Single Premium Immediate Annuities (SPIA)

Discussion of the Cash portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Single Premium Immediate Annuities (SPIA)

Post by MachineGhost » Thu Apr 14, 2016 9:02 pm

...seem to be paying around 4.5% currently.  Since you can ladder them, it seems like an interesting option for deep cash.  Has anyone considered or done it?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

Re: Single Premium Immediate Annuities (SPIA)

Post by ochotona » Thu Apr 14, 2016 10:08 pm

I think it's a good idea for covering the basic cash flow needs of life, if you shop around for the best rate from a very highly rated insurance company, and you don't mind giving up or reducing your ability to leave a legacy. You can always do a two-life annuity, or single-life with a period certain, but less return while you are alive. Don't expect to be able to reverse your decision, it's a one-way valve.
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Single Premium Immediate Annuities (SPIA)

Post by MachineGhost » Fri Apr 15, 2016 11:56 am

ochotona wrote: I think it's a good idea for covering the basic cash flow needs of life, if you shop around for the best rate from a very highly rated insurance company, and you don't mind giving up or reducing your ability to leave a legacy. You can always do a two-life annuity, or single-life with a period certain, but less return while you are alive. Don't expect to be able to reverse your decision, it's a one-way valve.
Do they offer inflation-protection as an addon rider or are you stuck to laddering it?  It seems a little weird to ladder when there's no maturity date to keep it rolling over.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
goodasgold
Executive Member
Executive Member
Posts: 387
Joined: Tue Jan 01, 2013 8:19 pm

Re: Single Premium Immediate Annuities (SPIA)

Post by goodasgold » Fri Apr 15, 2016 12:45 pm

ochotona wrote: I think it's a good idea for covering the basic cash flow needs of life, if you shop around for the best rate from a very highly rated insurance company...
This is the essence of my wariness concerning SPIAs. Who is to guarantee that today's "very highly rated insurance companies" really are correctly rated? Enron, anyone?

And once you sign on the dotted line, who can guarantee that today's *authentically* highly rated insurance companies will not lose their mojo tomorrow? Does anyone recall the "Nifty Fifty," not to mention the endless hype surrounding their innumerable heirs and successors down to the present day?

All in all, the concept of a SPIA sounds enticing as a great way to increase returns while we are still on this earth, but the implementation is a big problem. At a minimum, I think anyone contemplating SPIAs should invest small amounts in numerous insurance companies, and even this strategy does not preclude a systemic crash a la 1929. So caveat emptor, as always.
Last edited by goodasgold on Fri Apr 15, 2016 12:55 pm, edited 1 time in total.
Post Reply