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Old 04-06-2008, 11:40 AM   #21
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Tough to compare since the "cost" of the gov pension annuity is never given in dollars. If the recipents were given dollars instead of the pension followed by the opportunity to buy the pension, their propensity to do so would be determined by the cost. But that's just hypothetical, since no dollar cost equivalent is ever provided that I know of.
I guess the closest estimate would be the companies who "buy" military pensions for lump sums.

When I think back on the military's mandatory three-day transition-assistance planning seminar that I attended in 2000, the financial management focus was on finding a job and qualifiying for veteran's benefits. I can't remember a single hour spent on real retirement planning, other than a warning that it'd take just over a month after retirement for the first check to arrive.

I think the govt is terrified of offering lump-sum pension payouts to financially-illiterate taxpayers. There's certainly no reassurance from recent experiences with the lump-sum death benefits paid to beneficiaries of veterans killed in action.
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Old 04-06-2008, 12:03 PM   #22
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I am considering purchasing a Joint Survivor fixed annuity at age 65. Still thinking it over. If we do purchase one, we would only use a small amount of the portfolio.

DW cares nothing about managing finances. She is conservative with money but does not have any interest in managing investments... therefore she would not.

I am thinking it may help as part of a risk mitigation strategy for building a basic income stream just in case and for DW if something happens to me. The main challenge seems to be inflation. I will also move some of our assets to MFs that do not require much maintenance or management around the same time.

The problem with SPIAs is inflation. Inflation adjusted annuities are even more expensive.

There will be a bunch of new annuity product lines to hit the market over the next few years for boomers. I will be interested in seeing what emerges.
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Old 04-06-2008, 12:19 PM   #23
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I am considering purchasing a Joint Survivor fixed annuity at age 65. Still thinking it over. If we do purchase one, we would only use a small amount of the portfolio.

DW cares nothing about managing finances. She is conservative with money but does not have any interest in managing investments... therefore she would not.

I am thinking it may help as part of a risk mitigation strategy for building a basic income stream just in case and for DW if something happens to me. The main challenge seems to be inflation. I will also move some of our assets to MFs that do not require much maintenance or management around the same time.

The problem with SPIAs is inflation. Inflation adjusted annuities are even more expensive.

There will be a bunch of new annuity product lines to hit the market over the next few years for boomers. I will be interested in seeing what emerges.
If an inflation adjusted annuity is too expensive for your tastes, maybe one of the Target retirement type mutual funds would work for her. It wouldn't require much maintenance.

In investing in general, it seems like the lower the volatility, the less the earnings per invested dollar is, unfortunately. A fixed lifetime annuity with inflation adjustment would be about the lowest volatility investment (or purchase, actually) that I can imagine.
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Old 04-06-2008, 12:53 PM   #24
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The problem with SPIAs is inflation. Inflation adjusted annuities are even more expensive.
They are expensive largely because they are very hard to reserve for. If you are not a government that can rob the taxpayer, offering an inflation adjusted annuity is difficult task.

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Old 04-06-2008, 01:07 PM   #25
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You can sell anything if you package it right and put a pretty bow on top of it. It's called marketing. It has nothing to do with the worth of the package's content...
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Old 04-06-2008, 01:23 PM   #26
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You can sell anything if you package it right and put a pretty bow on top of it. It's called marketing. It has nothing to do with the worth of the package's content...
Pssst Wellesley! Current yield = 4.2% Adjusted impersonally by that good buddy of ours Mr Market - it will fluctuate so the entertainment is thrown in for free.

And I don't even own any nor get a commission - I just like to say Pssst.

heh heh heh - Early SS and a non cola Pension here as a 40% budget backstopper - OR close to 100% in my cheap bastard mode. . Now in 10 yrs or so in my 70's to 80's will I revisit the annuity question?? - sure, never say never.
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Old 04-06-2008, 02:18 PM   #27
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Pssst Wellesley! Current yield = 4.2% Adjusted impersonally by that good buddy of ours Mr Market - it will fluctuate so the entertainment is thrown in for free.

And I don't even own any nor get a commission - I just like to say Pssst.

heh heh heh - Early SS and a non cola Pension here as a 40% budget backstopper - OR close to 100% in my cheap bastard mode. . Now in 10 yrs or so in my 70's to 80's will I revisit the annuity question?? - sure, never say never.
And that's the beauty of Vanguard's products. They don't spend a bundle on packaging because the products are so good IMHO that they sell themselves. As far as annuities go, you gotta put a lot of lipstick on that pig to make it "attractive". Pay lots of money to a schmoozer Financial Planner to push the product hard, scare people a little, then promise them "guaranteed income for life", and give them nice glossy brochures with nifty graphics and optimistic projections and voila, it sells like hot cakes...
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Old 04-06-2008, 02:40 PM   #28
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im considering some guaranteed floor annuties , it has an adjustable rate with a min floor. im also considering an index linked annuity with principal protect . why? not as a proxy for a stock investment for which they suck but as a safe way of increasing my safe money bucket. it looks like even after those high fees theres enough ooomph left over to raise my income bucket up an additional 1% to 1-1/2% a year with no principal risk and a min guarantee on the interest..
If you really like this idea, do yourself a favor and "roll your own," rather than buying one of these things. You can do it a few different ways, but the easiest, cheapest and most flexible is to just buy a package of options and safe fixed income investments that duplicate the EIA without the extremely heavy internal expenses and surrender penalties these things typically carry. If you want a primer on how to do this, ask and I will try to explain (its pretty simple).
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Old 04-06-2008, 02:42 PM   #29
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I knew I kept all this Spreadsheet information for something. Government Annuity (Military Retirement Pay) over 29 years this coming July has paid out $590,999. Now, if back in July 1979, someone said "hey we will give you $500,000" if you will sign over your rights to further payment, I may have done the WRONG thing and said "yes". This was the gross payout and does not consider the fact that part of it has VA Disability (which is tax free). BTW the initial payout was $875.00 (back in Jul 79) a month so you can see the power of the COLA.
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Old 04-06-2008, 03:10 PM   #30
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Just to add some "logs to the fire"...

