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Old 03-22-2011, 07:02 PM   #81
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Oh, I see. Apparently, when you are new to this forum one should sit back and say nothing for some period of time for fear of being branded a troll. Of course, I am not familiar with the history of the rest of you folks so for all I know this is how you respond to new members.

The problem is that I am not sure what I have said that makes me a troll. Perhaps you could enlighten me so I don't make the mistake again.
Sorry jcgc and welcome to the forum. You will actually find that we are a friendly bunch including Brewer and me. But you tuned in during a questionable thread and jumped in like a salesman with your 2nd post. From your followup it appears that was not your intent. But it was deja vu all over again for old timers here so we rolled out the troll carpet to greet you. So, again, welcome to the forum
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Old 03-22-2011, 08:12 PM   #82
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Appreciate your response. As I said I generally don't jump into threads the first day I sign on to a forum. However, since I didn't see the info I provided anywhere else and thought it useful I decided to plow ahead.

I can see from some of the commentary on this thread that there are many folks who have a far better grasp on investing than I do.

That said I can relate to the fears expressed by the OP. I felt that what occurred in 08 and 09 was something we had not witnessed before and it was very questionable as to where the bottom was going to end up. Given my own short term horizon to retirement, at the time, I couldn't tolerate it.

Anyway, looking forward to learning more here.
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Old 03-22-2011, 08:52 PM   #83
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Originally Posted by calmloki View Post
Life is risk. Check Berstein figuring in a bit of history: "Thus, any estimate of long-term financial success greater than about 80% is meaningless". The Retirement Calculator from Hell, Part III

A one in 5 chance that things go flooey w/in the next 40 years with the best planning you can implement? Sounds like maybe you do the best you can, hope, roll the dice, and get on with living.
I've always liked how Paul Merrimen sums up his "Ultimate Buy-and-Hold" article (http://www.merriman.com/PDFs/UltimateBuyAndHold.pdf)
which uses historical data and incremental addition of asset classes to illustrate the value of diversification.

"All this uncertainty is simply inevitable. Still, I believe the Ultimate
Buy-and-Hold Strategy deals very well with it. If you own this portfolio,
you aren’t dependent on any particular asset class. You have them all.
And no matter which ones are doing well, you will own them.

To my mind, this is the best an investor can do. And when you have
done your best, it’s time to turn your attention to something else. A
very good “something else” is to make sure you are living your life the
way you want to."
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Old 03-23-2011, 12:38 AM   #84
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I think all the old rules just don't apply anymore. Everything went down in 2008. Stocks, bonds, international. Just don't know if it's worth the risk to be in anything but cash right now.
If you had stayed the course on an asset allocation you'd be back where you started. The stock market is a long-term investment and a couple of years time period is noise. You can allocate less to stock, but then inflation will eat up your funds faster.

With an ability to spend 1/30th of your funds each year, you should have enough to retire. But you should keep some portion in stocks to protect against future inflation. If you are risk-averse, possibly 30%. And then rebalance periodically.
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Old 03-23-2011, 05:01 AM   #85
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There is not short cut to gaining the knowledge. The good news is that it can be done and you do not have to be a financial genius. You just need to invest some time to educate yourself.

There is no one source of information and knowledge... But you can optimize your time by focusing on certain information first. There is a lot of good information available... but there is also some poor information.

IMO - Jim Otar's Book: Unveiling the Retirement Myth is a good book to read on the topic of producing a life long income stream and managing the risk. Even if you are new to personal financial management.... Read it and make notes of concepts you do not understand along the way. Then go research those specific topics to get a better understanding of them. Then read his book again.
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Old 03-23-2011, 05:45 AM   #86
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IMO - Jim Otar's Book: Unveiling the Retirement Myth is a good book to read on the topic of producing a life long income stream and managing the risk. Even if you are new to personal financial management.... Read it and make notes of concepts you do not understand along the way. Then go research those specific topics to get a better understanding of them. Then read his book again.
+1 On Otar's book, completely changed my outlook on FIRE.
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Old 03-23-2011, 06:04 AM   #87
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sidebar- thanks Calmloti.I love the Doors. You started my day off well.
Bill Bernstein has some fine books on investing.
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Old 03-23-2011, 07:33 AM   #88
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This is addressed to the people who seemed to find my posts somewhat interesting and helpful:

Forgot to mention that while we were in all cash and short-term bonds (which I also was nervous about) my husband also had money in company stock which was vesting over a 3-year period. We couldn't cash that out and were forced to be in stock. We got one batch yesterday and there's still another one to come next year. That stock is paying a dividend of about 4.5%.

