Annuities

Mikey, you must be a liberal with a post like that! - Us liberals would be proud to have you on our side.
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Cut-Throat, thank you for the  welcome into the liberal caucus. Unfortunately, I have had too much direct experience with the left half of the bell-curve to expect much from liberal policies. Got to admit that liberals are more fun though. Liberals want to sleep with one another; conservatives want to shoot one another.

BTW, Edmund Burke is largely known for his pro-monarchy writings after being repelled by the excesses of the French Revolution. Often forgotten are his writings urging King George to more equitable treatment of the American Colonies. If he had had more effect on policy, we might be more like Canada today.

Mikey
 
NFS - if you are trying to talk anything beyond 2+2 to *****, give up. I have always thought that the mucking around with the Shiller data series was messing up the errors. But no one would listen. :)

JWR's estimates notwithstanding (and they are estimates, being regression coefficients with very wide standard errors), the simple truth is that valuations on the S&P 500 at the start of both 1997 and 1998 were higher than they are today and nobody who retired using 4% SWR at the beginning of either of those years with a 100% US large cap portfolio is in much danger of going bust.
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Heh. I started in 1998, and I'm close to even in spite of takin out 3-4% per year. These guys don't want to hear that.
Believe me, your argument is damaged much less when you acknowledge outliers than when you pretend they do not exist.
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They only exist in la-la land. Don't waste your time on this. Really. It will drive you crazy, and you won't get any benefit. ***** is only in it for negative recognition as far as I can tell.

arrete
 
And - giveRe: Annuities

Shotguns and dogs

I'm thinking of going harder in the direction of 100% stocks(dividend stocks that is).

And given her zero interest in anything financial - thinking of putting a fixed annuity for the SO in my will.

My 8.4% withdrawal from my dividend stocks over the period was due to spin off mergers/ cash buyouts - was eratic, put some money back on dips and is a mess on a spreadsheet.

But - I find the dividend argument (already pre-predjudiced) over at NFB board increasingly compelling.

More than one way to skin a cat.

I think that an individual stock picker could put together a 3-4% div yield portfolio even in todays market - possibly competitive with inflation.

On the other hand - I wouldn't want to buy an annuity in today's market.

I reserve the right to change my mind.
 
Even if we are invested 55% in stocks we are probably OK. I think I'm going out for a Filet Mignon Dinner tonight and will sleep peacefully tonight, since you have endorsed our retirement plan

I don't know the details of your plan, Cut-Throat. But it would not surprise me too much if what you are saying here is very much so. But it's not me endorsing your plan, it's the historical data. All that I have done is report what the historical data says.

There are some who have gotten it in their heads that the historical data is telling an anti-stock message. That is sure not what I pick up from it. I view the message as being very much a pro-stock one overall, and even at times like today, the message is not nearly so anti-stock as some seem to imagine.

JWR1945's research shows that the SWR is higher for a 50 percent stock allocation than for an 80 percent stock allocation. My personal view is that 50 percent is a bit high at today's valuations, but I'm just some guy who posts stuff on the internet, you know? If you have some slack in your plan (and a good number of the people who post here have a good bit more slack in their plans than I have in mine), I think it is entirely possible that a 50 percent allocation will work out more or less OK.

In any event, none of us know the future. All we know is the past. It may be that stocks have entered a Golden Era that is going to mean they do even better in days to come than what the historical data suggests. You'll get the benefits of that if they do. And you'll have earned them for putting your money where your mouth is, so far as I'm concerned.

My beef is when there are attempts to block those with other persectives from having the conversations needed to better develop those perspectives and thereby gain the chance to realize the benefits of putting their mouths and their money in a different place. People with differing viewpoints on how to invest for early retirement are not enemies. They are people using different stratagies to attain the same goal. We need to be able to hear more than one viewpoint on investing for the board to achieve its potential.
 
if you are trying to talk anything  beyond 2+2 to *****, give up.

Arrete is pretty much on the mark with that one. Chapter Eleven of my book is titled "Every Number Tells A Story." Here are the first two sentences:

I'm math challenged. There are times when I find it a struggle to remember my telephone number.

I ain't no Numbers Guy, let's put it that way. Why do you think I can never stop singing the praises of this JWR1945 individual?

If you have some free time and want to see something that is not supposed to be seen in the natural world, go to the SWR discussions in the Post Archives of the Motley Fool board for the time between May 13, 2002 and August 27, 2002. That was the time-period in which I was defending the Data-Based SWR Tool from a solely conceptual standpoint. I hadn't discovered the Bernstein book yet and there was no SWR board for JWR1945 to post his research on at the time. It was just little old ***** and his word collection going against big bad intercst and a gang of number crunchers out to do him harm.

