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Old 08-23-2011, 08:24 PM   #101
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immeadiate annuities almost always pay a heck of alot more than a treasury. today i can get almost a 5-6% withdrawl rate and pass it on to my spouse forever. thats where the power is.

to get that level of pensionized income would require tying up lots more dough in bonds , if you even have it..
Any specific products come to mind?
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Old 08-23-2011, 10:09 PM   #102
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immeadiate annuities almost always pay a heck of alot more than a treasury. today i can get almost a 5-6% withdrawl rate and pass it on to my spouse forever. thats where the power is.

to get that level of pensionized income would require tying up lots more dough in bonds , if you even have it..
Amortize your initial investment over your joint life expectancy, add in the coupon, and I think you'll find the annuity payouts reflect bond market rates.

FWIW, you can build a 30 year treasury ladder today that pays 5%.
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Old 08-23-2011, 11:22 PM   #103
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That leaves you with very few choices, doesn't it?

I have found fewer than 30 US stocks that meet my own criteria (reasonable, well covered, and growing dividends with quality financials). Once I take valuation into account, the pool of possible candidates is even smaller (currently only 8 stocks out of the 30 are on my buy list).

I understand that some people would rather keep their stock picks private, but I would love to know what's on your list of acceptable stocks right now (acceptable from the long term income investor point of view that is).
I hadthis Stock of the week thread on the Individual stocks about my selection criterea and there must be something good about it because I see that Value Line is now selling a stock of the month selection with a commentary from analysis of the value line world with virtually the identical criterea I outlined in the thread. (consistent dividends Value Line Financial Strength rating of B+ or greater timeliness of 3 or greater better than average safety) They are charging $799 per year for this service, I almost fell out of my kitchen chair when they sent me their "inaugural offer"!

In any case of those stocks selected on the thread only one CFR - would I have sold as it fell to a 4 in timeliness last year with the industry rank it was in fally quickly as well. All of the other stocks picked have continued to do well and all have raised there dividend since I posted. Those are:
VFC - VF Corp
MMM - 3 M
CFR - Cullen Frost (sell as finance area untimely by Value LIne)
NST - NSTAR - currently potentially being sold
MCD - Mc Donalds
ABT - Abbot Labs
KMP - Kinder Morgan Partnership

Other stocks I would like are
PNY - currently at 4% dividend increased it's dividend for a long time and would be a solid holding in any long term portfolio
KO - I still love Coke, solid company
PEP - I split the percentage ownership with Pepsi, slightly crazy CEO, solid products slightly better dividend
Ross Stores - dividend growing very fast I like it in combination with:
MO: High risk good dividend at a 50/50 with Ross stores you have a 3.75 yield on growing dividends
YUM - Continues to roll
VVC - Vectron 5.3% dividend ( I would use this as a replacement for NST)
BDX - Becton Dickinson 2.07 % dividend when combined with VVC you get a 3.6% dividend.

So a portfolio with PNY KO/PEP MO YUM VVC BDX VFC MMM MCD ABT KMP is relatively diversified and I think a reasonable return for dividends.

Overall finding stocks worthy with over a 2% yield is more difficult to do than in most years in the past, but there are many good dividend stocks with dividends between 1 and 2% however, this is not historically a very good value.
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Old 08-24-2011, 04:21 AM   #104
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Amortize your initial investment over your joint life expectancy, add in the coupon, and I think you'll find the annuity payouts reflect bond market rates.

FWIW, you can build a 30 year treasury ladder today that pays 5%.
treasuries are in the low 4% range today... the immeadiate annuity has a withdrawl rate of 5.9% for a 62 year old couple with survivor benefits . thats a huge difference percentage wise.

what happens when those bonds mature in 30 years if rates are lower. will your plan still hold up?


think about the fact if you could free up that extra amount you had to tie up in bonds to get that difference in that income amount above and were able to put that in your stock investments instead ,how would that effect your outcome?
the other thing is what if you needed more than the 4% from the bonds to live on.?

to get that extra difference using bonds you would have to sell off bonds every year to make up that difference giving you even less income each year after that.

