Annuities

[Hyperborea]

Quote:

Here are the annual payouts for a $1 million immediate life annuity. If you want an inflation-adjusted benefit, the annual payout is cut in half. Age * * *Fixed * * * * * *Inflation-Adj (CPI) 35 * * * *$52,110 * * * * * *$24,060 45 * * * *$56,430 * * * * * *$29,140

It gets worse if you want joint life with a spouse. I put in a 45 year old with a wife 2 years younger and for CPI inflation adjusted you'll only get $23,479. Now on top of the meager returns you're still trusting that CPI will mirror the inflation that you experience and that the annuity provider will be around for 60 years. So, why again is this better?

[Jarhead*]

[quote] : intercst - You are picking apart 1 piece of what I did and trashing it. That is not fair and part of the problem with message boards.

Picking an opinion apart is part and parcel of exchange on message boards. It is really only a problem if you have a vested interest in trying to "sell" somebody an idea.
This message board has always discouraged the forum to be used by salesman. (One of the reasons I enjoy it).
You're not going to get a warm reception here, so best for you to pack up your "annuities kit", and try for more fertile grounds.

[Tony2002]

: Hyperborea - I did this at age 60 without buying the CPI option. You don't need the CPI option if you do what I did.

It works!

Read my previous post on how I am protected for inflation.

I was told that it works great for 50 year olds & up. My wife passed away 7 years ago so I did not look at the joint immediate annuities.

Yes I can understand why the payments would be lower than mine if you include your wife. It is common sense, women live longer than men so the insurance companies woud by pure statistics have to make payments for a longer period of time. Thus the payments must be lower.

BTW - I looked at the vanguard immediate annuities and they did not have the best payments available when I made my purchase. The guy I used quoted me over 15 companies. See my 1st two posts.

Tony

[unclemick]

So now we have Tony the annuity cat to complement JG with fixed income(no common stocks) plus real estate.

Tony - I'm too lazy to run the numbers - but based on the tax free return numbers - did you ever try to swag when the annuity company is betting on your demise?

[intercst]

Quote:

So now we have Tony the annuity cat to complement JG with fixed income(no common stocks) plus real estate. Tony - I'm too lazy to run the numbers - but based on the tax free return numbers - did you ever try to swag when the annuity company is betting on your demise?

In general, the mortality tables that insurance companies use for annuities have life expectancies 3 or 4 years longer than the tables they use for life insurance policies. This results in lower annual payouts.

The reason for this is adverse selection. Annuity buyers tend to be in much better health than the average person of that age. No one with a significant health issue would buy a life annuity.

intercst

[laurence]

Honestly, I've thought about a small annuity for part of my portfolio when I retire, just enough to cover my known fixed expenses (property tax, etc.) so that I knew whatever happened I had that covered. But seriously, a million dollar annuity? No way, too much tied up, I'll take a 4 percent withdrawal rate...

[rapoole]

Tony-

I don't believe a word you said. It does not have the ring of truth. I don't know what your game is exactly (though it's easy to guess). I hope you go away soon.

rapoole

[haha]

Quote:

: intercst - You are picking apart 1 piece of what I did and trashing it. That is not fair and part of the problem with message boards.

Tony, what I don't understand is why you care if a bunch of dumb clucks on an interenet bulletin board agree with your approach or not. For you , the die is cast. I don't think the insurance company is likely to refund your annuity premium if one of us convinces you that it was a bad idea.

It's too late for you, and maybe annuities don't seem attractive to most of us. Why do you care?

Mikey

[nfs]

Quote:

What you don't get ...

What you don't get is that, using the techniques commonly discussed on this board, anyone who starts with $240k in an IRA plus $1200k taxable can comfortably take $57k per year, only $8k per year less than your annuities pay you.

That payout increases with inflation every year, which your annuities do not. You have those deferred annuities in reserve, but it's hard to see how they can add more than about $40k a year 20 years down the road, while SWR keeps plugging along, adding just as much in those 20 years and continuing to grow beyond that.

Your estate will net zero from the annuities at your death. With very high probability, the estates of the SWR users will be sizable.

You could be posting here for any number of reasons. You can see that some think you are trying to sell annuities, in which case you had better give up here. This is a tough crowd.

Maybe you're just trying to validate the decision you've already made. Good luck with that. Readers here are likely to believe that you have flushed a good portion of your net worth into the pockets of insurance companies and sales personnel. You won't get many pats on the back here.

Or you may just be trying to spread the word about something that you sincerely believe is a great idea. You're entitled to your opinion. Annuities can work for some people, especially if they are very risk-averse and/or old. You're not old but you may be very risk-averse, so maybe this works for you.