I think I held up my end given the lack of numbers skills that God elected to hand out to me. There were some who gave expression to another point of view, but I have a funny feeling that they might have been hamming it up just a wee bit. Check it out for yourself. The arguments were not so tired in those days. People were saying stuff they really and truly believed and the difference comes through. I think it's a trip that we are able to go back and see the way we were looking at it then from the perspective we possess today.

If we had the chance to do it all again, tell me--Would we?
 
::)Part 1
I think that you all are not approaching this topic in the right way.

Let me tell you all what I did with my portfolio to generate retirement income.

I had a portfolio of approx $1.2 Million of non IRA money and $240,000 of IRA Money when I retired at the age of 60 in May of 2004. I have no pension and will start Social Security at age 62. I am currently single. I have 2 working children. My home is paid off.

My objectives are to travel and enjoy the remainder of my life for as long as possible. I am not concerned about leaving an estate to my children. I planned for that several years ago.

Here is what I did:

When I was 47 I created a trust for the benefit of my 2 children. In this trust I purchased a joint life insurance policy that would pay $1,000,000 upon the death of my wife & I. My wife passed away so this amount will be paid at my death. The smartest thing I did here was pay a premium amount that would pay this policy off in 13 years. I made my final payment and I never have to make another one. My children will receive $1,000,000 when I die. To pay the premium on the policy that the trust purchased we made gifts to the trust each year that equaled the amount of the premium. Since this is in a trust this $1,000,000 is not subject to estate taxes.

What will my children inherit in a worst case? $1,000,000 plus the value of my home when I die. Currently my home is valued at about $600,000.

So when I made the statement that "I am not concerned about leaving an estate to my children". You see why I think $1.6 Million minimum is plenty. My portfolio is for me alone. If any part of my portfolio remains after I live the remainder of my life to its fullest then my children will get some more. I expect to live into my 90's God willing! I also expect to enjoy myself. To protect my home, I purchased longterm care insurance with a strong home care benefit. If I need care I would prefer having the care at home instead of going into a nursing home. Yea, this isn't cheap, but at least with this I can control my situation.

The most important thing, as I see it, is to make sure that I do not outlive my assets or ability to generate income.

I see a lot of posts here about withdrawal calculations. I don't agree with any of it. Because any calculation you do, you always at some point run out of money. When your asset runs out, you no longer can receive income. Remember, I expect to live into my 90's. I can not trust any of these withdrawal models. They can NOT guarantee that I will receive the income that I want for the remainder of my life.

I purchased an immediate annuity with all of my IRA money. The $240,000 pays me a monthly payment of $1,475.42 or $17,705.04 per year for as long a I live.

With $649,287.49 on my non IRA money I purchased an immediate annuity that pays me a monthly payment of $4,000.00 or $48,000 per year for as long as I live.

Is this a good investment? I say YES! These assets are to pay me the most monthly guaranteed cash flow possible. Remember I said cash flow. Cash Flow is what you feel or can hold in your hand if you choose (what I receive every month. NOT that fictional rate of return that everyone talks about. One point in time its there and the next its gone along with some of your initial investment). These assets are for my benefit only not for my children. My children are already taken care of to my satisfaction.

So I invested $889,287.49 into immediate annuities that pays me $5,475.42 per month or $65,705.04 per year for as long as I live guaranteed. What is the cash flow rate that I receive? 7.3885% This is in a world where a 10 US Treasury Bond pays 4.53% and a 30 Year pays 4.81%. See part 2
 
::)Part 2
If I say this another way, I would have to buy a US Treasury Bond that pays 7.3885% in interest each and every month for entire life to match this cash flow. Well we all know that this is impossible.

Another advantage to me. Of the $5,475.42 per month of $65,705.04 per year, only $3,329.42 per month or $38,873.04 per year is considered taxable income. $2,146.00 per month or $26,832.00 per year is Tax Free (Considered a Tax Free return of initial investment).

All of my IRA money received each year taxable. Only 44.1% of the other payment is taxable income. So if you did this all with non-IRA money more of the payments would be tax free.

You say, these payments are fixed, what about inflation? Well, I will get an increase in monthly payments when my social security begins at age 62. This I think will start out in the $1,200 per month area. This portion will increase each year.

