Since about 2000, I’ve heard people say they’ll consider purchasing a SPIA or DIA when interest rates are higher. The statement assumes interest rates are the primary factor determining SPIA and DIA payouts.
Another factor to consider when considering a delay in the purchase of a SPIA or DIA is how you’d invest the money while waiting to buy the annuity. The result, even if interest rates rise in the next few years, is you’d probably receive a higher lifetime income by buying the SPIA or DIA now than you would receive by waiting a few years to buy the annuity.An insurer sells SPIAs and DIAs to a large number of people at a time. It estimates the average life expectancy of that group and uses that estimate to determine the lifetime income each will be paid.
Also, though average life expectancy in the U.S. decreased the last few years, that’s unlikely to continue. It’s especially not likely to continue for those who don’t succumb to Covid-19 or haven’t developed substance abuse problems. Average life expectancy is likely to increase in the future, and insurers are likely to factor that into their calculations, reducing the guaranteed income.
A MYGA is acquired to lock in a guaranteed yield while protecting your principal. If you are worried that you might lock in a yield for several years today only to see interest rates rise higher in six to 12 months, then don’t put all your money in one MYGA.