southerndoc

life is good
Moderator Emeritus
Lifetime Donor
15+ Year Member
Jun 6, 2002
12,025
1,002
Atlanta
Status
Attending Physician
Anyone have any experience with annuities?

I'm curious if purchasing one now (mid 30's) would be a good investment option for someone who wants a lifetime guaranteed payout. (i.e., if I retire at 60, I would get a set amount annually for as long as I live)
 

nontrdgsbuiucmd

10+ Year Member
Mar 28, 2008
998
3
my own little world
Status
Medical Student
Yes I have experience with these; used to be licensed in variable annuities.

I suggest you wait on these. Annuities often are pretty complex, and generally have high annual, upfront, and other fees involved. They're good for if you want someone else to take the risk, like if you took a GM buyout, got 100K, and wanted to have this last from age 60 through the rest of your life.

If you're 30ish, what I'd suggest instead in the interest of keeping more of your investment versus paying it as a load, annual fee, marketing expense into the fund, etc. is to invest in an index fund or two which have very low expense ratios (% of your total assets you pay per year as a fee), often .4% or so versus maybe 1-2% for an annuity. If I were investing with a 30 year horizon, I'd probably go nearly 100% stocks, maybe a small % bond funds, say 10-20%. As you get nearer retirement, gradually increase the % investment in bonds as these generally are lower risk, and decrease % invested in stock. It may make sense at around age 60 to cash most of this out and, at that point, buy an annuity. You can buy one that pays out immediately, each year/month/whatever, for the rest of your life, or a certain # years only, or for the rest of your life + spouses life, depending on your preferences. Each of these options would have a slightly different payment, of course.
 

shamrockmd

ASA Member
10+ Year Member
Mar 13, 2006
14
0
San Antonio, TX
Status
Attending Physician
Wow...love the bad advice on here. Turning to other people in the medical field is like the blind leading the blind.We are trained in medicine...not finance. Would you go to a financial planner for medical advice even if they took a Chemistry class in college If you need some real advice please let me know. My fiance is a financial planner (yes CFP) that only works with doctors.
 

The White Coat Investor

Practicing Doc and Blogger
Partner Organization
15+ Year Member
Nov 18, 2002
5,166
2,282
www.whitecoatinvestor.com
Status
Attending Physician
Annuities are generally a product meant to be sold, not bought. They pay the salesman a generous commission, but usually the expenses outweigh the benefit. One exception is a single premium immediate annuity, but this is basically longevity insurance you buy in your late 60s-early 80s.

At this point, max out what tax-protected vehicle are available to you (Roth IRA, 401K, 403B, SEP-IRA etc), then invest in low-cost stock index funds in a taxable account. You'll almost always come out ahead compared to most annuities.