Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 09-06-2015, 01:47 PM   #21
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,820
Quote:
Originally Posted by ETFs_Rule View Post
You insurance salesmen.
I'm pretty sure that sales of all kinds are prohibited on this forum.

If you can find a post where somebody is trying to earn a commission by selling something to another member, you should report that poster to a moderator.
__________________

__________________
Independent is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-07-2015, 04:20 AM   #22
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 189
Yes I know annities are not needed for everybody but for someone with modest IRA let's say 500k including non-qual money with SS of about 24k at FRA and does not want to work til 65. Its sort of hard to wait til 70 to collect SS(me). I also have very small pension of $260 month. At 60 I'm debating on using 25% of portfolio for a deferred annuity starting between 65 and 70. I'm very heathly I work out 4 or 5 time a week which includes running about 30 miles a week. So I worry about running out money. A couple of bad years in the market and I would be in trouble. By the way I'm single so that makes it a lot easier to figure out when to take SS and the 500k will last longer with only one person. Now if I only had a couple million I could forget about a annuity.
__________________

__________________
alaska55 is offline   Reply With Quote
Old 09-07-2015, 09:05 AM   #23
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,820
Quote:
Originally Posted by alaska55 View Post
Yes I know annities are not needed for everybody but for someone with modest IRA let's say 500k including non-qual money with SS of about 24k at FRA and does not want to work til 65. Its sort of hard to wait til 70 to collect SS(me). I also have very small pension of $260 month. At 60 I'm debating on using 25% of portfolio for a deferred annuity starting between 65 and 70. I'm very heathly I work out 4 or 5 time a week which includes running about 30 miles a week. So I worry about running out money. A couple of bad years in the market and I would be in trouble. By the way I'm single so that makes it a lot easier to figure out when to take SS and the 500k will last longer with only one person. Now if I only had a couple million I could forget about a annuity.
I'd suggest crunching the numbers. When I looked at it, deferring SS provided a much better return than buying a private SPIA.
__________________
Independent is offline   Reply With Quote
Old 09-27-2015, 09:05 AM   #24
Dryer sheet wannabe
 
Join Date: Dec 2009
Posts: 16
I bought my QLAC and feel quite lucky to have had the chance to do so. Lots of goofy things being said in this forum. Like advising to choose Soc Sec at age 70....why in the world would this be set up as a "choice"? I'm waiting to age 70 to start that AND I bot the QLAC. That way I can more freely spend between age 68 (now) and age 85 knowing that my old age is already covered. Less to worry about you know. And then there is the failure, that many show, to think of the QLAC as insurance against longevity. I'm not upset if my house doesn't burn down after I bot insurance. AND there is yet another goofy idea from my perspective. We can all look at our heredity as a clue to our possible life span. With my 2 grandmothers dying in their 100's and a mother alive at age 95 and doing well, I just might have reason to consider long life a risk that I face. Yes there are actuarial tables and they have value but we can look at other factors too. And the fact that we can take IRA money to buy this product without taking a taxable distribution (added to the reduced RMD value) just really all works for me.

And if I die at age 84 and collect no proceeds from the QLAC then I'll have had all the money I needed to get to that age and I can't take it with me, so no harm done, right? This protects my children from the risk of having to support Mom in her really old age.

So I guess I'm saying thank the government for allowing this option and think for yourselves whether it works or not. If you are age 60 and have almost no retirement money then obviously it does not work for you. I did an excel sheet to figure out how how to put in the QLAC (based on desired payout) and I bought a policy with CPIU increases. Sounds pretty obvious to me.
__________________
BobbinChina is offline   Reply With Quote
Old 09-27-2015, 09:34 AM   #25
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
A 65 year old puts $50k into a 20 year deferred annuity and assuming he starts income at 85 and lives a further 6 years, to generate $27k a year for that last 6 years the IRR per year over the whole 26 years is about 5%. There is also the tax advantage. Of course a lot of the IRR will be mortality credits, but you're buying insurance and if you aren't ok that the potential of your early death will fund other people's retirement, then you shouldn't buy an annuity.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 09-27-2015, 09:49 AM   #26
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
The criticism against annuities has always been their complexity and cost, so this is where QLACs win over many other annuities. I've always felt that most people going into retirement with just equity and bond mutual funds are under diversified and some insurance product or rental real estate would help in income planning. A QLAC offers a relatively inexpensive way of doing that and eases the "worry" of living too long
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 09-27-2015, 10:58 AM   #27
Dryer sheet wannabe
 
