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View Poll Results: Whats your thinking on annuities?
Would never consider one, ever 14 10.45%
Would consider one as part of my investments, if the numbers made sense 102 76.12%
Would put all or most of my money into one if the numbers made sense 6 4.48%
Would put all or most of my money into one because they're one of the better investment options 0 0%
Bought one, like it, would do it again 7 5.22%
Bought one, dont like it, wouldnt do it again 5 3.73%
Bought one, dont like it, but would consider buying one again 0 0%
Voters: 134. You may not vote on this poll

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Re: Annuities and their role in our investing plan
Old 01-30-2007, 09:50 AM   #61
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Re: Annuities and their role in our investing plan

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Originally Posted by FinanceDude
Yes, there is risk involved with even the big insurers. The interesting thing in all of this is the perception that an annuity company like AIG or MetLife is somehow riskier than having your money in a Vanguard mutual fund. I think the REAL question is: Can the insurer live up to their "guarantees"............and I think we could ask the same thing of Social Security........are they going to live up to their "guarantees"...........in some ways I feel more comfortable with Pacific Life than the Treasury...........
I posted a question about the security of companies like Vanguard and Fidelity some time ago. The asnwers I got were somewhat reassuring but I don't remember the details. It is probably worth revisiting now and then.

How secure are these big mutual fund companies. How much value is there in distributing your funds in several rather than keeping them all in one? I am thinking about moving a fair amount of money to a target retirement fund at Vanguard -- how secure is that concentration?
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 09:59 AM   #62
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by donheff
I posted a question about the security of companies like Vanguard and Fidelity some time ago. The asnwers I got were somewhat reassuring but I don't remember the details. It is probably worth revisiting now and then.

How secure are these big mutual fund companies. How much value is there in distributing your funds in several rather than keeping them all in one? I am thinking about moving a fair amount of money to a target retirement fund at Vanguard -- how secure is that concentration?
Oy, here we go again. Get ready for an outbreak of the tinfoil hat-wearing piglet sodomizers...

As I understand things (do your own due diligence, YMMV, offer not valid in Mexico, yadda yadda...), the assets you have in a mutual fund are effectively in a trust and cannot be attached by creditors of the fund management company. So the fund assets are presumably safe. The exposure would be to any cash in transit or any other obligations of the fund management company to you, which I would imagine are very small and generally transitory. All-in-all, looks like de minimus exposure to me.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 10:26 AM   #63
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Re: Annuities and their role in our investing plan

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Originally Posted by brewer12345
Oy, here we go again. Get ready for an outbreak of the tinfoil hat-wearing piglet sodomizers...

As I understand things (do your own due diligence, YMMV, offer not valid in Mexico, yadda yadda...), the assets you have in a mutual fund are effectively in a trust and cannot be attached by creditors of the fund management company. So the fund assets are presumably safe. The exposure would be to any cash in transit or any other obligations of the fund management company to you, which I would imagine are very small and generally transitory. All-in-all, looks like de minimus exposure to me.
Agree the risk is MARKET RISK (mutual fund), not SOLVENCY RISK (insurance comany)...........perhaps the main difference between a mutual and an insurance company.........different risks.............

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Re: Annuities and their role in our investing plan
Old 01-30-2007, 10:30 AM   #64
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Re: Annuities and their role in our investing plan

Simply put, the funds Vanguard offers are separate companies from The Vanguard Group, Inc. Each fund is owned by the investors that own shares of the fund [i.e. you and me]. The Vanguard Group, Inc is owned collectively by all of the vanguard funds [wellington, wellesley, 500 index, etc.]. Hence, Vanguard is owned by all of us, not Bogle, Brennan or anyone else.

The Vanguard Group, Inc provides services to the funds [at cost] pursuant to a Service Agreement. If the fund, or whoever votes in voting matters [probably the funds' trustees with Vanguard funds], decides that Vanguard is not longer the best administrator of that fund, that fund can find someone else to administer the fund. Of course, IIRC John Brennan is the Chairman of each of Vanguard's funds, so the likelihood of this happening is nil. The funds' trustees can also hire and fire the investment managers for each fund [i.e. Wellington Management, Vanguard Quantitative Equity Group, Barro & Hanley, etc.].