Part 2 to the inflation answer is the balance of my portfolio is to be invested and grow with some certainty so that when I feel the pinch of purchasing power loss, I can take some of that money and purchase a new immediate annuity that equals an increase in the monthly payments that I need.

What if I need ready cash? I set up a money market account with $75,000 in cash. I deposit money that I do not spend each month from the $5,475.42 per month I receive. I can not see any situation where I would need anywhere near that amount of money.

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!

Who advised me on how to do this? I actually found this professional on the internet through www.jdsfinancialsolutions.com . This website has a great deal of information on it. He does business nationwide. We did everything over the phone, through emails and through the mail. We worked very well together, I gave him all the information he needed to thoroughly understand my needs and he gave me all the time I needed to understand what he was proposing that I do. He gave me all the time I needed to make a decision with no pressure at all. He gave me a plan that actually works, is flexible and guarantees that I will not outlive my income & assets. Not some hypothetical withdrawal calculation that if you take out beyond the time you expect to live runs out of assets and thus income. Not some hypothetical withdrawal calculation with a hypothetical rate of return that has a possibility to be less than zero! You should talk to people who started using these withdrawal calculations in the years 1997,1998, 1999 & 2000. They are very sorry that they did this. I bet they run out of money 10 to 15 years sooner than they expected when they started them. I wonder if then even know!

I am about one year into my retirement, traveling, having fun, spending about 75% of this $5,475.42 per month and I have no worries. This strategy works great for me. Live, Love & Enjoy Life! Tony
 
::)The Topic of this string is Annuities & Retirement.

I know some you you here have a one track agenda (because you make a living at it).

The title of the website is earily-retirement and is suppose to be a place with an open sharing of ideas!

That is not the case here.

You guy's have one agenda and only one agenda and you trash everything else.

Their are many way's to solve the retirement income issue not just the one you guy's are paid to preach!

My previous two posts shows what I did. It worked for me and can work for 75% of the people in a similar situation as myself.

I think more people should do it my way because it has a higher probability of working for most of the population.

I will continue to share it. I will be the case study untill the day I die!

Tony
 
Deja vu? Didn't I just read this yesterday? Maybe my
ginkgo ain't workin' or it could be"Oldtimers" kicking in.
I may be opinionated, obnoxious, overbearing,
egomaniacal etc, but I never made the same post twice.
Well, maybe I did, but I covered myself
with cleverly camouflaged conclusions.

JG
 
Alas - ER's seem to be mostly a take charge of their own finances and budget - hands on the throttle crowd - thus achieving the big E in FIRE.

Giving control to an annuity company doesn't fly too well.

They have their place in the arsenal of FI - but it's way down the list for many(most?? ER's).

Go to an old timey estate planner - you know, the guys who were around before financial advisors got invented - and step into the world of trusts, insurance products, AND annuities.
 
JG, your eyes are NOT decieving you, unfortunately. I guess if the first dragnet didn't pull in any fish, cast again....and again.... :D
 
if you are trying to talk anything beyond 2+2 to *****, give up.

Arrete is pretty much on the mark with that one. Chapter Eleven of my book is titled "Every Number Tells A Story." Here are the first two sentences:

I'm math challenged. There are times when I find it a struggle to remember my telephone number.

I ain't no Numbers Guy, let's put it that way. Why do you think I can never stop singing the praises of this JWR1945 individual?
Click to expand...

Well then, *****, you're pretty much screwed. You're concerned that intercst is spreading false news, lulling people into a false sense of security. Since you know nothing about numbers, it could also be the case that JWR is spreading false news, gulling people into a false sense of anxiety. Perhaps you're just his cats paw, because I see a lot more anxious posts from you than from him.

I suppose I should have just trusted the early advice and my instincts and let this all go unremarked. Instead I wasted a few hours arguing with you. I've learned my lesson.

<Tony>:
Let me tell you all what I did with my portfolio to generate retirement income.
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Tony, cut and paste is really easy. It's also very ineffective. The sixth time around, it's pathetic. Sayonara.
 
It could also be the case that JWR is spreading false news

You are on point in your suggestion that I do not possess the skill set to know whether JWR1945 is handling things properly on the statistics side. I can tell that he knows a lot about the field. And I have seen how he responds when people point out mistakes in his work--he is unfailingly polite and prompt with a correction. So I have come to trust the guy. But it is indeed possible that he has unknowingly made some sort of mistake and that I am not aware of it because of my lack of skill with numbers.

