DiscussMormonism.com

Ok, are any of you economics minded guys personal financial or 401K gurus?

Specifically, does a guaranteed living benefit (GLiB?) program make sense for a modestly middle class guy 15 years from retirement?
This is also called a "income lock" I think.


Edit: Ooops, I guess this should have gone in "off topic".
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Depends. lol

What is your risk appetite? what would be the ratio of this investment to your other investments (eg. stocks, bonds, money market, etc.)? How long do you think you'll live?

In summary, annuities can and should be a part of your portfolio. But not a big part - especially 15 years away from retirement. Also, if your family has a history of not living past 75, for example, an annuity may not be the right choice. But the opposite is also true.

You'd really need to talk to someone who can look at your entire investment portfolio - to get the full picture.

TBSkeptic wrote:Depends. lol

What is your risk appetite? what would be the ratio of this investment to your other investments (eg. stocks, bonds, money market, etc.)? How long do you think you'll live?

In summary, annuities can and should be a part of your portfolio. But not a big part - especially 15 years away from retirement. Also, if your family has a history of not living past 75, for example, an annuity may not be the right choice. But the opposite is also true.

You'd really need to talk to someone who can look at your entire investment portfolio - to get the full picture.

I think this is something I buy for a percent .065% of my portfolio value. It guarentees that I can withraw living expenses based on the high watermark of my retirement value. For example, if my retirement reaches say 800,000 but then drops to 300,000 for some reason right before I retire, I can still withdraw monthly (some %) as if I had 800,000 and I am guarenteed to not run out of money before I am 90 even if they have to pay for it.

also called a "Guaranteed Minimum Withdrawal Benefit (GMWB)"

I have to decide on this but I hate this kind of stuff so any advice would be appreciated.

Not normally a good purchase unless you have a very specific need or concern you need to insure away. You normally need to be in the program for 10 years before you can activate the GMWB and you need to annuitize at that point and there are additional premiums for the GMWB. If you have a 401k you already have tax benefited status on the account if you put it in an annuity you'll have to pay .5-1% for the GWMB, 1.5% for the administrative and mortality expense, plus the management fees for the investments of 1% so you could be looking at a total of 3-3.5% annual fees for something you're not likely going to use. Of course advisors and insurance companies make a nice commission on sales of products like this.

Your best option is going to a fee based financial planner that accepts and makes absolutely no commissions. Avoiding those extra fees could add 20% or more value over 15 years but not paying for a unlikely event.