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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 05:40 PM   #121
 
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Re: Is an Annuity a good way to get over a SWR of 5%?

Quote:
Originally Posted by 2B
The longer you fear think you may live the later you should take SS.
Maybe I can put this another way.

If you know for absolute certainty that you will die before age 85, take your Social Security at age 62!

- Maybe that will help put things in perspective.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 05:50 PM   #122
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by Animorph
My custom simulation with taxes, 6% real return...
Is this perhaps a rather heroic assmumption?

Ha
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 05:57 PM   #123
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Re: Is an Annuity a good way to get over a SWR of 5%?

I always thought I would take SS at 62 and still may. Recently my wife was diagnosed with MS. That started me thinking about the health costs involved in the future. Now maybe 70 is a better plan. If her health costs exhausts our savings, at least my SS would be better. Lots of ways to look at this.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 05:57 PM   #124
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Re: Is an Annuity a good way to get over a SWR of 5%?

Quote:
Originally Posted by HaHa
Is this perhaps a rather heroic assmumption?

Ha
"Assmumption"? Is this perhaps a CHP? Sorry Ha, don't mean to
make you the butt of jokes.

JG
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 05:58 PM   #125
 
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by Mr._johngalt
"Assmumption"? Is this perhaps a CHP? Sorry Ha, don't mean to
make you the butt of jokes.

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You are the master of puns!
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 06:03 PM   #126
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by Cut-Throat
You are the master of puns!
Yes I am, and you have been punished enough.

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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 06:15 PM   #127
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by Rock
You guys are making my brain hurt...there are too many variables here: ROR, Longevity, Inflation, Taxes, SWR, personal goals, etc. I think this problem is way too complex to "talk out" a reliable solution.

Surely there is some powerful software available that can accurately model this problem?
Here... :P
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 08:26 PM   #128
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by HaHa
Is this perhaps a rather heroic assmumption?

Ha
Heh, speak for yourself, Ha. Some of us venture out beyond TIPS once in a while.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-24-2006, 08:34 PM   #129
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by brewer12345
Heh, speak for yourself, Ha. Some of us venture out beyond TIPS once in a while.
Including me. But I thouight that if one is going to take SS early he would likely stick to a very conservative path with that money. To gamble and win is great, to gamble and lose sucks. Even if the gambles are well informed.

Ha
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 03:01 AM   #130
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Re: Is an Annuity a good way to get over a SWR of 5%?

I used to say, "Tell me when you are going to die and I will tell you when to start taking social security benefits." Now I realize that even that's not true. I don't want to optimize my benefits, I want to optimize my satisfaction. Tell me how much the 70 year old version of me will enjoy my 70 year old benefits as compared to the 62 year old version of me and I can begin to answer this question. Of course factors that contribute to the enjoyment of benefits question include: how much you have in investments, how much you spend annually, how long you are going to live, how healthy and active you will be, etc. . . .

This is not a deterministic problem.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 03:07 AM   #131
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Re: Is an Annuity a good way to get over a SWR of 5%?

Quote:
Originally Posted by donheff
This has been my reaction to the annuity arguments as well. If you think in terms of investments (building a bigger pile for whatever reason - leave it to heirs, pay for assisted living in your 90s, etc.) annuities and delayed SS are not a good deal. If you think in terms of getting a larger safe income stream (e.g. with a 4% SWR you are barely able to cover your lifestyle) annuities and delayed SS can get you higher spendable income at the expense of a smaller estate.
boy of you look at the earlier discussions we had an annuties i have been saying this for sooooooo long. finally you guys are getting the point that annuties arent a bad thing.

it all depends on why you want them.

now lets think about taking ss later at 70 and utilizing an immeadiate annuity too.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 04:52 AM   #132
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by mathjak107
boy of you look at the earlier discussions we had an annuties i have been saying this for sooooooo long. finally you guys are getting the point that annuties arent a bad thing.

it all depends on why you want them.

now lets think about taking ss later at 70 and utilizing an immeadiate annuity too.
Immediate annuities can be wonderful things. The problem with every one I've seen is that they are poor investments. After being a poor investment, they are frequently not used/purchased correctly.

Every other annuity I've run across should be outlawed. I have never seen any reason why anyone would be better off buying them.

Social security is one annuity almost all of us have already bought. I beleive that for what I've put in (including employer contributions) it is also a poor investment and I would have been better off keeping my money. Unfortunately, that was not one of my choices. Since I've got it, the goal is to maximize the return.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 06:52 AM   #133
 
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by sgeeeee
Now I realize that even that's not true. I don't want to optimize my benefits, I want to optimize my satisfaction. Tell me how much the 70 year old version of me will enjoy my 70 year old benefits as compared to the 62 year old version of me and I can begin to answer this question.
This is exactly why you should delay your benefits to age 70. Because you get to spend more at age 62-70. If you don't have to be saddled with an SWR of 4% at age 62, because you know down the road that your benefit checks will cover you, you can optimize your satisfaction.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 07:57 AM   #134
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Re: Is an Annuity a good way to get over a SWR of 5%?

Quote:
Originally Posted by MasterBlaster
http://www.ssa.gov/retire2/delayret.htm

Notice that for those born later that the rate of increase in delaying SS after full retirement age is larger (per year) than for those born earlier.

If I remember correctly the benefit at 70 should be independent of which year you were born. Perhaps Martha (or someone else) knows more about this.
MB,

I have had a chance to look at the links you posted more carefully. I agree that the ratio of age 70 benefit to the age 62 benefit increases for those born later. The highest ratio would occur for those born in 1960 or later (full retirement age 67).

