Author Topic: Annuity Quote  (Read 623 times)

OldandGrumpy

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Annuity Quote
« on: May 30, 2019, 02:48:41 PM »
Interesting information on Vanguard annuities - at least it is interesting to me

An employer I left 30 years ago is terminating it's defined benefit pension plan.

My options are:
1. Rollover lump sum to an IRA
2. Take a lump sum distribution (and pay the taxes)
3. or - the Pension plan will purchase an annuity for me from an insurance company.

Just for comparision purposes -
I called to see if Vanguard could provide a higher annuity than the one offered by the pension plan.

Result - 
The monthly single life annuity offered by by Vanguard was 10% lower than offered by the pension plan.
and - I would pay a 2% commission on an annuity purchase through Vanguard.

I will rollover the money to a Vanguard IRA and into VBTLX and VTSAX

information below is copied from the email sent to me by Vanguard:
"Income Solutions®
An annuity purchase program of Hueler Investment Services, Inc. Delivered by Vanguard"

"Please be advised that all annuity quotes reflect a one-time, upfront commission equal to 2% of the deposit amount. The amount displayed already reflects this commission, and is the amount you would receive from your annuity. This commission is paid by the insurance company to Hueler Investment Services, Inc. only if a purchase is made; there is no cost to obtain a quote. "

bacchi

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Re: Annuity Quote
« Reply #1 on: May 30, 2019, 03:16:27 PM »
COLA on the annuities?

Do you have heirs you want to leave money to?

OldandGrumpy

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Re: Annuity Quote
« Reply #2 on: May 30, 2019, 03:25:05 PM »
COLA on the annuities?

Do you have heirs you want to leave money to?

No COLA(s) on either one of the annuities.

This money is not a big part of my portfolio (less than 5%) - so I will be leaving money to heirs from other sources.

bacchi

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Re: Annuity Quote
« Reply #3 on: May 30, 2019, 04:02:16 PM »
COLA on the annuities?

Do you have heirs you want to leave money to?

No COLA(s) on either one of the annuities.

This money is not a big part of my portfolio (less than 5%) - so I will be leaving money to heirs from other sources.

Have you run a VPW (variable percentage withdrawal) calculator on the lump sum amount? A simple 4% withdrawal doesn't work as well because it often leaves more money than starting. A VPW calculation would withdraw the amount to $0 depending on your estimated lifespan.

Or, given that it's not a big part of the portfolio, just don't worry about it and take the company annuity.

OldandGrumpy

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Re: Annuity Quote
« Reply #4 on: May 30, 2019, 04:26:18 PM »
I will read-up on VPW

bacchi

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Re: Annuity Quote
« Reply #5 on: May 30, 2019, 05:00:57 PM »
I will read-up on VPW

http://cfiresim.com

Select VPW for your spending plan.


You can use the PVA formula but it's probably equal to what you're being told.

http://financeformulas.net/Present-Value-Annuity-Factor.html

reeshau

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Re: Annuity Quote
« Reply #6 on: May 31, 2019, 02:19:44 AM »
I'm not surprised that your individual quote is lower, given that interest rates are so low now, even (especially!) on long-term bonds.

1) They are getting a group rate.  There is much less chance that the group, as a whole, will be a statistical outlier than you will be--law of averages.  (and, bundled purchase along with other insurance for the company)

2)  The company needs to roughly make people whole, based on what they have promised.  so they may be paying their insurance company something to increase the return to make it work.  They are paying to get out of their liability