My fiancé wants to buy a joint fixed income, 10-year deferred, guaranteed income annuity with survivorship that has a legacy rider. The purpose is to start paying us a guaranteed income in 10 years that will pass to me if I survive him, and then his kids will get the remainder if there is anything left after I die. It’s important to him that his kids get something from it, rather than leaving a lump sum to me and potentially having my kids inherit his money. Is this the best option for this specific need, or is there a better option?
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You have not given information about your and your fiancé’s age or financial situations so the following are some general comments based on my reading. 1) Most annuity products are complex products with high insurance company fees. However, the simpler Single Premium Insurance Annuity or the related Deferred (longevity) Annuities, although they lack inflation adjustments, can be suitable for some situations. 2) A legacy rider kind of defeats the purpose of an income annuity by significantly lowering your payouts. If you are going to go ahead consider selecting the amount you need to put in the joint annuity to cover both of your lifetime spending and invest other assets aggressively designation his heirs as beneficiaries.3) A Qualified Longevity Annuity Contract may be a better option if you will be using pre-tax requirement account to fund the annuity. 4) Your fiancé’ and you can make a more knowledgeable decision by getting input from an hourly only financial advisor.
Thank you for your input. I will put more research into a QLAC, and I think he is open to consulting a fiduciary fee-only advisor. Thanks.
I think talking to a fee-only fiduciary is a really good next step, especially with something as complicated and long-term as an annuity. The goal of making sure you’re financially protected while also honoring his wishes for his kids can get tricky. I’d definitely want to compare the annuity, QLAC, and a simpler investment/beneficiary approach side by side before making a decision.
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A good summary of your options.