See the information contained in:

Immediate Annuities in Retirement

Also see the imbedded links in the article for additional info (pros/cons, primer, etc.)

Bob did a good job on the SPIA subject (IMHO) to add to this discussion.

- Ron
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Old 04-06-2008, 03:17 PM   #31
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If you really like this idea, do yourself a favor and "roll your own," rather than buying one of these things. You can do it a few different ways, but the easiest, cheapest and most flexible is to just buy a package of options and safe fixed income investments that duplicate the EIA without the extremely heavy internal expenses and surrender penalties these things typically carry. If you want a primer on how to do this, ask and I will try to explain (its pretty simple).

i got to tell you, when it comes to using options im as dumb as a stump.
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Old 04-06-2008, 03:19 PM   #32
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i got to tell you, when it comes to using options im as dumb as a stump.
OK, but its really, really simple.
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Old 04-06-2008, 03:43 PM   #33
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My FIL has a COLA'd military pension and without it he would either be supported by me or living under a freeway overpass since he wouldn't sell his house before a total implosion. That means he'd be living under a freeway overpass since he successfully pissed away a lot of cash flow over the last 60 years. My life's goal is not to piss away my retirement options on his retirement lifestyle.

Government and military pensions are in the "Alice and Wonderland" of pensions. The amounts are beyond belief and they are backed by the US Government. The "true" COLA provision are also outside the norm of private pensions. Anyone with a government pension needs to stop complaining about how long they need to work to earn it or how low their payout is relative to the final salary. Those of us in the private sector would only like to rip out one of your limbs and beat you to death with it when we hear you whining. Granted, we all chose our lot in life and selecting a pension plan was one of the things to consider.
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Old 04-06-2008, 03:48 PM   #34
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OK, but its really, really simple.
Brewer,

You will never convince someone that has bought into the premise of the "sophisticated investments" to become a DIYS. I've decided that Mathjak is one of those so I'll let him make his own decision since he's made up his own mind. I'm only trying to give people with less assets at their disposal enough of a warning to not become trapped with a pretty sounding but poor performing choice.

We all have to buy our own ticket and take our chances. This forum is an opportunity to discuss some of the options.

Yes, I've seen some trolling by folks I've suspected of being annuity salespeople. I've shyed away from direct confrontation but I won't let platitudes go unchallenged.
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Old 04-06-2008, 03:57 PM   #35
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Brewer,

You will never convince someone that has bought into the premise of the "sophisticated investments" to become a DIYS. I've decided that Mathjak is one of those so I'll let him make his own decision since he's made up his own mind. I'm only trying to give people with less assets at their disposal enough of a warning to not become trapped with a pretty sounding but poor performing choice.

We all have to buy our own ticket and take our chances. This forum is an opportunity to discuss some of the options.

Yes, I've seen some trolling by folks I've suspected of being annuity salespeople. I've shyed away from direct confrontation but I won't let platitudes go unchallenged.
Maybe. He sure likes some strange things (unlisted REITs, etc.) that I wouldn't touch with someone else's 10 foot pole. If the "math is hard" thing is enough reason for someone to shell out thousands of extra dollars a year, well, more fool me. Maybe I am in the wrong business. After all, I wasn't using my soul...

Perhaps I will take the time to post a write-up anyway. If forum participants want it so, maybe the mods will stick it in the best of for easy reference. Otherwise it can float around in the archives.
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Old 04-06-2008, 04:06 PM   #36
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OK, but its really, really simple.
OK, lay it out for some of us other dummies.
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Old 04-06-2008, 04:14 PM   #37
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Perhaps I will take the time to post a write-up anyway. If forum participants want it so, maybe the mods will stick it in the best of for easy reference. Otherwise it can float around in the archives.
Me, me, me wants it too!
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Old 04-06-2008, 04:16 PM   #38
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IMO SS is a good annuity for the general masses who are financially clueless or too lazy/undisciplined to manage a personal portfolio. While SS has its problems, the problems would be more severe without SS.
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Old 04-06-2008, 04:22 PM   #39
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Maybe. He sure likes some strange things (unlisted REITs, etc.) that I wouldn't touch with someone else's 10 foot pole. If the "math is hard" thing is enough reason for someone to shell out thousands of extra dollars a year, well, more fool me. Maybe I am in the wrong business. After all, I wasn't using my soul...

Perhaps I will take the time to post a write-up anyway. If forum participants want it so, maybe the mods will stick it in the best of for easy reference. Otherwise it can float around in the archives.


and do i loooove my untraded reit, every month now when i get the 8-1/2% dividend. if we just get the buy in price back in 6 or 7 years id consider it a great deal. last deal worked out to 7-1/2% dividend for 7 years when interest rates were less than 1%. and a nice capital gain when the properties were sold in 2007.
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Old 04-06-2008, 07:29 PM   #40
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If you really like this idea, do yourself a favor and "roll your own," rather than buying one of these things. You can do it a few different ways, but the easiest, cheapest and most flexible is to just buy a package of options and safe fixed income investments that duplicate the EIA without the extremely heavy internal expenses and surrender penalties these things typically carry. If you want a primer on how to do this, ask and I will try to explain (its pretty simple).
Well, I want it! Tell, tell! (he asked hopefully)
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