Also, each fund has a custodian [like JP Morgan Chase for Wellington] that is responsible for maintaining the Fundís assets, keeping all necessary accounts and records of Fund assets, and appointing any foreign sub-custodians or foreign securities depositories. So, The Vanguard Group, Inc. does not hold any of the assets, and IIRC each funds' assets are separate from the assets of The Vanguard Group, Inc.

I would no problem holding all of my investments with Vanguard. Except for the TSP, we have all of our investments with Vanguard.

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Re: Annuities and their role in our investing plan
Old 01-30-2007, 10:51 AM   #65
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Re: Annuities and their role in our investing plan

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Originally Posted by Cut-Throat
Yup, you're exactly correct! But the poll was not searching for the truth. It was just trying to 'stroke a hairball'.
I hope that CFB can in the future stroke his hair balls in private.

Ha
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 10:59 AM   #66
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Re: Annuities and their role in our investing plan

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Originally Posted by Martha
I would never put all my money into an annuity product even if the numbers looked good because of the risk that something goes bad with the insurance company or something else bad happening that would make it a poor investment. A diversification issue. So the numbers can make sense but the investment still not make sense.
I voted the same way for basically the same reasons.

I didn't interpret the insurer default risk or future tax code changes or any other "unforeseeable circumstance" risk inherent in an annuity to be encompassed or intended by the phrase "if the numbers make sense."
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 11:05 AM   #67
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Re: Annuities and their role in our investing plan

Quote:
Originally Posted by HaHa
I hope that CFB can in the future stroke his hair balls in private. Ha
I'm never going to think of the term "non sequitur" in the same way again...
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 11:42 AM   #68
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Re: Annuities and their role in our investing plan

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Originally Posted by sgeeeee
Okay. Most of you are full of sh#t. CFB ended two of the options with the qualifier, "if it made sense." (choices #2 and #3) Yet very few of you selected #3. So . . . what you are saying is that you would not do something that made sense.

That makes no sense. Now, you may believe that #3 will never make sense, but that wasn't the option.

I have some pension benefits and SS coming. I feel comfortable with moderate risk. So an annuity (even a small one) doesn't make sense for me right now at age 52. But I have no idea what will make sense for me in the future. Is something does make sense, I hope I have the sense to do it.
I read #3 as a limited subset of #2 -- meaning first I have to consider it before I can decide how much to put into it. And if the answer to #2 is the numbers don't make sense, how can I honestly choose #3?
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 11:59 AM   #69
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 12:02 PM   #70
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Re: Annuities and their role in our investing plan

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Originally Posted by sgeeeee
Typical attorney response -- trying to redefine and parse the truth to bend it to your purpose. The statement didn't say, "If it makes numbers sense," Martha. It said, "If it makes sense." The fact that no one wants to read the statement as it is written but instead read their own bias into it is probably a good indication that CFB's hairball theory is indeed at work. You know how much it hurts me to admit that CFB is correct about anything? That's my hairball.
The poll says "if the numbers make sense."
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 12:14 PM   #71
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Re: Annuities and their role in our investing plan

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Typical attorney response -- trying to redefine and parse the truth to bend it to your purpose. The statement didn't say, "If it makes numbers sense," Martha. It said, "If it makes sense." The fact that no one wants to read the statement as it is written but instead read their own bias into it is probably a good indication that CFB's hairball theory is indeed at work. You know how much it hurts me to admit that CFB is correct about anything? That's my hairball.
I think you've persuaded the Academy that it's time to pass retire@40's Noodge Award to you.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 12:28 PM   #72
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Re: Annuities and their role in our investing plan

SGEEE says, referring to why most of those around him are full of s^%#:
Quote:
The statement didn't say, "If it makes numbers sense," Martha. It said, "If it makes sense." The fact that no one wants to read the statement as it is written but instead read their own bias into it ...
Martha corrects him:
Quote:
The poll says "if the numbers make sense."
What do you call it when someone tries to make a questionable point in a rude manner, then screws it up in the same way he is accusing others of doing, thereby rendering his whole original point meaningless, as he tries to tap dance his way out of it, misquoting the very material he used to make his point?

