Annuities

[cute fuzzy bunny]

Quote:

:th - There you go again! Selectivly pulling out one comment and picking it apart.

Actually that was the other 5 guys.

You see, the problem with making statements is that people will, in fact, pick them apart.

I can sense your frustration. It really screws up the flow of the infomercial when someone asks WHY someone cant slice an orange correctly with a knife or why juicing will really change their life.

Riddle me this, batman...er...tony...why did you feel it was so important to tell us all of this? I mean, you havent posted here before, you arent getting a real warm reception...why so detailed and persistent? Whats the motivation? Are you trying to save our retirements? Has Intercst been making death threats against you?

It all seems so strangely familiar...

[hocus]

I think some historical perspective might be helpful.

Intercst started the first Retire Early board (the Motley Fool board). That is the reason why the myth has grown up that there is some sort of magic to the 4 percent number. He put forward a study saying that the number is always 4 percent, and he did not permit questioning of the methodology of his study. So there were a good number of smart people (including Dory36) who once really believed that the 4 percent number was magic. They went off and started new boards and took their belief in the magic 4 percent number with them.

If you look to Retire Early experts who have not been caught up in the intercst mythology, you don't see much belief in the magic 4 percent number. Joe Dominguez's book has sold millions of copies, and he rejects stock investing altogether (I don't endorse his investing advice any more than I endorse intercst's investing advice, but that's not the point here). The other big book in this field is the Terhorst book. That book ALSO does not favor stock investing for early retirees. Terhorst changed his views later, but that doesn't change the fact that he did not argue in favor of any silly 4 percent rule in his book.

All that we have supporting the magic 4 percent number at this point is the cult of personality that has grown up around intercst at our boards. Experts like Arnott and Smithers and Shiller don't support it. Those who have studied the data in an analytically valid way (Bernstein, raddr, and JWR1945) don't support it. Even common sense does not support it. How could there ever be an asset class that supports a 4 percent withdrawal for 30 years no matter what price you pay for it? The claim is not just nonsense; it is on-its-face nonsense. You don't need to study the data to know that the SWR must change as valuation levels change.

We are now in a rut. If the claims about the magic 4 percent number were valid ones, it would follow that there would only be one way to invest for early retirement. Everyone should always put just about everything in stocks. Those of us who possess some common sense reject such an idea out of hand. What we have not yet come to reject is the magic claim that causes so many of our investing discussions to be posioned with all sorts of unnecessary friction.

When people try to defend something that cannot be defended with reasoned argument, they are forced to resort to something other than reasoned argument to do so. We should let these people off the hook. We should acknowledge that there is no one magic number. Stocks are a wonderful asset class, but they are not the only asset class that aspiring early retirees should be looking at. There are some valuation levels at which 4 percent is the number and there are some where the number is higher and there are some where the number is lower.

There is no magic to the number 4. Continuing to entertain the myth that there is is doing us harm. I say that we should let it go. We should stop living in a world of myth, face reality and the historical data as it exists, and proceed through our growing pains to become a stronger and healthier board community in the future than we have been in the recent past.

[intercst]

Good Lord! Some of Tony's posts are longer than a ***** rant.

intercst

[Tony2002]

: Quote from NTF - FACT: The 4% comes from the Trinity study, published in February 1998.

4% at that time was a very, very, very, very minority view.

Plastered all over the Financial News, Financial Press, Financial Advisors saying, Brokers saying, Financal Planners saying in 1997 to 2000 - 6% to 7% was the very heavy majority view. Not some obscure report saying 4%.

All who followed that view back then have been burned by this concept! Explan That!!!!!

Thats it for me Today, I am going out to spend some of my $5,475.42 per month or $65,705.04 per year that I receive guaranteed.


Tony

[hocus]

Please STOP with this almighty 4% SWR claim. It's doesn't work because they change are alway's changing the numbers so that you do not run out of assets! Was anybody around in 1997 to 2000 who can back me up here!

I can back you up by noting things I have heard said on the boards more recently than that. The intercst supporters argue that the magic of the 4 percent number remains in place until we actually see busted retirements resulting from use of it.

