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Old 07-15-2008, 11:33 AM   #21
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Originally Posted by tangomonster View Post
so-called near retirees, at age 58, have an average nest egg of $105,000 if their yearly income is $50,000. Their savings rise to an average of $280,000 if they earn $100,000 a year. New retirees, with an average age of 65, have $175,000 in savings if they earned $50,000, and $585,000 if they earned $100,000 a year
One thing I always wonder about when reading statistics like these, is how they report savings for married couples? I tend to think of DW and my retirement accounts (and our net worth, for that matter) jointly, rather than individually.

Are the numbers above per person? Because while they're still too low by ER.org standards, $350K + SS for a couple is more liveable than $175K + SS for an individual. I realize that not all retirees are married/coupled, but if they're reporting an average for individuals I wonder if that doesn't skew the numbers down a bit.
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Old 07-15-2008, 03:04 PM   #22
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I was tempted to start a new thread with the title:

Study shows that 80% of households have saved too much for retirement.

But I thought I would put it here.


Quote:
We find that over 80 percent of HRS households have accumulated more than
Quote:
their optimal targets. These targets indicate the amounts of private saving households should have acquired at the time
we observe them in the data, given their life cycle planning problem
and social security and defined-benefit pension expectations and realizations.
For those not meeting their targets, the magnitudes of the
deficits are typically small.

The study is in the Journal of Political Economy. The author is connected with the University of Wisconsin and the National Bureau of Economic Research. The data base is 6,322 households in the "Health and Retirement Survey", which seems to get pretty detailed information.

I won't claim that I've even scratched the surface on their method, other than it appears they do a calculation for each household individually. The calculation uses information like age, income, and expected social security and pension incomes. They compare their results to various "rule of thumb" approaches, and find that theirs generally calls for less saving.

I expect that they assume retirement at "normal retirement age" of 65 or 66, while many Americans target 62. But I couldn't find that age in a quick scan of the article.

I tried Googling, but couldn't find any references to this paper in the popular press.

http://www.ssc.wisc.edu/~scholz/Research/Optimality.pdf
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Old 07-15-2008, 04:19 PM   #23
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Originally Posted by ProspectiveBum View Post
One thing I always wonder about when reading statistics like these, is how they report savings for married couples? I tend to think of DW and my retirement accounts (and our net worth, for that matter) jointly, rather than individually.

Are the numbers above per person? Because while they're still too low by ER.org standards, $350K + SS for a couple is more liveable than $175K + SS for an individual. I realize that not all retirees are married/coupled, but if they're reporting an average for individuals I wonder if that doesn't skew the numbers down a bit.
Not sure, PB---all they said about the married versus single issue was:

"Married couples are more likely to outlive their assets than single individuals, the study said."

But I'm not sure what they are basing this on. I agree with you....
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Old 07-15-2008, 09:17 PM   #24
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Google is our friend:

http://www.navanet.org/res/outlook/2...cansSecure.pdf
NAVA OUTLOOK September/October 2004 Volume 13, Number 4 Page 1 of 2
Americans for Secure Retirement

By Mark Mackey and Joe McKeever

Last year NAVA, the Committee of Annuity Insurers, and the American Council of Life Insurers (ACLI) combined to form a coalition to pursue enactment of legislation that would provide a tax incentive for life-contingent annuities. The Coalition, which has adopted the name Americans for Secure Retirement (ASR), now also includes a number of consumer and business organizations, such as the American Corn Growers Association, Financial Services Roundtable, Hispanic Business Roundtable, National Consumers League, National Taxpayers Union, U.S. Chamber of Commerce, Women Entrepreneurs, Inc., and Women’s Institute for a Secure Retirement.

Committees Formed

The Coalition is governed by a steering committee which is comprised of representatives from twenty-two of the largest issuers of non-qualified annuities. Walter Welsh, Hartford, and Harvey Blitz, Equitable, were chosen to serve as chairman and vice-chairman. The Steering Committee has met on a monthly basis since last August. An executive committee, consisting of representatives of the three founding organizations (Joe McKeever on behalf of the Committee of Annuity Insurers, Mike Hunter for the ACLI, and Mark Mackey on behalf of NAVA), and Messrs. Welsh and Blitz, handles day-to-day operations and implements the directives of the Steering Committee. The Executive Committee has also been meeting regularly.

Lobbying Efforts

A government relations task force...

Hmmm, somehow they forgot to list support from "twenty-two of the largest issuers of non-qualified annuities" on their website...
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Old 07-18-2008, 01:43 AM   #25
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If the annuity (specifically an SPIA, as mine is) is purchased with "tax advantaged funds" (as mine is), would result in taxes not being paid on tax deferred funds (like roll-over 401k's and traditional IRA's).

That means that the annuity (again, speaking of an SPIA) would become "tax free" (like a Roth IRA).

It would be an advantage to anybody - even those folks that have "average" savings/investments for retirement. Their annuity distributions would be minumal on an annual basis and probably would put them in a low/no tax basis, anyway.

BTW, I purchased my SPIA at age 59, so I guess I'm within the "target age" of the article...

That what I'm speaking of ...

- Ron
Ron, where are you finding this info? The research I'm finding says just the opposite...that if you use tax-deferred funds to buy an SPIA, the payments are fully taxed. See below from Berkshire Hathaway site.

Thanks, Dave

**************
Tax-Favored Income
Under current IRS rules use of after-tax funds to purchase an SPIA results in payments that are only partially subject to federal income taxes. The non-taxable portion of each payment represents the return of your original investment over the life of the annuity.

At the other extreme, if you purchase your SPIA with funds from a tax-qualified plan (IRA, TSA, 401(k) etc.), the payments you receive are generally fully taxable as they represent funds that have not yet been taxed.

However, as SPIA payments are made to you over time, taxes will be payable over time. Therefore, even if you purchase an SPIA with pre-tax funds from a tax-qualified plan, you increase your tax-deferral benefit relative to a lump sum distribution, where the entire amount is taxed in the year of receipt.

Currently, BRK Direct does not offer tax-qualified annuities.
****
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Old 07-18-2008, 04:45 AM   #26
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Ron, where are you finding this info? The research I'm finding says just the opposite...that if you use tax-deferred funds to buy an SPIA, the payments are fully taxed. See below from Berkshire Hathaway site.

Thanks, Dave
You are correct. As the law is currently written, my tax advantaged SPIA is fully taxable. What I was talking about is if this "proposed solution" actually was to come about, I would not have to pay taxes (highly unlikely).

Additionally, someone else touched upon the fact that currently I would not have to pay tax if my income (with SPIA included) was at a low rate. This is also incorrect. Currently all SPIA income is taxed (assuming purchased with tax advantaged funds).

- Ron
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Old 07-18-2008, 05:15 AM   #27
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You are correct. As the law is currently written, my tax advantaged SPIA is fully taxable. What I was talking about is if this "proposed solution" actually was to come about, I would not have to pay taxes (highly unlikely).

Additionally, someone else touched upon the fact that currently I would not have to pay tax if my income (with SPIA included) was at a low rate. This is also incorrect. Currently all SPIA income is taxed (assuming purchased with tax advantaged funds).

- Ron
ah, I see...thanks for clarifying. Sometimes I don't read every post...and that occasionally gets me in trouble.
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