[Tony2002]

: NFS - Yes, I am very risk-averse about the amount of income I want to receive each and every month in my retirement for as long as I live. I do not want to risk any of the income.

I guess you people don't read very well!

The $550,000 can be invested to provide future montly income increases when needed.

I chose to invest this part the way I stated in my previous posts.

You can invest it all in one technology stock if that is what you prefer.

7.3885% cash flow is better than the 4% you guy's preach. My cash flow % will increace every 5 years when I buy a new immediate annuity. I have seen a cash flow % if I bought at age 75 that is about 9.66% for me.

Tony

[MRGALT2U]

Hello Tony. I don't think you understand the 4%
SWR concept. BTW, it's monthly, not "montly" and
increase, not "increace". Yep, it's a tough crowd all
right

JG

[azanon]

I'll be damned if i'm going to turn my money over to some insurance agent when I retire.

That's all I have to say.

[Tony2002]

: MRGALT2U - I understand the 4% SWR very well.

If I had listened to an advisor who proposed that to me in 1997 ( I was thinkg about retiring in 1997 which I am glad I did not do). I would have lost a lot of money and my income would have been cut by 40% to 60%

In 1997 they were preaching 6% to 7% SWR NOT the 4%.

It's very FUNNY that after the market downturn that started in 2000 the SWR is now preached at 4%.

You know why that is

Because those who were at 6 to 7 % will have NO ASSETS 10 to 15 years sooner than they expected. I bet some of those people don't even know that yet. Their advisors are afraid to tell them.

Tony

[unclemick]

O.K. - I'll bite

Single, age 61, Early SS in 3 month's at 1200/mo.

750k trad IRA, 150k taxable stocks, 100k junk(timberland).

So now I want to paddle off into the sunset in my kayak(a little forum humor).

BTY - I worked with a lot of Brit engineers in the 70's and 60's who bought annuities - Swiss usually because they did not trust British or American abilities to manage currency or inflation.

The IRS back in 1992 (pub 550) says I was allowed to croak at 84.3.

So what will annuities do for me?

[Tony2002]

: unclemick2 - I don't know.

I shared what I did with this board. Your situation is different from mine. It would need to be looked at by someone with experience. Unless you can figure it out for yourself.

Weather or not you can figure it out for yourself the guy I used will find you the immediate annuity or other types of annuities that will give you the best payment or rate.

Why don't you contact the guy I used at www.jdsfinancialsolutions


He did very well for me.

Tony

[brewer12345]

Quote:

: It works! Read my previous post on how I am protected for inflation. Tony

Tell you what: come back in 30 years and we will see how well this withstood the ravages of inflation.

Man, the bullsh!t-o-meter is off the charts on this one.

[Tony2002]

: 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.

Tony

[laurence]

It's all very elegant, Tony, I'm happy for you, you found a solution that works for you. But don't you think people who were disciplined enough to save this kind of money in the first place are disciplined enough not to need to be put on an allowance? And, of course, you recognize that annuity companies would not be selling these things if they weren't making a profit. You paid a premium to eliminate some risk, your choice. Not mine.

[nfs]

Quote:

I do not want to risk any of the income.

To lay off that risk, you have given an insurance company between 1/4 and 1/3 of your net worth. Maybe that seems like a bargain to you. It doesn't to me.

Quote:

contact the guy I used

Is this the pitch? :

Quote:

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.

Well, Tony, this board is dedicated to providing the discipline so that #3 isn't a variable. The standing advice on this board is also to diversify a portfolio, which can mitigate to some extent #2. And the 4% SWR is designed, albeit imperfectly, to mitigate #1. Meanwhile ...

Quote:

I only have one variable. The future inflation rate.

You have close to no protection against that variable. You also forgot (or intentionally omitted) one other variable that annuity purchasers face but SWR users don't. The insurance company that is paying you could go belly up. That would put quite a crimp in your lifestyle, n'est-ce pas?

[Tony2002]

: laurencewill: Even in your answer you miss the point.

At 4% you are on an allowance and if you increase your allowance you increase your risk of have your assets run out earilier than you planned for.

So what if the insurance companies make a profit!

Everything you buy or use in the USA, someone is making a profit.

Making a profit is what our economic system is all about.

Last May2004 I bought a 10 year deferred annuity that pay's me 5.15% in interest guaranteed for 10 years. Their was no other investment out their at the time that I could earn 5.15% each year for 10 years on. Nothing!

If the insurance campany can pay me that and make a profit for itself, so what!

I got a great deal!

If feel the same way about any other investment out there! Oh buy the way any investment you get into someone is making a profit on it!


Tony