I view this as a dangerous and irresponsible argument. The SWR is a data-based construct. We should be looking at data to determine the SWR, not just saying that because intercst says the number is 4 percent that number has acquired some sort of magic power. The three researchers who have looked at the data have found that the SWR number for a high stock portfolio is nowhere even remotely in the neighborhood of 4 percent at today's valuation levels.

My position is that we should permit discussion of what the data says prior to the time we experience large numbers of busted retirements. Now is when many people need to know what the data says. For some, it will be too late after their retirements go bust.

[nfs]

Quote:

All who followed that view back then have been burned by this concept! Explan That!!!!!

My explanation is: Following dumb advice rarely turns out well.

The trouble in this thread is that you're handing out dumb advice re annuities. It's a stretch to even call it advice.

Meanwhile, on another front:

*****, you're queering Tony's sales pitch. If you want to rewrite history yet again, start another thread that we can all ignore.

[brewer12345]

Quote:

Thats it for me Today, I am going out to spend some of my $5,475.42 per month or $65,705.04 per year that I receive guaranteed. Tony

Translation: He doesn't want to acknowledge being a shill, so he is taking his ball and going home.

Let's hope he stays there.

[hocus]

Good Lord! Some of Tony's posts are longer than a ***** rant.

This is the sort of comment that intercst has been putting forward for 34 months now in place of any reasoned argument that the historical data supports his magic number, Tony2002.

This individual is the cause of the problem on our boards. There are many people who would like to open up the investing discussions to a wider range of perspectives. Intercst has a personal interest in seeing that that does not happen. He has a good number of supporters who are willing to say anything that needs to be said to shut down reasoned debate.

Still, I don't think that intercst can hold back the tide indefinitely. There are lots of people in the world interested in early retirement who have never heard of intercst and who could not care less that he thinks there should be some sort of magic attached to the 4 number. Those people are in time going to insist that reasoned discussion of SWRs be permitted on our boards as reasoned discussion is permitted on so many other topics. That's my take, anyway.

I think that what we are experiencing is an acute case of growing pains.

[intercst]

Quote:

Please STOP with this almighty 4% SWR claim. It's doesn't work because they change are alway's changing the numbers so that you do not run out of assets! Was anybody around in 1997 to 2000 who can back me up here! I can back you up by noting things I have heard said on the boards more recently than that. The intercst supporters argue that the magic of the 4 percent number remains in place until we actually see busted retirements resulting from use of it. I view this as a dangerous and irresponsible argument. The SWR is a data-based construct. We should be looking at data to determine the SWR, not just saying that because intercst says the number is 4 percent that number has acquired some sort of magic power. The three researchers who have looked at the data have found that the SWR number for a high stock portfolio is nowhere even remotely in the neighborhood of 4 percent at today's valuation levels. My position is that we should permit discussion of what the data says prior to the time we experience large numbers of busted retirements. Now is when many people need to know what the data says. For some, it will be too late after their retirements go bust.

I think it would be particularly instructive to examine the ***** busted retirement. A group of talented scholars and researchers have done just that on the REHP forum.

http://www.retireearlyhomepage.com/c...num=1109786644

intercst

[P.S.]

Quote:

Sorry Tone old boy, we figured out you're a salesman just about from the get-go. But its a cheap way to maybe net yourself a client or two...couple of minutes cutting and pasting a few bits of boilerplate into a message board. Let me help you out a little. *I have a tiny smidgeon of experience in sales and marketing. *I think I took a class once back in the 80's. Have a nice day! (PS...I didnt even have to put on my badge for that one...) (PPS...any connection between Tony2002 and Hocus2004?)

TH:

Too funny .

BTW, don't think I've yet complimented you on your very beautiful, tiny capped cutie!

[P.S.]

And just to clarify (b/c of the direction of some recent threads)... the cutie baby in the picture.

[Tony2002]

:Before I go out!
************************************
I view this as a dangerous and irresponsible argument. The SWR is a data-based construct. We should be looking at data to determine the SWR, not just saying that because intercst says the number is 4 percent that number has acquired some sort of magic power. The three researchers who have looked at the data have found that the SWR number for a high stock portfolio is nowhere even remotely in the neighborhood of 4 percent at today's valuation levels.
***************************************

All that needs to be done is to examin all who took action in 1997 to 2000 on the the 6% to 7% withdrawal (I was almost one but decided not to retire).

