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Old 11-30-2013, 09:25 AM   #21
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I don't worry about anyone who has more money to spend than I do. Ha
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Old 11-30-2013, 09:44 AM   #22
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It is the Wellesley Fd. I do not use any of the monies generated by it, all is reinvested.
As I said I was looking for advice to compare with upcoming planners rec's.

ha ha...I hope you are not a financial planner...ha
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Old 11-30-2013, 03:22 PM   #23
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I'm no fan of annuities, don't own one and don't have any plans to do so. That said, I can see where a SPIA might be a good financial instrument for some individuals.

I won't venture an opinion as to the suitability of a SPIA for the OP as there are many variables in the decision. But a broad brush statement that "all annuities are bad" isn't backed up by factual evidence.
Once you enter into a SPIA contract your principal is gone for life. All you get is the payments. Agents who sell SPIA's earn between 5 and 10 percent! That money comes right out of your principal in the form of lower payments. You also have to pay for mortality fees, underwriting costs, plus the insurance company factors in their overhead, plus insurance companies are for profit companies. People can easily do better elsewhere. Also the ordinary income monster will get you with annuities. It's not what you make, but what you get to keep.
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Old 11-30-2013, 03:47 PM   #24
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Back in 2007 you said you wanted a return of 4% with some inflation protection, and since then you have invested in Vanguard funds including Wellesley.

You can go on the VG site and see what return you have achieved this last 5 or 6 years, including personal performance of each individual fund.

I just had a quick look at my Wellesley account and from Nov 1, 2008 to Nov 30, 2013 it has returned 11.8% /year. Your personal return will be different as I was adding to my fund for the first 18 months of that period while I was still working.

How have your funds performed, and what level of improvement are you looking for?
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Old 11-30-2013, 10:30 PM   #25
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Once you enter into a SPIA contract your principal is gone for life. All you get is the payments. Agents who sell SPIA's earn between 5 and 10 percent! That money comes right out of your principal in the form of lower payments. You also have to pay for mortality fees, underwriting costs, plus the insurance company factors in their overhead, plus insurance companies are for profit companies. People can easily do better elsewhere. Also the ordinary income monster will get you with annuities. It's not what you make, but what you get to keep.
I've gotten quite a few quotes for SPIAs. The commission was only 2% of the money put down. I think you're confused with variable annuities?
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Old 11-30-2013, 10:49 PM   #26
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People can easily do better elsewhere. Also the ordinary income monster will get you with annuities. It's not what you make, but what you get to keep.
Your characterization of SPIAs is a little one-sided. It's longevity insurance, and we're just as likely to "waste" our money on that type of insurance as we are on health insurance, fire insurance, and liability insurance.

Social Security may be the only longevity insurance that most people need-- but not everyone is eligible for Social Security, and ERs can have a lot of zeros in their earnings records.

Most people could easily do better "elsewhere" by self-insuring their longevity, but if they did then all the financial advisors would be out of business. So would the annuity sales people.

The whole point of a SPIA is to keep people from running out of money in that tiny little black-swan corner of the bell curve that is not able to be treated as part of a log-normal distribution. If FIRECalc gives a 95% chance of success then an SPIA can cover most of the 5% chance of failure... and the rest of the failure probabilities can be handled by a variable spending plan. An SPIA can keep the "variable" part in the vicinity of "cheap groceries" without dipping into "cat food" territory.
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Old 12-14-2013, 09:37 AM   #27
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Quote:
Originally Posted by Nords View Post
Your characterization of SPIAs is a little one-sided. It's longevity insurance, and we're just as likely to "waste" our money on that type of insurance as we are on health insurance, fire insurance, and liability insurance.

Social Security may be the only longevity insurance that most people need-- but not everyone is eligible for Social Security, and ERs can have a lot of zeros in their earnings records.

Most people could easily do better "elsewhere" by self-insuring their longevity, but if they did then all the financial advisors would be out of business. So would the annuity sales people.

The whole point of a SPIA is to keep people from running out of money in that tiny little black-swan corner of the bell curve that is not able to be treated as part of a log-normal distribution. If FIRECalc gives a 95% chance of success then an SPIA can cover most of the 5% chance of failure... and the rest of the failure probabilities can be handled by a variable spending plan. An SPIA can keep the "variable" part in the vicinity of "cheap groceries" without dipping into "cat food" territory.
+1

What I would add to this is that the OP should consider using an 'annuity hurdle' concept, as advocated by Fullmer and Otar. With the size of the OP's portfolio versus income needs, he's in a position to likely never need an SPIA but, should have a plan for the 'unlikely' events as described above by Nords. I'd suggest the OP study Fullmer's work and the "zone" section of Otar's book.
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