They do approve, in the right circumstances, of SPIA (Single Premium Immediate Annuities). Those are a commodity item, competitively priced, reasonable profit margin, and allow one to benefit from morbidity credits.
In other words, converting a pot of money into an income stream starting now for the rest of your life, rather than using an annuity as an investment intended to grow before the money is intended to be used, right?
Yes, that is one (typical) option, but the income stream does not have to start today. Could start in five years out, or ten. (If I read correctly, bus driver’s FA recommended one that would start later.) An annuity could also include a spousal survivor benefit, but the primary benefit would be lower of course…
Yes, BHs also approve of deferred annuities as long as they are simple transactions without a large profit/commission. They’re actuarily fair with a fair profit for the company offering it. If you die early (Ie, before your due date), your share goes to the longer lived members. If you live longer, good for you.
ETA: look at www.immediateannuities.com
SPIA is the product I had in mind
Speaking of individual stocks. It really is hard to beat the market/index. I just got lucky with few. Specially with Tesla. I realized some of my gains few days ago. Maybe too early. But oh well.
Out of curiosity, I took another look at the retirement plan the FA put together for us. I think it looked bizarre, but maybe someone else will have an opinion on this, or have heard of some of these products.
Apparently soon after retiring, we are to move much of our money out of our 401K’s. Not sure if this is a taxable event, but I’m guessing since much of it isn’t in Roths, that it would be.
800K to go to a single premium fixed index deferred annuity called the “Athene Agility 10 annuity”. It doesn’t pay anything for 10 years, and then an annual payment of $44,160. There is a death benefit, but this doesn’t sound like much of an annual benefit after that kind of wait and amount.
A significant percentage of what’s left to go to a number of REITs, Blackstone, ExchangeRight, InPoint and Vinebrook, with another portion in Delaware Statutory Trusts (which I’m fine with, due to the tax deferral from rental properties). Don’t know about so many REITs, however.
All of this building up to the highest income flow…when we’re 90. Likely I’ll have Alzheimer’s by then. 
Think it would be better to have the higher cash flow when you’re young enough to enjoy it.
@busdriver11, that plan should be a felony.
But the good news is that if this plan gives you enough money to retire, a good plan would let you retire in high style.
I don’t own real estate so don’t know whether the DSTs are a good way to “retire” from managing properties if that’s what you want, but the annuity is a red flag.
Not fair Bob, as that plan is the Retirement Plan for the FA. hahahahaha
I do like the DST’s, for sure. We have one so far, and have 1031 tax free exchanged a pain in the butt condo that needed constant attention and got maybe a 2-3% return in a good year, to a DST that returns over 5% with nothing to do but see the deposit in our bank account! Should have exchanged it years ago.
I think I like the plan a Charles Schwab FA gave to us a couple of years ago, where she recommended no new products to us, it was a plan purely with what we already had. She had us withdrawing from our 401K’s and selling rental properties as needed, no change in assets until we decided to use them.
@busdriver11 I’m certainly no expert here, but if you are not already locked into that plan it would make sense to investigate “Athene Agility 10 annuity” some more. It feels like that kind of thing could be recommended for FA commission reasons.
I do understand the appeal of a component where you don’t need to guess how long you will live. For my small pension, I opted for annuity payment instead of cash pay out. In my case the numbers seemed good, and 2 FAs (from Retirement Planning classes) said “can’t beat that”.
@colorado_mom, thankfully we aren’t locked into anything, may not even talk to that advisor again. I do see the appeal of having a fixed income, however, we can likely live on our pensions, without any supplement, if we need to. So I don’t understand why he would have us cash out our 401K’s to that extent, especially since our 401K’s have had a decent return over the long run. Unless, as you suspect, it has to do with a big commission.
@busdriver11, how hard is it to redeem out of a DST? I read about it and it looks like a Ponzi scheme.
I sure hope it’s not a Ponzi scheme, @cbreeze, I didn’t think it was sketchy at all. You know going in that the DST lasts for 4-10 years or so, and then you either cash out or roll it into another. Our DST consists of four commercial properties, including a Walgreens, FedEx facility, health care clinic, and I forgot what the other one was, something stable and boring. All of the leases are signed for many years. I sincerely doubt there’s any funny business with this.
What is shady is the annuity that @busdriver11 described in #17426. If we just back of the envelope this, $800k at a modest 4% annual return will be worth over $1.18mm after 10 years. $44,160 is just 3.7% of the balance you have built up. They could pay you to perpetuity at that rate, own all your principle and still be making money off your money (which is now their money, lol).
OK, so a DST represents a 1031 tax-free exchange into a fractional interest in a bigger set of properties?
@BKSquared, do you have to think about tax in your analysis? @busdriver11 has to pay tax (likely big tax hit) closing down 401k. Then there is no tax on the gains generated inside the annuity (I’m guessing this is true as they are a part of the business of the insurer) but then @busdriver11 pays tax on the distributions?
@busdriver11, why is this better than leaving the money inside the 401k (and putting together investments designed to get the desired return) and then making RMDs? Why maximize income in your 90s? They talk about the Go-Go years, the Slow-Go years and then the No-Go years. Watching my mother, the early 90s seem to be either No-Go or a transition from Slow-Go to No-Go. Not clear why the plan makes sense?
My guess is the plan would be to roll the 401k into an IRA and then buying the annuity inside the IRA. That would still be a bad idea (for one thing you don’t need the tax-deferral of an annuity inside an IRA which is already tax deferred) but not as terrible an idea as cashing out an $800K IRA all at once.
Need some advice since there are some big brains here. My MIL is in early 80’s collects social security, $200 per month pension and has $100k that she had in an annuity (rolled over from 401k) in which she draws $500 per month for expenses.
Question: The 100k annuity is paying measly 1% and she’s been with company a good 20 years. What if any other options are available to increase returns, while protecting principal ?
Thanks is advance for advice
Yes, @shawbridge, I think you nailed the essence of the DST. We own about a 1.5% share of the properties.
I’m not sure about the tax hit, if it’s required, or, if as @MomofJandL suggested, it would be rolled into an IRA and then buy the annuity inside of the IRA. I suspect he would not have recommended that we pay taxes on such a large amount.
And I don’t think the plan makes sense, at least not for us. If the advisor contacts us again about if we want to go with it, these are questions that we will ask, just for curiosities sake more than interest in the plan. He might have a good explanation. It’s interesting, when I look up these annuities online, there’s nowhere that you can find what the commission is on it, only articles about how great they are. I wonder if these companies are able to scour the internet and get rid of all negative information about them. Or maybe it is an excellent product. For someone other than us.