Until a few years ago, FDIC insured CDs were paying 5% because that's what I told our financial planner - we could have been getting 5% risk free while the market at 12,000 - 14,000 seemed to not have a lot of upside. By the time I convinced my husband of this CD rates were 2%. Now of course I'd be happy to get that. When the CD rates were 5%, inflation was close to zero.

What I'm asking now, and please don't respond with venomous rage, is wouldn't this be a very bad time to get an annuity and since we're in cash now should we perhaps wait and see if CDs go back up?

Recently we were listening to the radio and heard the market was up or down 1 or 2 % for the day and my teenage son said, "Isn't that a lot?" but we seem to have gotten used to that much volatility. I think my question is - if we can't stomach gradually losing money to inflation can we afford to take a hit on principal?

Also, if you look at history, there have been periods - the 80's I believe, when you could have bought stocks and they wouldn't have come back for 20 years. Don't remember the exact figures.

If you think this is not a worthy topic of conversation, or that I shouldn't bring it up before reading 10 books please tell me without calling me names.
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Old 03-23-2011, 08:07 AM   #89
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OK Amazon, I will bite since your last post sounded like a heart felt plea for understanding. If you read back through the thread you will see there is no "rage" at your views or questions. In fact, I am sure many share your worries. But everything you state in this last post you stated several times in your previous posts. And everything you ask was repeatedly answered to the best of people's ability. The fact that you keep asking the same thing over and over led several of us to conclude you were trolling for laughs. If you read through the thread and can't see that....well, try reading through again, slowly.
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Old 03-23-2011, 08:16 AM   #90
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Amazon, if you use the search button to look for threads on annuities you will probably notice many posters here feel the current low interest rate environment makes it a bad time to purchase a SPIA.
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Old 03-23-2011, 08:35 AM   #91
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amazon, quit whining and playing the victim. You got a number of straightforward replies that were quite helpful. So kwitcherbitchin.

Get it through your head that that was then, this is now. Sitting around pining for 5% CD rates is not helpful, nor is constantly reminding your husband that you are a nag your broken clock was right once. Make your decisions on the basis of what things are today and where you think they might be in the future.

If you do not want to invest in equities, that is your choice. Figure out what alternatives might be palatable to you. But always be aware of the non-equity risks you accept via whatever choices you do make.

Annuities come in many shapes and sizes. Particularly if you are considering one, do your research before you talk to any insurance agents as this product type includes many very complicated contracts that appear to be specifically designed to confuse the customer. In addition to the peculiarities of the various types of annuity products, you should be aware that annuities are policyholder obligations of insurance companies. As such, there is no equivalent of FDIC insurance protection for any obligation an insurer has to its policyholders. Since you appear to be extremely risk averse, think about that before you start shopping.
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Old 03-23-2011, 08:47 AM   #92
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As background, during the "financial crisis", a number of posters decided to go all cash, or buy gold, or whatever, and basically told the rest of us what numb nuts we were. In addition, there was a race to predict the most dire circumstances; i.e. Dow 4000, Dow 3000, Dow -3000...

So, yes, the market can crash, as can the market for bonds, real estate, etc. If going all cash or all gold suits you, I'm kewl with it. I think a better alternative is to diversify into cheap index funds or etfs. Others think solid, dividend paying stocks are the way to go. Nothing particularly wrong with SPIAs, though I think now is not an optimum time to purchase one, due to low interest rates. Many folks think inflation will be the problem du jour going forward, so interest-bearing accounts will have a hard time keeping up if that's the case.

Despite these problems, I expect the economies of the world will grow, and along with them the markets. I could be wrong, but I'm not...
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Old 03-23-2011, 09:20 AM   #93
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Originally Posted by amazon1 View Post
Forgot to mention that while we were in all cash and short-term bonds (which I also was nervous about) my husband also had money in company stock which was vesting over a 3-year period. We couldn't cash that out and were forced to be in stock. We got one batch yesterday and there's still another one to come next year. That stock is paying a dividend of about 4.5%.
You should have brought that up in your early posts.........it would have helped make more sense........

