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10-28-2016, 06:52 AM
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#1
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Recycles dryer sheets
Join Date: Sep 2004
Posts: 330
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Laddered annuities
Has anyone built a laddered annuity (s) as part of their long term strategy for retirement income. Welcome positive constructive replies.
Thanks
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10-28-2016, 06:54 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2003
Location: Florida's First Coast
Posts: 7,654
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We here are not great advocates of Annuities because of their high fees and really they only give you back what you put in + a below average interest rate.
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"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
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10-28-2016, 07:05 AM
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#3
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Recycles dryer sheets
Join Date: Sep 2004
Posts: 330
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The question is: "Has anyone built a laddered annuity" ...... not whether or not you're an advocate. Thanks for the reply anyway !
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10-28-2016, 07:07 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,405
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You want "positive constructive replies." That sounds like you want people here to support your decision to buy (or sell) these products.
That's not likely to happen. Some people here support annuities in a very few situations, but most think annuities exist to enrich the insurance company. Low interest rates and high fees make annuities a very bad deal. You can structure an income stream yourself, without paying an insurance company to do it for you.
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10-28-2016, 07:34 AM
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#5
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Recycles dryer sheets
Join Date: May 2012
Posts: 90
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I am assuming you are referring to laddering immediate annuity, not the other crappy high fees annuities people are referring to? I spoke with a mass mutual guy and he recommended that method rather than lump sum. I am also looking to blend that with some longevity insurance, but still doing my research. Rest of our portfolio is with Vanguard. We just want to make sure our day to day expenses are covered.
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10-28-2016, 07:39 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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a guy I used to w*rk with FIRED on a bond ladder - not sure about an annuity ladder but the combination of a diversivied portfolio, an immediate annuity and a QLAC make sense to me. YMMV
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You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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10-28-2016, 07:44 AM
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#7
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Recycles dryer sheets
Join Date: Sep 2004
Posts: 330
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Consider this, often times a person has already read or heard tge statements you or the first opine have stated. These are redundant. That's not the purpose of MY question.
I'm interested in hearing from people who HAVE bought the product ! I aware of the theories you guys are expounding.
When I say positive constructive points, I don't mean those that only agree with me, but that will hopefully answer the query as its put forth be it ppositive or negative ; pro or con.
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10-28-2016, 07:47 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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10-28-2016, 07:55 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Are you talking about a ladder of life annuities, period certain annuities or deferred annuities?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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10-28-2016, 07:56 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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I have considered an annuity in the past, although I am not a great advocate. They do have their place. I do not like bonds either. I do see a lot of similarities of an annuity in a bond.
An annuity probably has a better return than a bond fund, and is likely safer. Insurance companies are held to a higher fiscal standard than a municipality.
If you use the annuity as one leg of a retirement chair (pension, disability, SS, rentals, dividends, etc.), it could possibly a great income stream.
I considered 5-10% of my total liquid investment being put into an annuity. It would not be a lot monthly, but maybe it would be $1,000 a month (somewhat) guaranteed from age 62 or so forward. I view it as more of an income diversity thing than an investment.
IMHO, an annuity is a much better investment than LTC.
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FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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10-28-2016, 08:04 AM
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#11
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Recycles dryer sheets
Join Date: Sep 2004
Posts: 330
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Thanks. Has good reviews on Amazon !
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10-28-2016, 08:09 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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Quote:
Originally Posted by ferco
Thanks. Has good reviews on Amazon !
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great read; written by a retired pension actuary that isn't trying to sell you anything
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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10-28-2016, 08:16 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by Senator
... An annuity probably has a better return than a bond fund, and is likely safer. ...
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Not really in terms of return... not even close. On immediateannuities.com a 5 year period certain annuity yields 0.7%... you can easily beat that with an online savings account that is FDIC insured. The 10 year period certain annuity yields 1.6% but for longer terms an online account/CD ladder would beat that. The insurer invests in the same bonds but needs a profit.
If you have better than average longevity, then the mortality credits embedded in a life annuity might help it outperform a bond fund but it depends on how long you live.
The Vanguard Intermediate-Term Investment-Grade Fund Admiral has an SEC yield of 2.36%... a 60 yo male would need to live to be 84 to get that... live longer and your return increases... die early and it sucks. And you need to live beyond 80 to beat a plain old FDIC insured savings account that pays 1%.
