#401 - Listener Questions: Is an Immediate Annuity a Good Option for Me?

Do you feel like you are late to the ball game in saving for retirement? Have you ever wondered if an annuity could take some of the stress out of writing your own retirement paycheck? Are you trying to figure out the best way to self-fund long-term care for you or your spouse?

All of these questions come directly from listeners like you. If you have questions about retirement, Fridays are a great time to tune in. We are now releasing 2 episodes a week: one focused on the monthly theme and the other focused on listener questions.

If you have a query of your own question head on over to RogerWhitney.com/AskRoger to submit your retirement questions.

“If you have questions about retirement, Fridays are a great time to tune in.”

How to maximize retirement savings after getting a late start

Catherine writes that this podcast has helped her get over the shame and frustration of not prioritizing her retirement savings earlier. Now that she has worked her way through those feelings she wonders what the best way to increase her retirement savings would be after getting a late start.

Catherine is maxing out her 401K, and her husband has a simple IRA and no access to a 401K. However, if he could convince his partners to switch to a 401K he could max out the contributions and begin to expand their savings.

Another way to get plenty of bang for your buck is to use an HSA. Many people don’t consider the HSA as a retirement account, but it can be a great way to help play catch up. You can contribute up to $7200 per year to your health savings account if you are enrolled in a high deductible insurance plan. Not only do you get to use pre-tax assets, but you can invest those assets to use in retirement. If you invest your HSA aggressively, it can become like a supercharged Roth IRA.

“This podcast has helped Catherine get over the shame and frustration of not prioritizing her retirement savings earlier.”

Would an immediate annuity be a good idea for Mary?

Mary is considering purchasing an immediate annuity with the proceeds from the sale of her house. She would like to receive between $1000-2000 per month from the $300,000 profit.

A single premium immediate annuity (SPIA) could provide this kind of stable return, but before she jumps into such an arrangement she should consider the pros and cons of this type of annuity.

The pros and cons of purchasing a SPIA

One of the main reasons that people consider purchasing an annuity is their ease. With the SPIA Mary won’t have to manage her investments or worry about the markets. She’ll be receiving a guaranteed income for the rest of her life. There is definitely an advantage to this kind of simplicity.

On the other hand, if she passes away shortly after purchasing the annuity then the money will not be hers to pass on to her heirs. By giving up her $300,000 and committing to an annuity she loses out on optionality. One way to combat this would be to make sure to have liquid assets on hand in case of an unforeseen event.

“Press play to hear my thoughts on purchasing an annuity and to learn how to self-fund for long-term care.”

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

LISTENER QUESTIONS

[2:57] Getting over the regret of not saving better sooner
[10:06] Tom wonders if there will ever be an audiobook version of Rock Retirement
[11:46] Would an immediate annuity be a good idea?
[17:34] How to best self-fund for long-term care