Immediate annuities, yes or no in my case?

[Miss Prim]

Hi.  First time poster.  Have been lurking for about a year.  I am 60 and my husband is 64.  Although we are not early retirees, we have been  pretty mustachian our whole married life.  I have been recommending this website to all the young people I work with and including my son.
 
I will be retiring next year at 62 and will take SS.  DH will retire at the same time and will be 66 and also take SS.  He has a pension he has been collecting since 55 of about $400/ month.  He owns an office cleaning business and makes about $25,000 year net.  It is a part-time business.  I am a laboratory scientist and currently work in Microbiology at a large hospital.  I recently went down to part-time work.  I have been tracking my expenses on Mint (found out about it here) and we currently need about $36,000 per year for expenses.  This is without budgeting for travel which we would like to do as much as possible.

My husband's SS will be about $1600.00 per month, mine will be about $1400.00/mo.  We have a rental property that clears about $400.00/month and currently rent our basement apt for $600.00/month.  And then there is my husband's $400 mo. pension.  I will have the option of taking my pension as a lump sum of about $120,000.00 or buying an annuity that pays anywhere from $500-650 / mo. depending on the terms.  We have $550,000 in 401k/403b combined and a fully paid off house, second home and the rental and no other debt.  I will need a heath insurance policy from the ACA and husband will be on medicare this September. 

We will probably sell the rental property in the next year or two.  It is probably worth about $50,000 and it has been fully depreciated.  So, the income from the rental will go away.  I would like to preserve as much of our estate as possible for our heirs, although they are both doing well and one of them is frugal like us.  The other's husband is very spendy although he makes good money. 

Sorry, I digress!  I am trying to decide if I should buy an annuity with my lump sum pension to make sure all of our regular expenses are covered by our income without taking a lot of distributions from our savings until we have to at 71.5.             Miss Prim

[PeteD01]

Hi.  First time poster.  Have been lurking for about a year.  I am 60 and my husband is 64.  Although we are not early retirees, we have been  pretty mustachian our whole married life.  I have been recommending this website to all the young people I work with and including my son.
 
I will be retiring next year at 62 and will take SS.  DH will retire at the same time and will be 66 and also take SS.  He has a pension he has been collecting since 55 of about $400/ month.  He owns an office cleaning business and makes about $25,000 year net.  It is a part-time business.  I am a laboratory scientist and currently work in Microbiology at a large hospital.  I recently went down to part-time work.  I have been tracking my expenses on Mint (found out about it here) and we currently need about $36,000 per year for expenses.  This is without budgeting for travel which we would like to do as much as possible.

My husband's SS will be about $1600.00 per month, mine will be about $1400.00/mo.  We have a rental property that clears about $400.00/month and currently rent our basement apt for $600.00/month.  And then there is my husband's $400 mo. pension.  I will have the option of taking my pension as a lump sum of about $120,000.00 or buying an annuity that pays anywhere from $500-650 / mo. depending on the terms.  We have $550,000 in 401k/403b combined and a fully paid off house, second home and the rental and no other debt.  I will need a heath insurance policy from the ACA and husband will be on medicare this September. 

We will probably sell the rental property in the next year or two.  It is probably worth about $50,000 and it has been fully depreciated.  So, the income from the rental will go away.  I would like to preserve as much of our estate as possible for our heirs, although they are both doing well and one of them is frugal like us.  The other's husband is very spendy although he makes good money. 

Sorry, I digress!  I am trying to decide if I should buy an annuity with my lump sum pension to make sure all of our regular expenses are covered by our income without taking a lot of distributions from our savings until we have to at 71.5.             Miss Prim

Your expenses are 36k and your combined SS benefits are 36k. You do not need another annuity.

[newleaf]

My concerns would be 1) interest rates are so low right now, and annuities *may* adjust their rates as interest rises (depending on your annuity)--but, that adjustment will likely lag behind the actual market interest rate increases, and 2) the taxes you'd pay on a lump-sum this year should likely be much higher in this tax year with your earned income than they would be if you could put off the distribution until next year, since next year your income will mainly be SS and retirement income.

Can you put off the lump-sum distribution until next year and then just place the after-tax portion in a Vanguard account, investing in low-cost funds?

[Miss Prim]

Thank you both for your replies.  I guess I need to brush up on my arithmetic!  LOL  I would roll the lump-sum into a tax-deferred account.  I am thinking that the annuity is not a good idea.  I guess I was thinking that I should have some kind of pension to make sure we had enough coming in regularly to cover our expenses, which will also include a health insurance policy for me until age 65.  That would mean I would need more that $3000. month.   But, I think we will have enough.  I have some other questions about starting to move some of the tax-deferred money into a Roth account, but I will start a new thread on that.  Thanks again,  Miss Prim