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Re: Annuities and Social Security
Old 12-15-2005, 06:44 AM   #21
 
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Re: Annuities and Social Security

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Originally Posted by ((^+^)) SG
Roth is probably a plus for most people.

As for SS . . . even the most pessimistic projections indicate only a reduction of about 25% in benefits would be necessary.* There are people with political motives who want to convince people otherwise, but ss will not need to be eliminated, merely cut back.* *
If the COLA index is going to undercut the true inflation rate by 2-5% a year by the time you retire your SS will not matter.* Chuck in a 25% reduction on top of that - it is better to plan NOW on not having it then get to 55-60 and and they moved the retirement age to 72 from 62.

I know this sounds stupid but sooner or later they will say "we are living much longer" then adjust the rate up 5-12 years and really throw off your plans.

Plan for the worse, hope for the best - is the only way you can plan.* *
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Re: Annuities and Social Security
Old 12-15-2005, 06:49 AM   #22
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Re: Annuities and Social Security

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Originally Posted by . . . Yrs to Go

Tall order given a 30+ year time horizon.* But I agree that credit risk is not a huge factor if you select your provider carefully.* I still wouldn't bet my entire nest egg on the solvency of one company.
Entire nest egg? Nope. But it sounds like the annuity grumpy is talking about is just the "icing on the cake", so a single annuity would likely be fine. There are several insurers I would be happy with up to, say, a quarter of my net worth at stake.
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Re: Annuities and Social Security
Old 12-15-2005, 06:57 AM   #23
 
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Re: Annuities and Social Security

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Originally Posted by brewer12345
Entire nest egg?* Nope.* But it sounds like the annuity grumpy is talking about is just the "icing on the cake", so a single annuity would likely be fine.* There are several insurers I would be happy with up to, say, a quarter of my net worth at stake.
Just read the stories of the retirees from Enron, Worldcom, Global Crossing.

If your company goes into bankrucpy they switch it over to that gov organization with the funny name and you are lucky to get 40% of your benefit.

Within a decade their will be no more company pension programs - mark my words.

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Re: Annuities and Social Security
Old 12-15-2005, 06:58 AM   #24
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Re: Annuities and Social Security

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Originally Posted by Marketneutral
Just read the stories of the retirees from Enron, Worldcom, Global Crossing.

If your company goes into bankrucpy they switch it over to that gov organization with the funny name and you are lucky to get 40% of your benefit.

Within a decade their will be no more company pension programs - mark my words.

MN, we were discussing annuities, not pensions. Big, bg difference.
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Re: Annuities and Social Security
Old 12-15-2005, 07:01 AM   #25
 
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Re: Annuities and Social Security

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Originally Posted by brewer12345
MN, we were discussing annuities, not pensions.* Big, bg difference.
True. Wonder how the annuitity companies are doing with the current yield curve?

Having 100% of your nuts in one hole makes me nervous.

With that said, who says an annuity company can not go bankrupt?

Plan for the worse, hope for the best.
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Re: Annuities and Social Security
Old 12-15-2005, 07:38 AM   #26
 
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Re: Annuities and Social Security

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Originally Posted by WhodaThunkit
The increase in life expectancy may not be all that much.* Over the last however many years, life expectancy from birth has increased greatly because of reduced infant mortality.* On the other hand, the life expectancy of a 65 YO has increased, but not nearly as much.* Probably not 12 years!*

People who actually work at work, for example bricklayers, cannot normally work until age 72. So raising the retirement age that much is probably not going to happen.

More generally, the projections that show SS "in crisis" assume a (real) productivity growth rate of 1.2% for the US economy.* This is significantly less than the actual productivity growth rate of the US economy over the last 100 years, which period of course included boom times and also the great depression.* Even at 1.2%, however, SS is solvent until about 2040-2050.* If you use the actual hundred-year historical growth rate of 2.0% in making projections, SS is solvent for many, many, many years into the future without any changes at all.* Moreover, there is no reason to assume that real productivity growth will decrease -- it may just as well increase, based on technological and business-process improvements.

The problem that people need to think about is the cost of medical care.* This is showing evidence of being a real concern TODAY, as opposed to a theoretical problem that might happen in 2042.* There is no way that Medicare can be sustained as it now operates.* Unless we have some thoughtful progress in containing the cost of medical care, we are in real trouble as retirees and would-be retirees.

Bottom line -- If SS fails, it will fail for ideological reasons, not financial reasons.* OTOH, Medicare will almost certainly fail unless something is done fairly soon.
I was speaking about the future.

Can you really say 30 years from now the social security retirement age will not be 12 years higher then now?

My point is if you based your retirement calculations on now - when the actual time comes you may be caught with your pants down.

An extra $50 a month now towards retirement could means thousands that need to saved years from now.

