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Old 11-29-2010, 01:00 PM   #21
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Thank you, CoolChange. No two of us have exactly the same life experience, of course, though we share an interest in early retirement. Let me ask you this: Assuming you manage your retirement assets to be reasonably confident that you won't outlive them, what to you plan for the remaining assets when you die? Some advocate "Die Broke" -- a policy they implement largely by buying life-time annuities. That seems to me to be a way of making the annuity seller your beneficiary -- that seller gets to keep any funds still left. Maybe that's fine, if the seller is some charity that you are happy to support (posthumously). Alternatively, you can plan to bequeath the remaining assets to one or more of your survivors. My problem with that is this: my relatives are either good at managing money (and don't need mine) or not good at money management and would just squander assets that my family has taken more than a century to put together.
I think your annuity model is mistaken. On balance, spread over all annuitants in their book, the company makes a normal profit. This is not a huge margins business. Some guy dies young, and his unused money goes largely to those annuitants who live longer than expected.

Ha
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Old 11-29-2010, 01:15 PM   #22
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Thank you, Ha. I accept the correction, but now my objection is making unknown long-lived annuitants the beneficiaries of any residual value in an annuity I might buy. I might bet, though, that I am going to be long-lived and get a good deal from the annuity. Do you know what the insurance company's margin is on annuity sales? USAA is a company I trust. A Single Premium Immediate Annuity that I could purchase from USAA today, at my age and living in my state, would pay me 7.674% a year, with no survivor benefits. That's very generous compared to the 2.5% withdrawal rate I allow myself. I'll think about it. USAA is owned by its customers, most of whom are current or former American military officers. Maybe I don't object to any residual in an annuity going to them.
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Old 11-29-2010, 01:21 PM   #23
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A Single Premium Immediate Annuity that I could purchase from USAA today, at my age and living in my state, would pay me 7.674% a year, with no survivor benefits.
Take a look at high yield corp bonds HYG, FAGIX, they are paying similar rates plus you have the principle to draw on in an emergency.
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Old 11-29-2010, 01:39 PM   #24
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I might bet, though, that I am going to be long-lived and get a good deal from the annuity.
The best thing about annuities is they encourage exercise and good diet, at least if you're as tight as I am, since you try to live longer so as to collect as many payments as possible.
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Old 11-29-2010, 02:07 PM   #25
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The best thing about annuities is they encourage exercise and good diet, at least if you're as tight as I am, since you try to live longer so as to collect as many payments as possible.
I feel the same way. It is probably superstition, but that was at least part of why I delayed SS until 70. I would like to eventually cost the government a lot of money.

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Old 11-29-2010, 02:23 PM   #26
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...., you can plan to bequeath the remaining assets to one or more of your survivors. My problem with that is this: my relatives are either good at managing money (and don't need mine) or not good at money management and would just squander assets that my family has taken more than a century to put together.
Saw my FIL deal with that problem - by the time his long-lived father wanted to give him some money, not through inheritance but before his death, FIL had no need of it. Now when he was 30 and scrambling he could have made good use of it, but when he was 30 his father was dubious about his ability to use the money (in his estimation) wisely. By his sixties FIL was set through his own efforts.

Seems like skipping a generation might be the way to go unless you want to fund someone else's retirement.
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Old 11-29-2010, 02:48 PM   #27
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Now when he was 30 and scrambling he could have made good use of it, but when he was 30 his father was dubious about his ability to use the money (in his estimation) wisely.
That's the core of the affluenza concern-- the next generation thinks they're scrambling and really could use the help, while the last generation thinks they could cut back on all that frivolous spending...
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Old 11-30-2010, 03:53 PM   #28
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For jtmitch: Good to see you again after all this time. I admit that my recall is fuzzy, but I remember you as one of the good guys, easy to get along with, and, IIRC, a retired military officer. I worked in the civilian defense industry for thirty years after three years active duty as a Naval officer. Same team, same goals as you...

What's your news, Friar?
Yes; that would be me. 28 years USN and 6 years or so as a defense contractor in the DC area. Retired for good at 58. My wife worked for a year and a half more than I did and about 6 months after that we left MD and moved to VT. (My wife and I are both originally New Englanders and wanted to get back here. At the time, one daughter and her family were living in Burlington and we made quite a few trips up here and got to like VT - which was the NE state we had been least familiar with.) Been here 5 1/2 years now although the daughter and her family moved to MA due to a job change on her husband's part. We live in a rural area between Burlington and Middlebury and enjoy it very much here - lotsa outdoorsy stuff year 'round. When we feel the need for a few days of city life we go to Montreal or to visit my daughters in MA. (The one who didn't live in Burlington lives in Boston.) For other travel we've discovered this hemisphere and have been to South America twice (once on a cruise around Cape Horn) and Costa Rica. Also took a trip to Ireland the summer before last with college friends who hadn't been to Ireland before. (It was our 5th trip there.)

Health has thankfully been good enough to allow me to stay active; I work out, on average, 5 - 6 days per week. I do some volunteer work to keep busy and am on the verge of joining the Lions in the local area (which will lead to more volunteering.)

Investment-wise, I long ago left behind managed funds and individual stocks and, like you, am now primarily an index fund guy. I took SS at 62 as did my wife. Most of the time we live fine on the USN pension; some months we dip into the SS. We pretty much can afford to do what we want, although except for the trips I mentioned above, we live pretty simply day-to-day.

In addition to this web site, I follow Bogleheads.org but have pretty well given up on the Motley Fool REHP.

Take care.
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Old 11-30-2010, 06:01 PM   #29
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Originally Posted by Ted_Shepherd View Post
Let me ask you this: Assuming you manage your retirement assets to be reasonably confident that you won't outlive them, what to you plan for the remaining assets when you die? Some advocate "Die Broke" -- a policy they implement largely by buying life-time annuities. That seems to me to be a way of making the annuity seller your beneficiary -- that seller gets to keep any funds still left. Maybe that's fine, if the seller is some charity that you are happy to support (posthumously). Alternatively, you can plan to bequeath the remaining assets to one or more of your survivors. My problem with that is this: my relatives are either good at managing money (and don't need mine) or not good at money management and would just squander assets that my family has taken more than a century to put together.
I have not done a great deal of estate planning yet. If I die right now, it is pretty simple:
  • Dear mother is beneficiary of the bulk; she is 80 years old, still in good health (mentally and physically) and an even bigger tightwad than me to the point of still working a couple of days a week for play money so she doesn't have to touch her savings. (Yes, there are subjects for several more threads here.)
  • Some would go to current SO and her daughter; but, they both like to spend money much more freely. And, they both have their own careers to support their habits, lifestyle, etc.
Assuming the statisticians are reasonably correct and I die long after my mother and SO (who is a decade older than me and not as concerned about diet, exercise, etc.), one or more non-profits that I am interested in (PBS, Wikimedia Foundation, Methuselah Foundation, etc.) will likely be the major beneficiary.

I am not managing my portfolio with the express purpose of leaving a large stash when I go (some will probably be annuitized to spread risks); but, I will almost certainly leave something relatively significant unless my plans completely fall apart since I am not planning to die broke either (way too much risk for my tolerance).

I have not completely formulated my withdrawal plan yet; but, I expect it to be something along the lines of setting a budget to be X% (likely somewhere between 2.5% and 4.0%) of current portfolio value for the coming year along with a target of 2-3 years minimal living expenses in cash so I do not have to liquidate investments during crazy markets. I have been a consultant for most of my professional life; so, I am very used to wide fluctuations in income. (Yes, this is easily a subject for at least one more thread.)
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