So is this financial planning concept a sign of the times- yes, it is.

Obviously, as market conditions change, the concept of a reverse mortgage may look better or worse. That is a relative issue…assuming you get one, when is the best time?

My point was focused not on timing (the relative benefits of a reverse mortgage), but that the very concept itself emerged in the last 2 years, i.e., at the peak of the real estate market. While some owners might find it their best option, my impression is that reverse mortgages were aggressively marketed as a great way to sell your house and still live in it. The tricky part, as I understand it, is not in how the monthly payments are computed, but in how sale/liquidation of the house occurs, if and when the occupants die. It would be nice if the bank said, "well, the survivors legally own X% of the home, so we will liquidate and split the proceeds accordingly." However, my ignorant impression is that it doesn't happen quite so easily (e.g., the bank can dictate the terms of sale, and also various fees).

My argument is admittedly a bit of hand-waving, but my concern is not with the product itself, but rather the market conditions that lead to the product's creation, and the various fees and costs that are associated with administering it. In the same vein, I wonder if the annuities being discussed here are more a product of our current economic environment, than economic good-sense.

First, Dean (from PA) says that annuities are know to be quite expensive with low yields. Please do your research before posting any rumors that you obviously know very little about. Immediate (and Fixed) annuities, unlike Variable Annuities, do NOT have expenses associated with them. You merely receive an interest rate, much like you would with a savings account or a CD at the bank– would you consider CD's expensive? Also note that most immediate annuities are paying 3-6% right NOW. I dont know about you, but to get 3-6% without market risk is pretty nice, wouldn't you agree?

Peter, you biggest flaw is not recognizing that reverse mortgages 2 years ago would have actually been the BEST thing you could have done. Dont you make money when you buy low, sell high?

Bart, you ask who wants to trust their life savings to an insurance company? Do you have health insurance? House insurance? Life Insurance? Car insurance… Enough said, I think.

All, most of the payout from annuities are nontaxable? Not true. Research shows that over 41% of all non qualified annuity payouts are taxable. How does this work? If you deposit $300/month into a variable annuity and earn a mere 5% (net of fee's) for 20 years, you would have invested 72,000 and would have over 147,000. Now take that 147k and annuitize over the next 20 years (and an assumed 5%), guaranteed, you would receive $961 a month. That math is you would receive over 230k for those 20 years.

However, that 961 payment would be about 30% principle and 70% taxable- at ordinary tax rates.

Are immediate annuities right for all? No. No investment program is. Furthermore, in reviewing insurance companies you should always look at the rating companies. There are 4 major ratings and then an index called comdex. With wise decisions you will can make good decisions. My suggestion, get professional, trusted advice.

But there are lots and lots of catches, in the real world: (1) what if you die before the lump sum is returned, (2) what is the effective rate of return on the payments, after service charges and fees, (3) what if the company you paid goes under (not an incredible question, these days)?

There are several other hidden catches, that generally make annuities too good to be true. In general, they are a GREAT product for insurance and investment firms, and TERRIBLE products for the annuitant (depending on the risk level, of course).

My feeling about this proposal is that it is industry-fueled, and specifically worded to feed on our current fears of stock-market crashes. Remember how tempting "reverse mortgages" sounded 2 years ago? I think this is more of the same.

Second, annuity payouts are based on US Treasury yields. Extremely low right now compared to historical values. Thus, buying an annuity now is locking in low payouts forever. Not something we should encourage through a tax policy that sounds good but isn't.

A better idea is to pay off everything and thus need less money to live. Then you don't have to take any risk.

I can live on my small pension and SS and don't need to live off of my CD savings. A much better idea. No risk.