Many Busted Retirements here I am very sure!

They don't want to do this because they will find many bodies and disprove even the 4% theory!

Theory is all this is. Follow this and you will be a body too!

What I did with immediate annuities and annuities & other works! Go back and read my 1st two posts!

Don't be a lab rat to this Theory! Look at the evidence from 1197 to 2000 for your evidence!

See you tomorrow. I have a right to my opinion and to share my story!

[brewer12345]

Quote:

See you tomorrow.

Damn!

[cute fuzzy bunny]

Why thank you PS! He is a doll, isnt he?

Check this new shot out...



(My next door neighbor owns the local John Deere outlet)

[P.S.]

Oh soo sweet! *And by the twinkle in his eye, he looks to be tentatively developing his own mischievous humor!

[hocus]

Plastered all over the Financial News, Financial Press, Financial Advisors saying, Brokers saying, Financal Planners saying in 1997 to 2000 - 6% to 7% was the very heavy majority view. Not some obscure report saying 4%.

That's one of the reasons why Bernstein refers to the Trinity study as "breakthrough" research (I agree with him on this). At the time the Trinity study came out, the common view was that the SWR for stocks was HIGHER than 4 percent. The Trinity study was a voice of caution. It HELPED early retirees by making people know that the conventional view was wrong.

Interct is using the REHP study for a very different purpose. Today, valuations are higher and SWRs for high stock portfolios are lower, according to the historical data. Intercst's voice is not a voice of caution. He is saying that it is "100 percent safe" to put most of your money in an asset class that is at the most overvalued level it has ever been at in its history. Intercst's investing advice is irresponsible. It does not help aspiring early retirees, it threatens to do them great harm.

[nfs]

Quote:

All that needs to be done is to examin all who took action in 1997 to 2000 on the the 6% to 7% withdrawal (I was almost one but decided not to retire). Many Busted Retirements here I am very sure!

6-7% was bad advice. What's your point?

Quote:

They don't want to do this because they will find many bodies and disprove even the 4% theory!

Not exactly. The great thing about numeric challenges from the numerically challenged is that they're so easy to refute.

Just for argument's sake, assume a 100% S&P 500 portfolio. (A portfolio like this is also the result of bad advice IMO, but I'm trying to lean as far your way as is possible.) If you started with $1MM at the beginning of each of these years, using 4% SWR, here's what your portfolio would be worth at 12/31/04.

1997 $1.43MM
1998 $1.04MM
1999 $796k
2000 $658k
2001 $789k
2002 $962k
2003 $1.32MM
2004 $1.06MM

That's not to say that the 1/1/2000 retiree who used 4% SWR is in a happy place these days and that a reduction in spending wouldn't be advisable. But you should note that there isn't a bankrupt anywhere on that list.

[arrete]

I see the twinkle in that eye, TH. You're in trouble At least you'll have something to do in your retirement unlike the rest of us sitting on our duffs.

arrete

[nfs]

Quote:

That's one of the reasons why Bernstein refers to the Trinity study as "breakthrough" research (I agree with him on this). At the time the Trinity study came out, the common view was that the SWR for stocks was HIGHER than 4 percent. The Trinity study was a voice of caution. It HELPED early retirees by making people know that the conventional view was wrong. Interct is using the REHP study for a very different purpose. Today, valuations are higher and SWRs for high stock portfolios are lower, according to the historical data.

Do you think people can't google "S&P 500 p/e ratio" and know within minutes that you're talking through your hat? At the time of Trinity's publication, valuations as measured either by p/e, p/b, or yield on the S&P 500 were considerably in excess of those "today".

Quote:

Intercst's investing advice is irresponsible. It does not help aspiring early retirees, it threatens to do them great harm.

Yet, according to you, Tony's annuity suggestion, which typically pours 1/3 of the purchase price into the pockets of financial intermediaries, is "fresh perspective".

[hocus]

JWR1945 has added a post to the SWR Research Group board thread linked above that provides some links to material re annuities posted at the Gummy Stuff site. Gummy generally provides quality information, so I think that those interested in obtaining a more balanced view of the annuities question than is permitted here might want to take a look over there.