Insured Annuities for Wise Bloggers

Thanks for the annuities information, I hadn't geiven them much thought before.

Actually, you don't necessarily need to be in terrific health to get a good deal with an insured annuity. See - with this concept, you're playing both sides of the insurance fence.

If you are in poor health, you indeed may have higher life insurance premiums (because the insurance company figures you're a higher risk of dying sooner than later and they want to get enough money in premiums out of you to justify giving you the policy).

BUT - You're also getting an annuity, and since you are in poor health, the insurance company will give you a higher income since they figure you have a reduced life span.

So as long as you are in good enough health to qualify for life insurance at all, the numbers generally work themselves out.

 And a great observation on having a little additional cash on hand.....it's always prudent to have an emergency reserve. The example I used in the article is fairly narrow in scope, not taking into account what the entire financial situation looks like.

@Linda: You're welcome! I love it when people get it! Not that I specifically recommend any of these products for everybody (you are right in that you need to make the best decision for yourself) - I just want people to understand them.

Under the scenario you painted my choices are $15,000 a year income and $500,000 in the bank or $20,000 a year income and $0 in the bank.

No brainer, I'll take the half mill thank you. Why? Because your scenario is highly flawed.

Your analysis falls short in two key areas. First, the interest rate you qoute as a return for the non-annuity scenario is ridiculously low. The fact is the spread between what you can earn safely on your money and what the annuity is paying isn't nearly as wide as you state it is. When you recaculate using accurate return rates what you suggest makes no sense.

Also what you fail to mention of extreme importance to your analysis is that you put yourself in a position where you have no emergency fund. That is about as poor an idea as anyone could possibly suggest as financial advice. The whole reason we save and invest is to have an available supply of funds to draw on not just live on but to deal with unforeseen expenses and emergencies. Under your scenario if an extraordinary cost arises there isn't anyway to deal with it other than borrowing money. Bad, bad, bad.

Your example does NOT reflect real world conditions. But it is a great suggestion if you happen to sell either of or both of these vehicles. Commissions are a wonderful thing.

Thanks Myscha for your understanding that this is just a concept, separate from what a full financial plan should look like. In fact, I also mentioned something to this effect in my last comment here.

re: Interest Rates - ING 's Orange Savings Account (a liquid guaranteed investment which many seniors gravitate towards) is currently paying out 4.3% interest. If this is off base and there are other liquid guaranteed investments that yield higher returns, then please do share them with us all! I'd love to see what "accurate" looks like. I'm game for making the most money that I can!

"But it is a great suggestion if you happen to sell either of or both of these vehicles. Commissions are a wonderful thing."

I hope this isn't an implication that I might be trying to gain business through Wise Bread. I couldn't make commissions or get business through Wise Bread if I wanted to! Belive it or not, I actually just write to educate and provide thought-provoking articles.

It's such a shame that we are constantly shrouded in suspicion of being "pitched" to in some way, or fearful that a hidden agenda is always prevalent. It says something scary about our society in general. 

I'm with you on that. It's one of the reasons I believe so strongly in what Wise Bread is trying to do. I've always been an educator at heart.

With things the way they are these days, I feel that financial education is more important than ever. Gaining independence from the rat race early has enable us to focus completely on projects and ideas that we value greatly. Can you imagine the power of what our world could be like if everyone was in such a place?

Keep those financial strategies coming, Nora!!!!!

Despite what some skeptics are posting, your concept is rock solid.

Putting 30% in stocks as Jon states is not an option in most cases. Someone who is 65 years old today is not that far removed from the last depression which means that he/she would rather stick their money under a mattress (or stick needles in their eyes) than experience the risk of losing a dime in the markets.

As far as your return estimate, I still say it's bang on. First of all, money market funds are not guaranteed as one skeptic claimed. A vast majority of Americans/Canadians get zilch on their bank accounts much less the 4+ you were stating or the 5% or 6% that is avaialable at some obscure financial institution run by Guido out of his basement.

Lest we forget that as the Fed drops interest rates like Britney Spears drops babies, returns on short term savings will continue to deminish.

Keep up the great work Nora. I enjoy all your articles.

you buy a term 100 $500,000 life ins for $25,575. so you spend $26k then when you die your family get4 $500k as an annuity , right? Yuo buy a fixed annuity, ladder bonds and buy stks or mutual funds. Wouldn't this be diversified enough even if you are 65 and retired to get you thru the next 20-30 years? And still be somewhat safe and secure?