Powerball - The Real Jackpot is the Lump Sum

"A nickel ain't worth a dime anymore." ~ Yogi Berra

Larger Powerball Jackpot due to Higher Interest Rate

The latest $1.79B Powerball jackpot is worth a $820M lump sum payout.   That's because $1.79B is based on a 29 year annuity payout.  The annuity amount fluctuates with interest rates. When interest rates are higher the total annuity payout is larger.   When interest rates were lower, the same $820M lump sum would have been about $1-2B.

Most winners take the lump sum, despite the higher payout with an annuity.

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This is not financial advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Longevity Insurance through an Annuity

Lately, I been looking at income options that may be needed if we live longer than expected.    One option I've been evaluating is purchasing an annuity.  I've talked to insurance agents about several possibilities.  Here are the similarities I noticed when talking to different agents:

Product sounds great. The annuity insurance all sound almost too good to be true :-)  Guaranteed returns of 5% or market returns, which ever is higher, tax deferred earnings growth, guaranteed fixed income for life, withdrawal of accumulated earnings, and, often, a life insurance benefit equal to the premium paid. 

Little interest in my product request.   My main interest is purchase an immediate annuity sometime in the future at about 75.   The agents have been reluctant to discuss this product, mainly because they won't be the person selling it to me 20 years from now since they will be retired.   No commission, no interest, I think.

Since I'm always interested in learning, I decided to ask some questions about the single premium deferred annuity.   First, I asked, "Not to be challenging, but the annuity you described sound really good.  So what's the downside.  Why isn't everyone using this annuity as their ONLY retirement option?"   Really, I was just curious.  Here's what I learned:

Loss of flexibility.  Usually, the recommendation is to rollover IRA or 401K money into the annuity.  Once rolled over, it cannot be rolled over again into an IRA or other qualified pension plan.  So leaving the annuity plan is a taxable event of 100% of the withdrawal.

Perhaps high fees.  The annual cost of the annuity wasn't obvious to me.  However, it was clear the immediate upfront fees were 8% of assets invested based on the withdrawal chart that I was shown.

Inflation.  While $3000 a month may sound like a lot today, it may not be much 20, 30 or 40 years from now.   The annuities I was evaluation were fixed and not inflation adjusted annuities that would provide increasing payments bases on cost of living adjustments.

After getting a balanced information of the pros and cons,  I had a better understanding of the product.  For now,  I still believe an immediate annuity in the future around 75 is the best option.   Although it will cost more, I prefer to pay when I need it versus paying now for what I think I may need in the future.

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This is not financial or insurance advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC

Thinking about Annuities

I've never been interested in annuities before.  I've always believed that investing in the stock market was a better option.   Lately, I've been thinking that annuities do have a place in our wealth building plans: longevity insurance.  This would address the risk of outliving our assets should we have longer than average life expectancies.

My plan is to sell our house when our daughter graduates from college, in about 15 years when I'm 70ish .  If we're lucky, home prices will appreciate about 5% per year giving us double the current market value.   The proceeds from the sale of our home can be invested in a second to die annuity that provides income for the rest of our lives.   That way, we will have some guaranteed income for life.

Lately,  I've been exposed to more information on annuities.  Last month, a local financial planning group invited me to a seminar which included a discussion on annuities.  This week's cover story in Barron's is the "
Top Fifty Annuities."  One thing I've learned is today's low interest environment makes it the least favorable time to initiate an annuity.  A better time is when interest rates are high(er).  That way the monthly payout will be higher for the same investment.

Fortunately, we have at least 15 years before we will start an annuity.

For more on  New Beginnings, check back every Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC