To take the comparisons above a step further, let us include the LifeX TIPS Mutual Funds (which include CPI inflation adjustments and longevity pooling after Age 80). The ideal time to buy such a product would be just before they close to new investors at around age 79, but at the present time the most mature offering is for age 76 (birth year 1948), so we will use that. Current payout quotes are available here: https://www.lifexfunds.com/calculators/planner. The payout period is through age 100, or 24 years.
1) The payout rates for the LifeX TIPS Mutual Funds are:
LIAAX, Age 76 - Male, the cost is 71.0K for a payout of 5K/yr (7.0%) in real dollars
LIADX, Age 76 - Female, the cost is 78.7K for a payout of 5K/yr (6.4%) in real dollars
The blended cost is 149.6K for a payout of 10K/yr (6.7%) in real dollars
Comments:
Since a joint life solution is not yet available, the payout is cut in half when the first spouse dies.
Income ends at age 101.
Income increases with CPI.
No Residual for heirs on death beyond age 80.
Will be some (unknown) additional advisor fee since the product is only available through an advisor.
Compare this to several alternatives:
(SPIA data from intermediateannuities.com, TIPS ladder data from tipsladder.com)
2) SPIA, Age 76 - Joint, the cost is 116.7K for a nominal payout of 10K/yr (8.6%)
Comments:
The payout continues for the life of the second to die.
The buying power of the income decreases with inflation.
No residual for heirs on death.
3) SPIA with 3% COLA adjustments, Age 76 - Joint, the cost is 152.9K for an initial payout of 10K/yr (6.5%)
Comments:
The payout continues for the life of the second to die.
The buying power of the income fluctuates and is not inflation protected.
No residual for heirs on death.
4) 24-year TIPS Ladder (through age 100), the cost is 185.5K for a payout of 10K/yr (5.4%) in real dollars
Comments:
Income ends at age 101.
Income increases with CPI.
Heirs receive the unspent residual on death.
Based upon this it seems like the LifeX Funds are worth considering as a possible alternative to a TIPS ladder.
1) The payout rates for the LifeX TIPS Mutual Funds are:
LIAAX, Age 76 - Male, the cost is 71.0K for a payout of 5K/yr (7.0%) in real dollars
LIADX, Age 76 - Female, the cost is 78.7K for a payout of 5K/yr (6.4%) in real dollars
The blended cost is 149.6K for a payout of 10K/yr (6.7%) in real dollars
Comments:
Since a joint life solution is not yet available, the payout is cut in half when the first spouse dies.
Income ends at age 101.
Income increases with CPI.
No Residual for heirs on death beyond age 80.
Will be some (unknown) additional advisor fee since the product is only available through an advisor.
Compare this to several alternatives:
(SPIA data from intermediateannuities.com, TIPS ladder data from tipsladder.com)
2) SPIA, Age 76 - Joint, the cost is 116.7K for a nominal payout of 10K/yr (8.6%)
Comments:
The payout continues for the life of the second to die.
The buying power of the income decreases with inflation.
No residual for heirs on death.
3) SPIA with 3% COLA adjustments, Age 76 - Joint, the cost is 152.9K for an initial payout of 10K/yr (6.5%)
Comments:
The payout continues for the life of the second to die.
The buying power of the income fluctuates and is not inflation protected.
No residual for heirs on death.
4) 24-year TIPS Ladder (through age 100), the cost is 185.5K for a payout of 10K/yr (5.4%) in real dollars
Comments:
Income ends at age 101.
Income increases with CPI.
Heirs receive the unspent residual on death.
Based upon this it seems like the LifeX Funds are worth considering as a possible alternative to a TIPS ladder.
Statistics: Posted by MtnBiker — Sun May 05, 2024 9:08 pm — Replies 128 — Views 13246