folks you cant compare the 2 as its like comparing a pension to your own investing. they are different products and at times give much different results.

there is a place for bonds in a portfilio but there is also a place for taking some market and interest rate risk off your shoulders and having a 3rd party bear that weight. that you cant do by yourself just buying bonds. the 2 products work very differently from each other.
bonds your buying an investment with a return, annuities your buying an income and returns are unknown.


thats why depending on each one of us and our situation that pensionized income may or may not be a better way to improve our success rate.


the worst thing anyone can do is to just belive their own bull -shi* that all types of annuities are bad and a rip off .

these have been unconventional times this past decade and it just may call for un-conventional investing styles and products to survive.
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Old 08-24-2011, 05:59 AM   #105
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the worst thing anyone can do is to just belive their own bull -shi* that all types of annuities are bad and a rip off .
I agree.
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Old 08-24-2011, 08:22 AM   #106
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treasuries are in the low 4% range today... the immeadiate annuity has a withdrawl rate of 5.9% for a 62 year old couple with survivor benefits . thats a huge difference percentage wise.
The life expectancy of a 62 year old is 17 years, so some of that 'huge difference' in payout is almost certainly larger amortization of principal. I'd have to see the details of the annuity to replicate it, but rest assured there is no magic going on here. The insurance company can only pay out what it expects to earn by investing your premium, less a little sugar for itself. If it consistently pays more than that the insurance company will eventually go broke. So if it looks like the insurance company is paying above market rates, you've probably missed something.


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what happens when those bonds mature in 30 years if rates are lower. will your plan still hold up?
I didn't say a bond ladder was a plan. I was simply pointing out that fixed annuity returns are in keeping with current market interest rates. There may be good reasons to buy a fixed annuity, but it's probably best if those reasons are properly understood.
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Old 08-24-2011, 09:27 AM   #107
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You ought to be able to get some real time annuity quotes and projections on this site: Immediate Annuities - Instant Annuity Quote Calculator.

Kinda neat to play around with some of the figures.
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Old 08-24-2011, 12:10 PM   #108
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The life expectancy of a 62 year old is 17 years, so some of that 'huge difference' in payout is almost certainly larger amortization of principal. I'd have to see the details of the annuity to replicate it, but rest assured there is no magic going on here. The insurance company can only pay out what it expects to earn by investing your premium, less a little sugar for itself.
Plus the mortality bonus from those annuity holders who die early. This can be a large factor.

Ha
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Old 08-24-2011, 01:35 PM   #109
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Playing around with annuity calculators. I just don't get it. To provide lifetime income of 2500/mo., you need 585000.00 bucks. I'd rather buy 5 homes and rent them out. You would make 50 % more and get tax breaks and have the probability of appreciation. I am not finding any guaranteed withdrawal annuities that were prevalent a few years ago. They have reduced their guarantees. In reality those guarantees may just cause some major defaults if we have a few more bad years in the market.
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Old 08-24-2011, 02:07 PM   #110
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I wonder what the insurance company would charge to live my life for me while I hide under the bed.
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Old 08-24-2011, 02:17 PM   #111
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the worst thing anyone can do is to just belive their own bull -shi* that all types of annuities are bad and a rip off .
If you really think that "just believing their own bull-shi* that all types of annuities are bad and a rip off" is the worst thing anyone can do, you're one naive dude. Sheeesh........

Did you really mean that? Or are you just worked up because not everyone will buy in on your annuity pitch?

I don't belive in painting with a broad brush when it comes to dealing with finances and I don't think all annunities "are bad and a rip off" for all people. But, if I did, that would hardly be "the worst thing anyone could do." Millions of Americans have/are pulling off successful FIRE situations without buying an annunity of any type from an insurance company. Millions of others are not successfully retiring because they did something even dumber than failing to purchase an anuity from an insurance company.

