brewer12345 - Come bak in 30 Years and will see if you have any assets left to generate income for you or if the actual Dollars you receive are higher or lower than when you first started.
Remember what all advisors say and those commericals and adds say!
"Past investment performace does not guarantee future results"
This means that you have no idea what your future returs will be and they can also be losses.
You have 3 variables that you do not know at this point in time:
1. Your future rate of return
2. The future inflation rate
3: If you will be disaplined enough to only take 4% per year from your assets.
I only have one variable. The future inflation rate.
I know that my montly payment can not go lower than $5,475.42 per month or $65,705.04 per year. I know that in 14 months I will start to receive about $1,200 per month of social security that will incease each year.
I also have certainty of rate for $250,000 of my $550,000 because i locked in rates for 10 year & 6 years.
1 variable is easier to plan for that 3 variables. This is common sense!
In 30 Years I will be 90 and I don't think I will be out and about spending money like I am now. Plus I have set up inflation contingencies and it is a very sound strategy.
You still don't understand how I am protecting myself on inflation. No one person has looked at my whole picture disputed my inflation protection.
I will Repeat!
You are not understanding how I am protecting against inflation. Key, if you make up the monthly payment shortage caused by inflation buy purchasing new immediate annuities at an older ages, your shorter life span creates larger montly payments (high that the 7.3885% cash flow on each new immediate annuity. I would buy a new immediate annuity every 5 years or when I feel that my money isn't buying what I expct it to buy.
If you read my 1st two posts they completely explain what I did. Every base is covered including inflation.
I have $550,000 remaining after I purchased the immediate annuity. This is the amount that I invest to protect my fixed payments from inflation.
My cost for the immediate annuities which I bought in May of 2004. Well I payed $889,287.49 and receive $5,475.42 per month or $65,705.04 per year for the remainder of my life. $2,146.00 per month or $26,832.00 per year is Tax Free.
That is a cash flow rate of 7.3885% ($65,705.04/$889,287.49).
$75,000 I keep in a money market account ING Direct
What did I invest my reaming portfolio of $475,000 in? All but $75,000 in Deferred Fixed Annuities.
I put $150,000 in a fixed annuity with a 10 year interest rate guarantee of 5.15%.
I put $100,000 in a fixed annuity with a 6 year interest rate guarantee of 4.20%
I put $150,000 in an equity index annuity. This is more long term 10 to 15 years. This gives an opportunity to earn higher interest rates than regular fixed annuities without risking your initial investment amount plus interest earned. This is NOT a variable annuity, I think variable annuities are expensive with the fees. Variable annuities are like a mutual funds, your initial investment can lose value. They have some guarantees against loss, but I just don't like them.
With these 3 annuities I am very well protected against inflation.
What am I doing with the last $75,000? This is my play money. I do some swing trading. Buy 3 or 4 stocks and hold them for 3 weeks to 6 months. If I am good at it, this $75,000 will grow nicely over time and will also provide additional inflation protection. If I suck at this, I will lose the $75,000 and I will never do this again. To this point, my $75,000 has grown to about $125,000. Can I be successful over several years? I don't yet know the answer to that. That is why I call this play money!
The point is that you can invest the $550,000 any way you want, I chose to do the above.
What you don't get is that it will be 5 years before I convert some of the $550,000 plus growth into an additional immediate annuity to provide me the bump up in monthy payment to offset inflation. I will also be 5 years older so montly payments will be higher per dollar invested. I will only use a small portion of my portfolio to get the increase in monly payment that I will need. I will do this every 5 years.
The cash flow rate will be higher than the 7.3885% I currently receive and will be higher in each subsequent 5 year period.