Lump Sum | | 100,000 | Monthly benefit | | 462 | | | | | | | Age | n | IRR | 60 | 0 | | 61 | 1 | -98.4% | 62 | 2 | -81.6% | 63 | 3 | -61.5% | 64 | 4 | -46.1% | 65 | 5 | -35.0% | 66 | 6 | -27.0% | 67 | 7 | -21.0% | 68 | 8 | -16.5% | 69 | 9 | -13.0% | 70 | 10 | -10.2% | 71 | 11 | -8.0% | 72 | 12 | -6.2% | 73 | 13 | -4.7% | 74 | 14 | -3.4% | 75 | 15 | -2.3% | 76 | 16 | -1.5% | 77 | 17 | -0.7% | 78 | 18 | 0.0% | 79 | 19 | 0.6% | 80 | 20 | 1.1% | 81 | 21 | 1.5% | 82 | 22 | 1.9% | 83 | 23 | 2.2% | 84 | 24 | 2.5% | 85 | 25 | 2.8% | 86 | 26 | 3.0% | 87 | 27 | 3.3% | 88 | 28 | 3.5% | 89 | 29 | 3.6% | 90 | 30 | 3.8% | 91 | 31 | 3.9% | 92 | 32 | 4.1% | 93 | 33 | 4.2% | 94 | 34 | 4.3% | 95 | 35 | 4.4% | 96 | 36 | 4.5% | 97 | 37 | 4.6% | 98 | 38 | 4.7% | 99 | 39 | 4.7% | 100 | 40 | 4.8% |
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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10-28-2016, 08:46 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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Quote:
Originally Posted by pb4uski
Not really in terms of return... not even close. On immediateannuities.com a 5 year period certain annuity yields 0.7%... you can easily beat that with an online savings account that is FDIC insured. The 10 year period certain annuity yields 1.6% but for longer terms an online account/CD ladder would beat that. The insurer invests in the same bonds but needs a profit.
If you have better than average longevity, then the mortality credits embedded in a life annuity might help it outperform a bond fund but it depends on how long you live.
The Vanguard Intermediate-Term Investment-Grade Fund Admiral has an SEC yield of 2.36%... a 60 yo male would need to live to be 84 to get that... live longer and your return increases... die early and it sucks. And you need to live beyond 80 to beat a plain old FDIC insured savings account that pays 1%.
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That is interesting. I never really looked at the interest rate return, and every time I ask an annuity guy, they dodge the question.
I went to that site and just did a 5 year immediate annuity. $100K now, only gives back $101,820 over five years, or $1,697 per month. According to my HP12C, that is 0.593% interest. Most bonds, or even DVY, would give that. I get a lot more than that by paying off my mortgages.
The security of a 'guaranteed' investment is what you are buying I guess.
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FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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10-28-2016, 10:07 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by Senator
That is interesting. I never really looked at the interest rate return, and every time I ask an annuity guy, they dodge the question.
I went to that site and just did a 5 year immediate annuity. $100K now, only gives back $101,820 over five years, or $1,697 per month. According to my HP12C, that is 0.593% interest. Most bonds, or even DVY, would give that. I get a lot more than that by paying off my mortgages.
The security of a 'guaranteed' investment is what you are buying I guess.
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I think you got 0.0593%, which is per month, which converts to 0.72%/year. Math is hard.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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10-28-2016, 10:36 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 16,973
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We get a small Pension, non cola.
Took 1/2 of the $ as lump sum, and is invested, idea being in a decade to buy an annuity (possibly).
I have realized our SS is really an annuity as well, and we plan to tap those later on.
So yeah, I suppose I could think of ourselves as having laddered annuities, just not the kind where you pay some salesman to give you back your money over time.
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10-28-2016, 10:43 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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he's using a HP12C and not a TI BAII plus
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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10-28-2016, 02:15 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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Yep. After looking at it again, that is what I got. Either way, it's not good.
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FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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10-28-2016, 02:25 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,304
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Quote:
Originally Posted by pb4uski
Are you talking about a ladder of life annuities, period certain annuities or deferred annuities?
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+1
The word "annuity" is just too generic.
It's very tough to be constructive without knowing something about the specific situation and specific annuity types. I am considering a ladder of Multi-Year Guaranteed Annuities to bridge the gap between ER and starting SS. These are frequently compared to CD's except no FDIC. Rates are around 3% for 5 yrs. A CD ladder is my alternate choice and I will pull the trigger next year when I get a chunk from a maturing CD.
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...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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10-28-2016, 02:29 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Are you sure about that 3%? Looks high in comparison to these SPDAs from Fidelity. Usually CDs and bonds and annuities returns are within similar range and I'm not aware of any 5 year 3% money out there though Andrews CU is offering a 7 year, 3% IRA CD.
Guaranteed Rates for Tax-Deferred Fixed Annuities (SPDAs) Available Through Fidelity
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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