Annuity question

I would suggest you talk with your financial advisor if you have one. Annuities can be very good but are not for everyone. It depends on the individual's financial condition. Might be great for someone and terrible for another.

Why is your horizon window 15 to 20 years?

No offense, meant. But 86 years old?

Pease don't waste money on an annuity. There are very, very few instances in which an annuity makes sense. They are expensive, inflexible, and confusing to the end investor (purposefully so).

If you don't need the money, just invest it in an appropriately diversified portfolio and let it grow.

If you want a little extra off the top but not see the amount really decrease think about a dividend paying stock or more specifically ETF.

SCHD (Schwab's US Dividend Equity ETF) is very popular as a slightly higher dividend paying ETF that has gone down way less than even the S&P 500 has this year (S&P down 22%, SCHD is down just 13%). It covers a good bit of sectors as well so very diversified.

It pays out dividends quarterly and with $100k into it at the current price you're maybe looking at an extra $750-$1k every quarter via its dividend and over time your $100k balance should go up so if you need to can still access the larger amount for whatever reason.

If you're looking to just squeeze that money out considering your age over the next decade or two there's also things like QYLD that pay huge "dividends" monthly. For $100k it would pay you out probably close to $1k a month but the balance WILL go down over time because of the super high payout it achieves. But it should last you plenty of time considering your time horizon. A good bit of the payouts are just return on capital in a market like this since the balance will go down so fast in a market like this so it wouldnt even be taxed (but is taxed like ORDINARY income not dividend income otherwise in this fund usually).

Just dont do an annuity and pay those expenses.

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What are all of these expenses y'all are referencing?

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Fixed annuities dont have advertised expenses management fees like variable ones do, but it's just baked in the annuity itself in the case of a fixed one.

There is a cost associated with administering the annuity, they arent doing it for free.

Compare that to something like a dividend paying fund like SCHD, the expense ratio is .06% which is practically nothing. Now QYLD actually has a healthy expense of .6% which isnt nothing but does have extremely big payouts (in his case $1k a month on $100k), but I would still bet he would be much better off in a fund like QYLD vs. annuity over time in terms of return on that $100k.

A fixed annuity is a terrible investment if you end up not living long. A $100k fixed annuity at his age might pay out $550-ish a month. That means he needs to live at least another 15 years to get that $100k back with $550 a month. Anything after the 15 years is basically an actual return on that money. Now if yyou live to be 95, great. But even if he goes from 66 to 86, he got extremely little total return on that investment. Certainly much worse than just investing it in the market of some kind.

20 years of that would be a $132k payout, or $32k total return on that $100k. But over 20 years that's just a 1.6% annual rate of return if my math is right there. Didnt even keep up with regular inflation

The company is making a huge return on that at his expense in that sense. Imagine how much they made with that $100k over 20 years. If you put $100k in the S&P 500 back in September 2002, even if you DIDN'T reinvest the dividends you got and just spent that, you'd have a 7.5% annual rate of return from then through September 2022 (with our crappy year this year and then fall of 2008 included).

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but I would still bet he would be much better off in a fund like QYLD vs. annuity over time in terms of return on that $100k.

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Maybe, but not everyone is willing to tolerate seeing there investment go down double digits. I don't there is near enough info provided by the OP to make any definitive answers.

The biggest problem to me is this sounds like NQ money.

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Would a 15 or 20 year annuity be a good idea for that $100k? Thanks

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Full annuitization is very rarely a good idea in my opinion.

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It depends upon interest rates. Annuitization has been awful in low interest rate environments.

Consider a joint annuity with cash refund option that guarantees your initial investment

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For example, I recently purchased a three year, 4% annuity. No fees to net out. I get 4% tax deferred for three years from one of the top companies, which is better than paying current taxes. I also own deferred income annuities, which I purchased years ago. I give the company, x number of dollars, and at age 63, they pay me and spouse X $$ for as long as we live. If it takes more than a few sentences to explain, it's probably not a good purchase. This is with a small portion of my safe money. Perhaps I can do better in the market, but being near retirement age, I feel pretty good about having a lot of money that was unaffected by the recent stock and bond correction.

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You can get CDs and treasuries that are paying more than 4% for 3 years. The tax deferred benefit of an annuity is completely over blown for most annuity purchasers, and the lack of stepped up cost basis upon death is an awful feature of annuities.