Just for the discussion.* I am 31 and retired two years ago.* So the retirement age of 62 now seems very far off.* My guess is my social security age will be close to 70-75.

This figure is based on the rate of social security payments makes up against GDP and the ratio of workers to retirees now...................

Besides what the ratio to brick layers to paperpushers?

We are turning into a service based economy from a manufactoring (producing) economy.* With advances in health care the age for min retirement benefits will probably increase 6-12 months for every 3 years in the future.
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Re: Annuities and Social Security
Old 12-15-2005, 07:47 AM   #27
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Re: Annuities and Social Security

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Originally Posted by Marketneutral
True.* Wonder how the annuitity companies are doing with the current yield curve?

Having 100% of your nuts in one hole makes me nervous.* *

With that said, who says an annuity company can not go bankrupt?

Plan for the worse, hope for the best.* *
OK, time for a little remedial education. *First, let's contrast a pension and an annuity. *A pension is a claim on a pension fund. *Most pensions sponsored by corporate employers have assets (stocks, bonds, etc.) and liabilities (what they have to pay out in the future). *The feddle gummint requires some minimum levels of pension funding (assets to liabilities), but in actual fact, corporate pensions are allowed to run with assets to liabilities at 50% or less for years. *In contrast, annuities are sold by life insurers. *Like pension funds, insurers have assets and liabilities. *Unlike pension funds, assets must be considerably above liabilities (106 to 110% is typical), and insurers have far less discretion than corporate pensions over how they compute the liability. *Insurers also usually have portfolios mostly of high grade bonds, versus lots of equities, RE, hedge funds and other volatile stuff in pension portfolios. *So while pensions are commonly underfunded, insurers are not allowed to be, and regulators will step in long before they even get to 100% funding.

Second: Can annuity insurers go BK? *They sure can. *But what happens inthat case is that the regulator takes over and any debt holders usually get stiffed. *Policyholders get whatever there is, and any shortfalls (rare) are backed up by state guaranty funds. *Policyholders usually get 100 cents on the dollar plus accrued. *In contrast, when a corporate pension sponsor defaults on an underfunded pension, the retirees get the PBGC-capped payout. *This can be a 50% or greater loss in many cases. *Big difference between 50+% loss and zero loss.

Would it be smart to put every last penny in a single insurer's products? *Obviously not, but the level of risk one runs is a LOT smaller than that of a pensioner.
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Re: Annuities and Social Security
Old 12-15-2005, 07:53 AM   #28
 
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Re: Annuities and Social Security

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Originally Posted by brewer12345
OK, time for a little remedial education. *First, let's contrast a pension and an annuity. *A pension is a claim on a pension fund. *Most pensions sponsored by corporate employers have assets (stocks, bonds, etc.) and liabilities (what they have to pay out in the future). *The feddle gummint requires some minimum levels of pension funding (assets to liabilities), but in actual fact, corporate pensions are allowed to run with assets to liabilities at 50% or less for years. *In contrast, annuities are sold by life insurers. *Like pension funds, insurers have assets and liabilities. *Unlike pension funds, assets must be considerably above liabilities (106 to 110% is typical), and insurers have far less discretion than corporate pensions over how they compute the liability. *Insurers also usually have portfolios mostly of high grade bonds, versus lots of equities, RE, hedge funds and other volatile stuff in pension portfolios. *So while pensions are commonly underfunded, insurers are not allowed to be, and regulators will step in long before they even get to 100% funding.

Second: Can annuity insurers go BK? *They sure can. *But what happens inthat case is that the regulator takes over and any debt holders usually get stiffed. *Policyholders get whatever there is, and any shortfalls (rare) are backed up by state guaranty funds. *Policyholders usually get 100 cents on the dollar plus accrued. *In contrast, when a corporate pension sponsor defaults on an underfunded pension, the retirees get the PBGC-capped payout. *This can be a 50% or greater loss in many cases. *Big difference between 50+% loss and zero loss.

Would it be smart to put every last penny in a single insurer's products? *Obviously not, but the level of risk one runs is a LOT smaller than that of a pensioner.
Boy that is a riot.

The guy that started this threat is complaining his contract for life has changed and now you want me to believe this "contract for life" is safe.

Sorry - I am not a Kool Aide Drinker. *When someone tries to pull me to their busom and tell me all is right and sign here....I puker up. *

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Re: Annuities and Social Security
Old 12-15-2005, 07:56 AM   #29
 
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Re: Annuities and Social Security

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Originally Posted by WhodaThunkit
Hi, MN -- The only reason I responded to your comments was that I see so much bad information here of an emotional nature from geezers like me regarding SS that I wanted to put my two cents worth on the record. *A lot of people read this forum, even though they don't post.