I'm not arguing with your position that assuming that all annunities "are bad and a rip off" is not a good idea. But I think you're wrong and/or naive that it's "the worst thing anyone can do."
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Old 08-24-2011, 05:45 PM   #112
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i meant it in a very broad sense. not just pertaining to annuities but in everything in life.

we all get these ideas in our head and true or not, partially true or even true in the past and we believe thats the way it is . we close our minds off to things without actually looking at things.

its usually not what we know that gets us in trouble. its what we know that aint so .

some forms of annuities can be very beneficial to some folks but they hear the word and they shut down. already they say it cant be good.

the fact is we all have to stop believing alot of old facts and things we believed to be true and re-evaluate them again.

like i said earlier we are living though the failure rate the calculators talk about the past 12 years. that just may require looking at things very different then we we learned.

our brains dont give us rational decisions either when our money is on the line. we get a weighted answer from our brains that hates losing money more then it likes making it.

if you believe your own bull-shi* it can have you bailing when you should be buying or rebalncing. it will talk you out of starting a business, it will do many things to you if you listen to it when its using incorrect logic..

for an interesting look at this read the book your money your brain by martin zweigs son jason . using modern brain scanning equipment he shows you how badley our brains go off kilter when we make stressful money choices .

anyway you get the point of what im trying to say here ..
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Old 08-24-2011, 06:45 PM   #113
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We may be living through that failure period that the calculators take into account when they make their predictions. If we have been living through those times in the last 12 years, then I would say we should be nearing the end. It is hard to imagine a secular Bear market lasting much over 15 years. 15 years is the outer boundary for secular losing markets, right? My thoughts, which may be wrong.
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Old 08-24-2011, 10:59 PM   #114
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I wonder what the insurance company would charge to live my life for me while I hide under the bed.
Maybe you "get it" after all. They're not selling investments, they're selling risk insurance policies for people who can't (or don't want to) hedge their own.

I think it's smart to annuitize a portion of one's retirement income-- say 25-30%-- just as it's smart to diversify an asset allocation. Even Milevsky, in "Are You A Stock Or A Bond?" has come to agree that SPIAs are not as bad as they were in the 1990s. And Otar is a big fan of annuities for those without a significant margin of safety.
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Old 08-24-2011, 11:20 PM   #115
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The life expectancy of a 62 year old is 17 years, so some of that 'huge difference' in payout is almost certainly larger amortization of principal. I'd have to see the details of the annuity to replicate it, but rest assured there is no magic going on here. The insurance company can only pay out what it expects to earn by investing your premium, less a little sugar for itself. If it consistently pays more than that the insurance company will eventually go broke. So if it looks like the insurance company is paying above market rates, you've probably missed something.

.
Yup if you got treasury at Aug 1 at 4.07 and then amortized over 30 years you get 6.2%"yield" sure you'd run out of money from this thing when your are 92 but this is pretty old. But maybe you could use the $300 to buy longevity insurances that kicks in only if you live past 92. The benefits are if you get hit by a car your heirs get your money, if you don't have kids and if you find out you have a cancer and only have a year to live you could have some fun with the money.
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Old 08-26-2011, 04:20 AM   #116
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longevity insurance is a very interesting product . its one im looking into and comparing to using an spia.

my ultimate goal is to end up being able to run a fairly conservative allocation in the 30-35% equity range while increasing my success rate thru insurance products .
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Old 08-26-2011, 07:43 AM   #117
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longevity insurance is a very interesting product . its one im looking into and comparing to using an spia.
I figure I already have longevity insurance. It's called a country club membership. The dues have been growing at about three times the CPI, so there's plenty of inflation protection. Besides, who wants to play golf when you have reached the age that you can only drive the ball about 175 yards.
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Old 08-26-2011, 08:52 AM   #118
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I figure I already have longevity insurance. It's called a country club membership. The dues have been growing at about three times the CPI, so there's plenty of inflation protection. Besides, who wants to play golf when you have reached the age that you can only drive the ball about 175 yards.

I know several where I play. I'm not a long ball hitter(245-260 range), but I can't see myself playing when I can only hit it 175. But these guys are 75-80 years old and are just happy to be out doors with their buds. We let them play from the ladies tees to keep them in the game.

As you said, dues are going up at a fast pace and our membership is dropping at an equally fast pace. At this rate, not sure if my country club will be around 2-3 years from now.
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