I nominate this for best of the boards .
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 12:30 PM   #73
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 12:34 PM   #74
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 12:41 PM   #75
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Re: Annuities and their role in our investing plan

Where's an English teacher when I need one?? Hey MOM?? MOM!!!

Maybe I'll e-mail her this..........with a Master's in English and 30 years teaching, I think she can help...........
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 01:04 PM   #76
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Re: Annuities and their role in our investing plan

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Man, Rich. You've sure joined the board modulator clique that attacks me at the slightest provocation. Where's REWahoo to pile it on?
I'm right here.

I've been steering a wide path around you since your last little 'episode', and while it is tempting to provide you with the attention you are seeking, I think I'll pass.

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Re: Annuities and their role in our investing plan
Old 01-30-2007, 01:12 PM   #77
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Re: Annuities and their role in our investing plan

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Originally Posted by Want2retire
One of my options with the federal government's 401K (our "TSP") is to put all or part into a fixed lifetime annuity with MetLife. You don't get the money back, but you get fixed monthly payments for life. At 62, I would get $681/month on every $100,000. Another option is actually the same thing, but inflation adjusted to a limited extent. That one would pay me $494/month on every $100,000. (This is just for me as a single person with no ten year guaranty or other frills.)
Using the numbers you gave, if you don't buy the annuity, to get $494/mo from a $100,000 portfolio would be a WR of >5.9% which would be very risky for a 40 year retirement. So I think your thought of buying an annuity to "insure" your minimum retirement is worth consideration. I would suggest you check out other annuity companies to find the one that best fits your needs for security and payout. The problem with the TSP's inflation protection annuity is the inflation adjustments are capped at 3% which is low. (However from a security aspect I wonder if the US gov would feel any obligation to protect the company providing their retirees with annuities since they picked the company in the first place. They did do something to protect their employees and retirees when the largest health insurer in their pool pulled out some time ago.)

Quote:
Originally Posted by Want2retire
So far, 100% of the advice I have received elsewhere has been vehemently opposed, so I am still up in the air on this one. The main reasons I have been given are that you lose control of the money, and that interest rates are low compared with historical values so I would be getting less than I might have in other times.
I submit that these are not good reasons for you to not purchase the anniuty.

When buying an immediate annuity you are buying an income stream. In your case you would be buying it with money that you must use to produce said income stream anyway. The only control you have now with the money is how to invest it to produce said income stream. If for planning purposes you use a tool like FIRECalc to determine a SWR for your portfolio you will see that to get an equal income stream from a portfolio you will need to have ~$170K (or more) invested for every $100K of annuity purchased. Therefore if you buy a $100K annuity you freed up $70K that you now have greater control over since it does not have to produce you any income for you to keep your income level the same. If you leave it in your portfolio and you don't increase your WD amount, you have made your portfolio safer since you lowered your WR. Or you could keep the same WR thus increasing your WD amount. Lots of flexibility.

As to the interest rate I submit that when you retire you should be more concerned with a SWR. Don't get me wrong I am not saying that rate of return are not important when you retire. On the contrary, getting a good rate of return on your portfolio will be your job in retirement. However the point of getting a good rate of return on your portfolio is just a means to an end, the end being providing a safe cash flow for you to live on, thus your primary concern is to continue to maintain a SWR and as I show in the previous paragraph an annuity can help to do this.
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 01:22 PM   #78
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Re: Annuities and their role in our investing plan
Old 01-30-2007, 01:25 PM   #79
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Re: Annuities and their role in our investing plan

sqeeeee

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Re: Annuities and their role in our investing plan
Old 01-30-2007, 01:27 PM   #80
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Re: Annuities and their role in our investing plan

I always enjoy a passionate debate about annuities.
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