I had no idea you were so young. *Most of the people who frequent this forum are, I think, a lot older. *Someone who retires at 29 needs to have a different kind of retirement plan than someone who retires at, say, 55 or older. *The 29 YO needs, in some sense, to finance two retirements back-to-back. *

Best wishes!
Plan for the worse, hope for the best - works for any age.

Maybe a fresh perspective other then all will be all right and just base my retirement plan in the future on NOW figures, is needed here.

But what do I know?
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Re: Annuities and Social Security
Old 12-15-2005, 08:00 AM   #30
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Re: Annuities and Social Security

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Originally Posted by Marketneutral
Boy that is a riot.

The guy that started this threat is complaining his contract for life has changed and now you want me to believe this "contract for life" is safe.

Sorry - I am not a Kool Aide Drinker. *When someone tries to pull me to their busom and tell me all is right and sign here....I puker up. *

I'm not trying to sell you anything, MN, just give you the facts. FWIW, I don't think a payout annuity is that great an idea for most FIREd folks. However, buying one exposes you to a lot less credit risk than an underfunded pension.
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Re: Annuities and Social Security
Old 12-15-2005, 08:02 AM   #31
 
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Re: Annuities and Social Security

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Originally Posted by brewer12345
I'm not trying to sell you anything, MN, just give you the facts.* FWIW, I don't think a payout annuity is that great an idea for most FIREd folks.* However, buying one exposes you to a lot less credit risk than an underfunded pension.
Facts I give you facts:

The Next Retirement Time Bomb

http://www.nytimes.com/2005/12/11/bu...Ip9wbyv2WS9Uyw

Bottom line: Nothing is safe. If you base your retirement plans on it is iron clad - then Gold help you when it explodes and you are working the counter at McDonald's at age 73.

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Re: Annuities and Social Security
Old 12-15-2005, 08:09 AM   #32
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Re: Annuities and Social Security

OK MN, then let us now when you decide its OK to come out from your hiding place under your bed.
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Re: Annuities and Social Security
Old 12-15-2005, 08:12 AM   #33
 
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Re: Annuities and Social Security

I will as soon as I see people stop putting 100% of their retirement assets into one investment.

Because an annunity is just another investment - covered by a wrapper that generates people like you huge fees.

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Re: Annuities and Social Security
Old 12-15-2005, 08:20 AM   #34
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Re: Annuities and Social Security

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Originally Posted by Marketneutral
I will as soon as I see people stop putting 100% of their retirement assets into one investment.

Because an annunity is just another investment - covered by a wrapper that generates people like you huge fees.

You haven't been around here for very long, so I will be nice (this time). I am not now and never have been in the business of selling any investment product. I have experience analyzing insurance products and companies and I am more than happy to share the benefits of my experience (for free). I have never and will never get a fee for selling anyone an insurance product.
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Re: Annuities and Social Security
Old 12-15-2005, 09:28 AM   #35
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Re: Annuities and Social Security

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Originally Posted by Marketneutral
I will as soon as I see people stop putting 100% of their retirement assets into one investment.

I don't know anyone here who is doing this. We aren't all a bunch of idiots.
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Re: Annuities and Social Security
Old 12-15-2005, 09:35 AM   #36
 
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Re: Annuities and Social Security

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You can also just cut to the chase by buying from a single company that is never going to have problems (barring some of Greg's deranged fantasies coming true combined with a meteor strike).* Ask me about specific companies hwen the time comes - I used to evaluate the creditworthiness of life insurers for a living.
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Re: Annuities and Social Security
Old 12-15-2005, 09:37 AM   #37
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Re: Annuities and Social Security

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Originally Posted by Marketneutral
I gotta say it "buying from a single company that's never going to have problems"? Impossible to predict. Even I couldn't do it.

JG
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Re: Annuities and Social Security
Old 12-15-2005, 09:38 AM   #38
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Re: Annuities and Social Security

MN, give it a rest. *Don't quote me out of context and I won't point out that you appear to be both rude and wet behind the ears.
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Re: Annuities and Social Security
Old 12-15-2005, 09:40 AM   #39
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Re: Annuities and Social Security

MN -

We like and appreciate Brew's advice.* He has never crosses any boundaries and is very well respected.* It would be great if you could chill out a bit and ease into the posting process instead of trying to ruffle feathers.
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Re: Annuities and Social Security
Old 12-15-2005, 09:41 AM   #40
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Re: Annuities and Social Security

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Originally Posted by MRGALT2U
I gotta say it "buying from a single company that's never going to have problems"?* Impossible to predict.* Even I couldn't do it.*

JG
JG, my comment was in the context of grumpy's annuity, which appears to be a very small part of his net worth.

Its not hard to pick a company that won't fail unless the entire financial system or our society goes kablooie. *If that happens, you will be a lot more worried about eating and staying alive than your monthly annuity check.
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