Life Expectancy

[rmark]

According to the IRS tables a married couple at age 62 has a joint life expectancy of about age 91, while by age 80 that has moved out to age 94. Several of my relatives have made it into that latter range.

 

[cute fuzzy bunny]

CFB,

You changed the rules immediately from my example. I said Age 120, you knocked it down to age 90-95.

I actually was hoping that you had a better plan that was going to be safer than mine!

When you said you would invest in even higher returning investments, does that not entail even more risk? Remember low tolerance for risk!

All I did was ask you a question and I was hoping you would stay in my parameters. I don't have my mind made up at all. But your proposed 'plan' has more risk than I would want at age 70 and I stipulated that the 70 year old had little or no tolerance for risk

Like I said, you didnt read or comprehend what I wrote, so very little point to this.

Your scenario has only one acceptable 'right' answer given its unlikely and unreasonable parameters. You will not live to 120, nor will very many other people. You cannot increase withdrawal without creating risk. You are simply denying the risk you've created, while magnifying the risk in other options.

Annuities are not risk free nor does including higher returning, higher volatility asset classes automatically create risk. In fact, the very act of portfolio diversification is to increase returns and dampen volatility and risk of loss. Sort of a pretty basic fundamental tenet of investing?

I expect no different result going further in this discussion, thus I'll stop and prove my sanity.

 

[jdw_fire]

CT,

CFB accuses you of doing exactly what he himself does

but then its tough to propose something thats workable in a no-win situation where theres only one accepted outcome and new data and rules keep appearing to make any alternative proposal undesirable.

Clearly your mind is made up and like the last time, you'll continue to either change the base parameters, eliminate other options or change the expected outcome to eliminate any other options presented.

Funny I got that impression about CFB in the thread I refered to earlier. He changed the inflation rate from CPI to his own personal inflation rate, he falsely stated that my example would not produce an inheritance, he falsely said it would produce less income, etc.

Firecalc was a good tool until it produced results contrary to your plan, but now its good again because using it in an asymmetric fashion produces the 'right' results. Firecalc and the 25x rule are too conservative and leave too much money left over for people who will die before they spend it, but when considering alternatives to what you've decided to do, the 25x rule becomes paramount, as does life expectancies to 100-120. PICK ONE!

Funny CFB does exactly this. Again in the thread I refered to earlier he apparantly didn't like that my example used FIRECalc results (he wanted me to compare to Wellesley or himself) but he sure used FIRECalc to try and make his point when he was arguing with you on the thread where you suggested that taking SS at 70 would allow you to spend more in your 60s.

you really didnt pay much attention to what I had to say the last time

Again I think CFB is describing himself here as when you look at the thread I refered to, you will see that I gave an example of buying an annuity and showed how it beat FIRECalc outputs but he compared it to Wellesley and his own investing ability (he also made false statements about my example). There he stated

"My" "Plan" (also known as "investing") offered substantially higher income, an excellent prospect of better inflation protection and a likely ability to pass more money to your heirs, with the acceptance of some minor downside market risk that has not materialized during the last 30+ years for the specific fund I mentioned, and in aggregate hasnt been a problem for the term of the entire US stock market since 1871.

Which, by the way, also says he is able to beat the results produced by FIRECalc, and maybe he can. BTW if Wellesley beats FIRECalc results then what do we need FIRECalc for, all we all need to do is buy Wellesley right?

However, I posted my example in an attempt to help older people (CFB is 45, my example was for a 60 yo), who may not be as proficient at investing as CFB, may not have as big of a portfolio as he or may not have a desire to spend alot of time managing their portfolio, to feel better about retiring sooner rather then later by providing them with some level of "safe", CPI adjusted, non market invested income. It happens that at the same time it provides a higher level of CPI adjusted payout than FIRECalc says is "safe" for a portfolio invested in the stock/bond market.

 

[JohnEyles]

You got me interested so I ran Rich's plan against a 3% adjusted annuity for DW and I starting immediately on Vanguard's calculator. It would take 27-28 to break even on the 3% adjusted. It looks like a reasonable bet would be calculate what you would want as the annuity income if you were adjusting at 3% and put the equivalent principle on a fixed. Then start out investing the difference in a fixed income fund that you could tap to cover living increase costs if needed. Only increase the amount you spend if your real expenses go up.