If we take a full benefit at age 67 = 100

The benefit at age 70 = 100 + 3 x 8 = 124 (from your second link)

The benefit at age 62 = 70 (from your first link)

The ratio = 124/70 = 1.77

This ia a 77% increase, not 82%
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 08:50 AM   #135
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Re: Is an Annuity a good way to get over a SWR of 5%?

Quote:
Originally Posted by 2B
Immediate annuities can be wonderful things. The problem with every one I've seen is that they are poor investments. After being a poor investment, they are frequently not used/purchased correctly.

Every other annuity I've run across should be outlawed. I have never seen any reason why anyone would be better off buying them.

Social security is one annuity almost all of us have already bought. I beleive that for what I've put in (including employer contributions) it is also a poor investment and I would have been better off keeping my money. Unfortunately, that was not one of my choices. Since I've got it, the goal is to maximize the return.
Well.............I could not disagree more............. I think immediate annuities are a crap shoot. Even with period certain, the IRR is less than 3%. $1000 a month now may not look so hot 10 years from now, when your medi-gap and LTC insurance have doubled...............

Albeit RARE instances, it is always better to have CONTROL............

And don't get me started about Social Security...........I'll be lucky to get any...............
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 08:55 AM   #136
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by FIRE'd@51
MB,

I have had a chance to look at the links you posted more carefully. I agree that the ratio of age 70 benefit to the age 62 benefit increases for those born later. The highest ratio would occur for those born in 1960 or later (full retirement age 67).

If we take a full benefit at age 67 = 100

The benefit at age 70 = 100 + 3 x 8 = 124 (from your second link)

The benefit at age 62 = 70 (from your first link)

The ratio = 124/70 = 1.77

This ia a 77% increase, not 82%
You are probably right. I just used the little SSA calculator to get my numbers. Perhaps I was in error.

Nonetheless the numbers are pretty close to what I posted, and the concept of delaying SS by spending down your nest-egg which is made-up for by the increased SS payment is still valid.

I haven't quite caffinated yet so I'm not going to jump into a discussion of the finer points on SS payouts just yet.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 11:28 AM   #137
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Re: Is an Annuity a good way to get over a SWR of 5%?

Lets beat this thing to death and have even more fun with immediate annuities, social security and safe withdrawal rates...

From my example posted earlier in this thread the 70 year old person would get around $14260 extra SS at 70 versus retiring at 62.

So what is that payment stream worth ?

I played around with the Vanguard immediate annuity calculator http://www.aigretirementgold.com/vli...=RequestaQuote

So based on the Vanguard calculator for a 70 year old man getting that $14k immediate annuity payment per year adjusting the payment for (CPI) inflation each year I get a value of ~ $207392.

Now using my example of depleting your nest-egg with a 4% SWR I suggested that waiting until 70 years old to collect SS was worth more than $356k.

so, I believe that the waiting approach clearly comes out ahead.

- Any comments ??
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 04:34 PM   #138
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Re: Is an Annuity a good way to get over a SWR of 5%?

Quote:
Originally Posted by 2B
Social security is one annuity almost all of us have already bought. I beleive that for what I've put in (including employer contributions) it is also a poor investment and I would have been better off keeping my money. Unfortunately, that was not one of my choices. Since I've got it, the goal is to maximize the return.
That is something almost everybody felt in the booming 90s. I always assumed the sentiment was probably right since I could, of course, expect to earn about 10%/yr if I invested my own funds. 8) But the reality is, we can expect quite a bit less after inflation. So I decided to run a *reasonable* earnings scenario against DW's SS statement (I was a Fed without SS so I can't use my own). DW has paid 30 years of SS at the maximum rate and is 54. I projected her first year of SS earnings backwards for 10 years to approximate where she would be with 40 years in right now (this actually overstates her contribution since SS didn't tax as much income going back those ten years). I calculated the "contribution" as 14% of SS earnings and calculated the ROR as 4% real/yr - a rate that seems fair to me based on everything I have heard around here. Under that scenario she would have $432,937 to invest in an annuity today. I guesstimated an annuity with survivor benefit for a 66 YO to pay 5%/yr. That would be $21,647 or $1804/mth. Her SS statement says she would get $2152/mth at 66 ($2852 at 70).

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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 05:06 PM   #139
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by FinanceDude
Well.............I could not disagree more............. I think immediate annuities are a crap shoot. Even with period certain, the IRR is less than 3%. $1000 a month now may not look so hot 10 years from now, when your medi-gap and LTC insurance have doubled...............

Albeit RARE instances, it is always better to have CONTROL............

And don't get me started about Social Security...........I'll be lucky to get any...............
Did you read my post? I said the idea of an immediate annuity is good concept but they don't make sense based on the poor IRR of all of the available products.

I also said that since we're stuck with SS we should attempt to maximixe its value.
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Re: Is an Annuity a good way to get over a SWR of 5%?
Old 10-25-2006, 05:11 PM   #140
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Re: Is an Annuity a good way to get over a SWR of 5%?

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Originally Posted by Cut-Throat
This is exactly why you should delay your benefits to age 70. Because you get to spend more at age 62-70. If you don't have to be saddled with an SWR of 4% at age 62, because you know down the road that your benefit checks will cover you, you can optimize your satisfaction.
Money is money CT. The key is that if the SS is safely growing at better than your SWR (or whatever) you are better off spending you own money and letting SS grow. If you die young, your heirs lose. If you deplete your capital, SS won't be enough to cover assisted living or nursing care.

People on the edge don't have a choice. Most people on this forum do.
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