Quote:
Until a few years ago, FDIC insured CDs were paying 5% because that's what I told our financial planner - we could have been getting 5% risk free while the market at 12,000 - 14,000 seemed to not have a lot of upside. By the time I convinced my husband of this CD rates were 2%. Now of course I'd be happy to get that. When the CD rates were 5%, inflation was close to zero.
CDs are not "risk-free". CPI is a terrible measure of inflation, because it excludes energy and food costs. Of course, as an economist, you know that.... Inflation has never been close to zero, IMHO. How good ar ethose 2% CD's when the price of gasoline is up 90% in 2 years, and food is up about 20%? YMMV..........

Quote:
What I'm asking now, and please don't respond with venomous rage, is wouldn't this be a very bad time to get an annuity and since we're in cash now should we perhaps wait and see if CDs go back up?
What do you need to live on?

Quote:
Recently we were listening to the radio and heard the market was up or down 1 or 2 % for the day and my teenage son said, "Isn't that a lot?" but we seem to have gotten used to that much volatility. I think my question is - if we can't stomach gradually losing money to inflation can we afford to take a hit on principal?
It's called risk, and there risk in everything. You are not the only person who is worried about the economy. But let me ask you this, other than a diversified mix of equity investments, WHAT has outperformed inflation over the past 100 years? Real estate? No. CD's? No. Cash and MM investments? No and no. Gold? Uh, no...... The days of buying Treasuries and "washing your hands" are over........

Quote:
Also, if you look at history, there have been periods - the 80's I believe, when you could have bought stocks and they wouldn't have come back for 20 years. Don't remember the exact figures.
It was the 70's, not the 80's. After we got through the early 80's, the bull market took off. 1982-1999 as I recall...............
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Old 03-23-2011, 09:38 AM   #94
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There is inflation now (for the past 2 years) but before that, there were 5% CDs and zero inflation and perhaps a threat of disinflation. Do we have a good reason to believe that there won't be 5% CDs again soon? I don't think we've seen rates this low in many, many years, if ever.

It's not really as if everyone on the board, in unison, gave me a single path to take. Get an annuity (now? - not now). It was scary that all asset classes plummeted at the same time two years ago. Does anyone fear that the market is overvalued now and that interest rates have to go up which would make bonds lose value too?
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Old 03-23-2011, 09:52 AM   #95
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It was scary that all asset classes plummeted at the same time two years ago.
Too lazy to look it up, but my total bond market fund was negatively correlated during that time, thus, not everything went down.
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Old 03-23-2011, 09:57 AM   #96
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What I'm asking now, and please don't respond with venomous rage, is wouldn't this be a very bad time to get an annuity and since we're in cash now should we perhaps wait and see if CDs go back up?

I would not get a variable annuity right now because interest rates are low. I have considered the possibility of an "immediate income annuity" in 3 years when I officially retire. I would not even do one of those for more than 5 years due to inflation. I also may not do one at all....for this reason - I can't find a logical reason to do so ...other than...not wanting to deal with my money...and that is not a good reason (until I can no longer write my name in which case I will not care). Ask yourself this question: Can I annuitize myself". If the annuity company can pay me $3000 a month, can I simply allocate a years worth of pay to cash on a rotating basis and pay myself $3000 a month?
There are many pitfalls to annuities. For ex:...with variable annuties..if you have funded it with after tax money...when they start to pay out...you will be taxed again...because they pay out "growth first". It is only when you invade "basis" that it becomes a net of tax distribution to you. If you have funded it with "before tax" money...then it doesn't matter. However, most do not recommend putting what is already tax deferred money into ...another tax deferred vehicle. What's the point?
If you choose the annuity route...get the salesman to run scenarios....during the withdrawal phase thru all sorts of market conditions (not just the accumulation phase which looks good on paper).

[/I]
Recently we were listening to the radio and heard the market was up or down 1 or 2 % for the day and my teenage son said, "Isn't that a lot?" but we seem to have gotten used to that much volatility. I think my question is - if we can't stomach gradually losing money to inflation can we afford to take a hit on principal?

