The first time I discovered I had any potential connection to an annuity was about a decade ago when my father spoke to me about either taking a lump sum buyout or annuity payments from his former employer.
My father was retiring. Like millions of people his age, he faced a choice: take the lump sum and put the money into a mutual fund or invest the proceeds into an annuity and turn on the payment stream for life.
He died on Dec. 31, 2009, at the age of 83, about five years after leaving his job as a foreign correspondent at the Los Angeles Times.
I never thought much again about annuities until I started to write about them four years ago. Now the choices he faced come back to me.
Before he died, I remember visiting him in his apartment in Los Angeles and laying eyes on the Vanguard statements strewn about his desk.
He would call the fund every so often and sell modest amounts of his holdings to pay for a trip here or there with my stepmother.
Never much to worry about numbers or money, Dad was astute enough, I think, to know that with an annuity if you die relatively early – as he did – you lose your retirement. This is assuming you put the entire amount into an annuity and decline a return of premium rider.
I’ll never know how seriously he considered an annuity, or even whether he was familiar with return-of-premium riders and joint life options if they were available to him.
Since he opted for the lump sum, the point is moot.
But I wonder whether annuitizing a portion of his retirement assets, which would have supplemented his and my stepmother’s Social Security revenue, would have made life a bit easier, particularly for a retired couple quickly bored by any discussion of money.
Fixed living expenses would have been covered. It would have have avoided him nibbling into the fund, although any withdrawals he made were pretty small in the larger scheme of things.
The lump sum has been earning interest in a trust with the help of an advisor. The advantage of this is that everything has now gone to my stepmother, a thrifty sort who has every intention of letting the assets grow.
Once she dies, which won’t be for a while yet assuming “normal” life expectancy, what remains will be split between my stepbrother and me.
Dad knew that, and that’s the way he wanted it.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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