That doesn't change the fact that William Bernstein also found that intercst got the number wrong in the REHP study. And that raddr did as well in the days when he was shooting straight. And that there are a number of other experts who have rejected the intercst assumption that changes in valuation have no effect on long-term returns--Rob Arnott, Andrew Smithers, Robert Shiller, Ed Easterling, Scott Burns, and Peter Bernstein.

Is it possible that all of these people got it wrong and that interest--whose only qualification to tell us what the historical data says re SWRs is that he is a guy who figured out how to post stuff on the internet--got it right? I say no. I expect that there will be many people adding important enhancements and adjustments to JWR1945's work as time goes on. I don't think that we will ever again have confidence that 4 percent is the magic number regardless of the valuation level that applies. I think that idea is part of our past and not part of our future.
 
Interesting strategy.

Does a guaranteed whole life premium really mean guaranteed under all circumstances? Or is there some loophole to jack it up if something unusually bad occurs.

intercst
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Usually, the life prooduct in these arbitrages is a no-lapse UL policy rather than a whole life policy. There are no loopholes in the no-lapse policy as long as you make all the scheduled premium payments.
 
::) Go back and read my posts.

My joint life policy in a trust was paid off in 13 years. I never have to make another payment!

Tony!
 
You guy's have one agenda and only one agenda and you trash everything else.

Please do not think that the small number of posters who have posted rude and abusive comments are representative of our community, Tony2002. I have been part of this community since its earliest days, and I can assure you that this is not the case.

The majority does not favor annuities, that's fair to say. But the majority would like to see the loudmouths give it a rest and allow some new people put forward some new ideas. The loudmouths are used to having their way. They see their influence fading as their "100 percent safe" ideas are revealed to have not worked out so hot in the real world. They see themselves as being in the process of losing something and those who are losing something are often more inclined to fight than are those who would like to gain something but don't even know much about what it is they hope to gain because they have never yet experienced it in a complete way.

We are going through a period of transition, Tony2002. We need people like you putting forward new perspectives to help us along. We very much do NOT need you getting down in the dirt with the disruptors. That's what they want you to do. Do that, and you (and the rest of us too) lose. I appreciate you sharing what worked for you. I hope you to continue to do so in an appropriate and effective way. I'm happy that you found something that worked for you, and pleased that you were willing to take the time to share, even under the difficult circumstances that unfortunately apply here at the present time.

Hang in there, Tony2002. I believe that it's going to be getting better before too long. I think we will be able to change your views as to what this community is really all about before too much more time passes through the hourglass.
 
Tony2002 is the only shill in this thread. It should be pretty obvious to anyone who reads his posts and sees the same marketspeak cut and pasted repeatedly.

His posts seem to associate this board's membership of prognosticating 6-7% withdrawal rates in 1996 and/or of being commissioned financial advisors. Um, that wasn't this group; this board was staretd about 3 or 4 years ago. And check our post counts and see if we've ever tried to sell anything. Intercst's site has a couple of reports for sale but the vast majority of info there is free for the reading and following his advice leads to no particular investment company. Dory36 doesn't sell a thing as far as I know. Neither site even has ads.

Some lurkers may wonder why we take the effort to attack these people. If I may dare to speak for some others, it's because we think they're offering bad or at best unqualified advice and/or shilling or selling a product and don't care to let that sit unchallenged on our board because a casual reader may not know the reputation difference between Tony2002 and intercst.

*****, I admire your doggedness and refusal to respong with anger. Still, I am totally in the dark as to why you continue. What is your goal?
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***** has had a book in the works for at least 5 years. My recent theory is that he is trying to build grass roots support and/or shape this--as identified and defined by him--epic "Great SWR Debate" either as an audience to sell the book to or more likely a sign of interest and rising new FI/RE phenomenon that may convince a publisher to publish his book.

Positioning himelsf against intercst makes sense because inctercst has some web and publicity fame and was even on tap to write ER for Dummies for IDG publishing until he turned it down because they wanted to push certain ideas. Amazon.com presold copies of that book by Greaney (intercst) before they chagned authors. Anyway, if ***** could promote his book as controversial to or correcting intercst's popular website and the SWR studies he reports it might make the book more interesting to publishers.

Anyway, it's just a theory of mine, and I know little about ***** and nothing about publishing. But I find it funny that I decided to post this before reading in this thread his mention of his book.

Back before things got ugly I got on the list to be notified when his book was published. You can take me off, though...I've seen enough.