Interesting, for me the break-even point (where the 3%-graded payment catches up
with a flat payment from the same principal) is only about 13 years. I'm single and
54yo.

I did something similar to what you suggest, and put in the principal that gave the
same flat payment in year1 as the 3%-graded does. Invested the saved principal and
used it to make up the 3% increases. I'd have to earn 6% APY on the investment for
it to be able to cover the makeup payments for 35 years.

I also did EXACTLY what you suggested and invested the SAME principal in a flat-payout
SPIA, and invested the excess payments to makeup the shortfall after the break-even
year. Got EXACTLY the same result - investment must yield about 6% to remain viable
for 35 years.

So looking at it this way, the 3%-graded seems like a pretty decent deal to me, given
that it gives me the same effect as a guaranteed 6% return on that extra money.

I'm not commenting on SPIA viability in general - yes, I realize I can PROBABLY do better
than 6% in the market, that the SPIA isn't guaranteed if AIG fails, and that I probably
will not live for 35 more years. I am simply looking at putting a limited part of my egg
(probably about 10% and certainly no more than 25%) into a SPIA as a diversification
of income streams.

 

[cute fuzzy bunny]

Blah blah blah

You gave a one sided argument, weren't interested in the possible shortcomings, and weren't interested in other alternatives. Then you got mad.

And still are...

<insert some pithy yoda quote about anger, etc>

For anyone who gives a hoot (which is nobody except you), actually reading any of the threads in question should produce a pretty clear picture of what actually transpired.

 

[Cut-Throat]

jdw_fire,

I didn't see any anger on your part or my part. I am not attached to any 'side' of any solution here. I was actually hoping for a non emotional discussion. My current plan is to stop discussing this matter with sensitive prickley individuals.

I do plan on reading the book you recommended. on Dying Broke and would like to know the title and Author. Thanks!

 

[jdw_fire]

jdw_fire,

I didn't see any anger on your part or my part. I am not attached to any 'side' of any solution here. I was actually hoping for a non emotional discussion. My current plan is to stop discussing this matter with sensitive prickley individuals.

I do plan on reading the book you recommended. on Dying Broke and would like to know the title and Author. Thanks!

CT,

Sorry, I thought Nords beat me to the punch on the title ("Die Broke A Radical, Four-Part Financial Plan") and author (Stephen M. Pollan). As for recommending it, I'm not sure I remember it well enough to recommend it. Taking a quick look at the back cover I see one of the 4 parts is Don't Retire, which, depending on his definition of retire, I don't agree with. I just brought it up because Rich's annuity buying plan reminded me of the book and I was wondering if he got his plan from the book.

Cheers,
jdw_fire

 

[bbbamI]

Wow...I just love this forum!

 

[JohnEyles]

I wonder if a SPIA would have been a good idea for Hitler ?

 

[JohnEyles]

I wonder if a SPIA would have been a good idea for Hitler ?

For those new to The Google (as our fearless leader calls it), it is
traditional that a thread ends when Hitler is mentioned.

So I was just trying to do to this thread what I was hoping the friendly police
officer would do to the badly injured deer I found on the way home tonite.
(Alas, local police policy does not allow such interventions).

 

[cute fuzzy bunny]

Yeah, its a great place.

Look you two...both of you had reasonable ideas with ups and downs. I perfectly understood both of them and told you what the shortcomings were. And if you'll re-read the respective threads, I was pretty dang nice about it.

Unfortunately, not completely accepting your ideas resulted in both of you coming to the same conclusion: I must simply not understand them! Aint that obvious?!?

I patiently explained to both of you my comprehension of your ideas and specifically what the problems were with them, as I perceived it. Several times. But it appeared you both jumped to write your replies before reading anything I wrote and looking at what I had to say.

Because...wow...I still didnt understand your foolproof ideas. What a moron!

After the 3rd or 4th time through this, yep, I got a little "prickley" about it.

While both your ideas are innovative and bear merit and consideration, both have holes big enough to drive trucks through.

Which would probably be why almost nobody is doing either of them.

Maybe all y'all would like to consider figuring out how to separate yourself from your ideas so as to not take it personally when the ideas are criticized.