The problem is one doesn't have a crystal ball...which makes predicting the future impossible. We can only do what makes sense for ourselves.
Also, it depends on what you call principal. I don't consider growth on investments principle. I consider principle the money I saved and contributed. So...if my growth over the last decade equates to $400,000 and due to market conditions I lost $200,000...I'm still $200,000 ahead of where I would have been had I done nothing. Does it still hurt? Yep. The other thing that hurts is ..it is likely that I already paid tax on some of those gains...that were then lost. Which is why diversification ...in all asset classes is critical and asset allocation percentages is critical.


Also, if you look at history, there have been periods - the 80's I believe, when you could have bought stocks and they wouldn't have come back for 20 years. Don't remember the exact figures.

If you think this is not a worthy topic of conversation, or that I shouldn't bring it up before reading 10 books please tell me without calling me names.
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Old 03-23-2011, 10:02 AM   #97
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Amazon,

Don't take this the wrong way, but here's a book you should pick up and read:

Amazon.com: Investing for Dummies, Second Edition (9780764551628): Eric Tyson: Books

The Dummies books give a great overall picture of things. I've found many good Dummies books when trying to get an overall understanding at a high level.

It seems to me in your situation there are two events that stick out. One, when it comes to investments, you and your husband are not on the same page (not saying he's right, or you are right). Two, you need to understand that there's no one perfect solution. There is no such thing as no risk and guaranteed high return. Otherwise everyone would find the system and we'd all be rich. If you continue looking for the perfect solution, you'll never find it. Even more, be careful of falling into the trap of buying from someone who says they have the perfect no risk, guaranteed high return solution for you.
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Old 03-23-2011, 10:16 AM   #98
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There is inflation now (for the past 2 years) but before that, there were 5% CDs and zero inflation and perhaps a threat of disinflation. Do we have a good reason to believe that there won't be 5% CDs again soon? I don't think we've seen rates this low in many, many years, if ever.

It's not really as if everyone on the board, in unison, gave me a single path to take. Get an annuity (now? - not now). It was scary that all asset classes plummeted at the same time two years ago. Does anyone fear that the market is overvalued now and that interest rates have to go up which would make bonds lose value too?
To sum up peoples advice, what you want does not exist. You can't avoid risk. You can avoid types of risk, but you open yourself to other risks. What feels good in the short term may leave you eating Alpo in the long term.

What everyone would agree is that the stupidest thing you can do is make a plan and then change it at the worst possible time because your emotions can't take it. Selling out at the bottom because of the fear and buying at the top because of greed is a sure fire way to end up broke.

You need to make a reasonable plan and stick with it. For most people on the board that is a diversified portfolio according to an asset allocation they are comfortable with with some sort of rebalancing on a regular basis. Other people have different plans. Some people have assumed large single stock or options risk that blew up their plan.

If you are not willing to read 10 books and learn about it then you should get an advisor who is not a salesman to help you. What you are doing now is going to result in failure unless you are very lucky.
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Old 03-23-2011, 10:50 AM   #99
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..... Even more, be careful of falling into the trap of buying from someone who says they have the perfect no risk, guaranteed high return solution for you.
Doggone it - here I was going to try and peddle our 7-unit apartment building as a super safe, all upside non-stock market investment. See, for instance, this new CNN report:
Double-digit rent rise is coming to the housing market. - Mar. 15, 2011

We have very little in stocks or bonds - and 2x that amount in PenFed CDs bought back when they were 4%. Have been juicing up our return by making hard money loans, but that is getting tougher. Sure wish there was a single simple right answer so I didn't have to think about how to assure we don't run out of money during our lifetimes. Right now it seems the only sure thing is (transmission ends...)
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Old 03-23-2011, 11:05 AM   #100
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Just a slightly contrarian (but pretty uninformed) take on the don't buy an SPIA now position. If a highly risk averse investor (like Amazon) has sufficient funds to purchase SPIAs to cover basic needs I think it would be worth looking into. I recently read a contrarian view of the impact of current interest rates on SPIAs by some knowledgeable analyst (Otar?). I am not interested in SPIAs so I didn't pay close attention but the gist was that higher interest rates do not have as large an impact on annuity payouts as most of us assume. Certainly worth doing a bit of research. Also important would be analyzing the level of protection offered by your state guarantee program and probably engaging in multiple SPIA contracts all within the guarantee limit. And check with Brewer on the quality of the companies before you leap
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