment? Would a SPIA generate 1500/month if half went into the SPIA and for how long a period? With no other source of income I dont think I would write it since she cant tap that for more than the payout amount. Maybe she should look into getting a job instead.
 
Have a Life/health client that called me to discuss annuities. She has about $100K in cash and wanted to put at least half in an annuity. She doesn't work, and has no income. She is drawing a minimum of $1500 a month out of this cash bucket just to pay her living expenses, and sometimes more..I told her that we needed to wait, until she began drawing SS, before discussing an annuity again.

IMEO, I didn't think that an annuity for her was suitable, but curious if any of you that write a lot of annuities would have done it.

with her current burn rate of 18% of her total money, there likely is no annuity that could fit the situation as she would be hit with surrender charges immediately in almost all deferred annuities plus some that pay better interest dont even allow access to 10% free withdrawal that quickly.

only possible scenario would be a very short term SPIA to fill in until she can collect SS, but even then, 1-5 year SPIA fixed periods are very rare & if there are any, they are more designed for Medicaid Spend down & pay little to no interest anyway. in this scenario, a short fixed period SPIA is likely no better than cash at bank whereas in a Medicaid spenddown, it is being done by an elder law attorney to protect assets & the interest of 0% doesnt matter.

I would say you did the right thing unless you can find a carrier with an 18% guaranteed lifetime withdrawal rider (LOL)
 
only possible scenario would be a very short term SPIA to fill in until she can collect SS, but even then, 1-5 year SPIA fixed periods are very rare & if there are any, they are more designed for Medicaid Spend down & pay little to no interest anyway
You're very correct, Allen. In fact, few carriers will even offer these because they end up paying out less than the principle (effective negative interest).
 
Are you saying..gasp!...that if you put $50,000 in an annuity you can't pull out $1500 per month for life?!!!
Well what is this world coming to?
 
I told her that we needed to wait, until she began drawing SS, before discussing an annuity again.

That makes the most sense. When you have an "income bridge" account to maximize (or become eligible for) Social Security, that money needs to be as safe as possible - particularly with a high % draw down rate.

If the draw-down rate was 10% or less, then an annuity CAN make sense. (Athene Agility 10 allows for 10% withdrawals based on the initial premium rather than anniversary values.) Doesn't appear that it makes sense in this case with the given information.
 
If the entire $100k is not needed for income to bridge until SS hits, then you could possibly put part of the difference into an annuity for growth purposes. Maybe not $50k, but possibly $25k.

If its not needed for the next 5 years, its better than sitting in cash.
 
If the draw-down rate was 10% or less, then an annuity CAN make sense. (Athene Agility 10 allows for 10% withdrawals based on the initial premium rather than anniversary values.) Doesn't appear that it makes sense in this case with the given information.

Yes, when she first asked about it, I was hoping that this was going to be a "bridge account" type of case(in the true sense) and immediately began reviewing annuities with the 10% withdrawal feature. I couldn't make it work, if that was all the $$ she had with no income and didn't want to call her back with bad news.

Fortunately she called me back and confirmed that was all the money, and she is sometimes drawing down at a rate higher than first indicated...at this point, I can only recommend going back to work, or getting married.
 
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