By the way, if ***** is "the founder of the SWR Research Group board at NoFeeBoards.com" then do I get to be "the founder of the Young Dreamers board at Early-Retirement.org"? I'm adding that to my sig.

EDIT: Cross-posted with ***** (and Tony and brewer). ***** attacks the "100% safe" moniker, but I haven't seen any such consensus that 4% is 100% safe no questions asked. There's been lots of discussion and everyone has their own fudge factors for their situations. I don't see the straw monster ***** is attacking.

Go back and read my posts.
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Why bother? You'll post them again tomorrow.
 
I don't mean to pull this off thread but
brewer12345 - were you able to read all of Svjek? - the author went through a lot of alcoholic episodes and you really can tell in some of the writing.

I used to work in the MOD building mentioned in the beginning of the book and even visited the famous pub, now a tourist trap.

arrete
 
::)What a coincidence that you started promoting the 4% SWR 3 or 4 years ago!

Just when the 6% to 7% SWR promoted from 1997 to 2000 exploded many early retirement plans.

I don't think this is a coincidence.

Tony
 
Intercst's site has a couple of reports for sale but the vast majority of info there is free for the reading

I don't think that intercst is trying to make money with his magic 4 percent SWR claims (except for the small amount he earns from sales of the REHP study). He is indeed "selling" something in his posts to this board, however. He is "selling" himself as some sort of guru on how to achieve early retirement.

When posters come to fancy themselves as gurus with the right to stomp out alternate viewpoints, it does damage to the board. We are a community of people with diverse ideas on how to win financial freedom early in life. It is the diversity of viewpoints heard on a board that give it its strength.

We don't hear a diversity of viewpoints on SWRs at this board. We hear one viewpoint over and over and over and over again. There are people saying that Tony2002 is repetitive in his claims. Well, he's got a long ways to go before he will be a match for intercst. There are thousands os posts on this board pushing the intercst view on SWRs.

Why is it OK for intercst to be repetitive and not for Tony2002 to be repetitive? This I do not get. I believe that it is reasonable to rein in posters who cross a line and become so repetitive that their posting is disruptive of other conversations that people want to have. But I also believe that the same rules that are applied to Tony2002 should be applied to intercst and his supporters.
 
Some lurkers may wonder why we take the effort to attack these people....It's because we think they're offering bad or at best unqualified advice and/or shilling or selling a product.

If you see flaws in the argument that Tony2002 is putting forward, you are doing us a service by asking hard questions. When you put forward unproven allegations that he is selling something, you do us harm by generating unnecessary friction. The impression you give when you do that is that you had your mind made up before he put forward his first post and that your only purpose in participating in the discussion was to see that it was quickly brought to a close.

a casual reader may not know the reputation difference between Tony2002 and intercst.

I ain't a casual reader. I have over 2500 posts to my credit and my first post came in May 1999, the month the first board went up. I think that Tony2002 has more to offer us today than intercst. We all have every argument intercst is capable of putting forward memorized by now. Tony2002 is saying something that we have not been much exposed to in the six years since that first board (the Motley Fool board) was formed.
 
I don't mean to pull this off thread but
brewer12345 - were you able to read all of Svjek? - the author went through a lot of alcoholic episodes and you really can tell in some of the writing.

I used to work in the MOD building mentioned in the beginning of the book and even visited the famous pub, now a tourist trap.

arrete
Click to expand...

I've read it several times, although only in the English translation. Yeah, it is clear that Hasek was in his cups much of the time, but the book works as a series of (loosely) connected vignettes. I think it is hysterical, in fact, and it is a great comfort when I am really feeling like an oppressed cog in the corporate wheel.
 
Positioning himelsf against intercst makes sense because inctercst has some web and publicity fame

I didn't "position" myself as anti-intercst. Intercst positioned himself as anti-me when I reported accurately what the historical data says re SWRs.

if ***** could promote his book as controversial to or correcting intercst's popular website and the SWR studies he reports it might make the book more interesting to publishers.

The "Passion Saving" book does not discuss SWRs. It does mention intercst, but only in positive ways. It describes him as being a highly effective saver and credits him as the founder of the Motley Fool board, which I identify as having been the most important resource on Planet Earth for learning about early retirement during its Golden Age (December 1999 through January 2001).

I am planning a second book, which will focus on how aspiring early retirees can make use of the Data-Based SWR Tool to win financial freedom early in life. I will of course be reporting in that book that the REHP study is analytically invalid for determining SWRs and exploring what the various communities learned about what the historical data says during The Great SWR Debate.
 
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