Join Date: Dec 2009
Posts: 16
Quote:
Originally Posted by Pbkmaine View Post
Why not just wait until 70 to collect Social Security? That way you get a 24% increase in payment with COLA.
Quote:
Originally Posted by Independent View Post
I'd suggest crunching the numbers. When I looked at it, deferring SS provided a much better return than buying a private SPIA.

Duh, describing it as a choice between one or the other might make sense for your specific circumstances, but it certainly does not make sense for most people's situations. DO BOTH ...but in any case, DO crunch the numbers and then you'll see what the real situation is likely to be!
__________________
BobbinChina is offline   Reply With Quote
Old 09-27-2015, 02:44 PM   #28
gone traveling
 
Join Date: Nov 2013
Location: Los Angeles
Posts: 202
QLAC is just another fancy name for an annuity. Insurance companies are not playing Santa Claus. They are laughing all the way to the bank with Longevity Annuities too. No different.
__________________
ETFs_Rule is offline   Reply With Quote
Old 09-27-2015, 03:32 PM   #29
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by ETFs_Rule View Post
QLAC is just another fancy name for an annuity. Insurance companies are not playing Santa Claus. They are laughing all the way to the bank with Longevity Annuities too. No different.
QLACs have tax, cost and simplicity advantages over many other annuities. If you are ok betting that you'll live into your 90s you can get an IRR over 25 years of 5%. Is that worth it? A QLAC might make it easier for people to plan their withdrawal rates from other investments. There is no silver bullet in retirement planning and annuities might be appropriate for some retirees who worry about running out of money or who have a more liability matching outlook. As with everything keep costs to a minimum and know what you are buying and why you are buying it. Simply posting videos that trash annuities and push equity and bond mutual funds ignores that people's circumstances vary greatly.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 09-27-2015, 05:09 PM   #30
Full time employment: Posting here.
 
Join Date: Aug 2009
Posts: 522
Quote:
Originally Posted by ETFs_Rule View Post
QLAC is just another fancy name for an annuity. Insurance companies are not playing Santa Claus. They are laughing all the way to the bank with Longevity Annuities too. No different.

The insurance companies aren't playing Santa Claus ..the people that die before you are.


Sent from my iPad using Early Retirement Forum
__________________
bmcgonig is offline   Reply With Quote
Old 09-27-2015, 06:34 PM   #31
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by bmcgonig View Post
The insurance companies aren't playing Santa Claus ..the people that die before you are.


Sent from my iPad using Early Retirement Forum
Yes, but the insurance companies are certainly making a nice bit of money off all the annuitants and in return you get some insurance. To compare an mutual fund with a QLAC is almost meaningless as they serve very different functions. That essential difference between a mutual fund and an annuity is one reason I would never buy a variable annuity. Own mutual funds for investment and annuities for insurance.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 09-28-2015, 12:31 AM   #32
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 1,152
I plan to delay SS until 70 AND probably also do a QLAC within my traditional IRA. This will hopefully help reduce my RMDs throughout my 70's and early 80's. In the meantime, I will be spending down my taxable account so the QLAC RMDs in mid-80's and beyond will have less of a tax impact. In addition to greatly reducing my longevity risk.

Currently QLACs are not very cost competitive but hopefully, as more people use them and competition in the insurance place increases as a result, they will offer better value.
__________________
kramer is offline   Reply With Quote
Old 09-28-2015, 07:41 AM   #33
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by kramer View Post
I plan to delay SS until 70 AND probably also do a QLAC within my traditional IRA. This will hopefully help reduce my RMDs throughout my 70's and early 80's. In the meantime, I will be spending down my taxable account so the QLAC RMDs in mid-80's and beyond will have less of a tax impact. In addition to greatly reducing my longevity risk.

Currently QLACs are not very cost competitive but hopefully, as more people use them and competition in the insurance place increases as a result, they will offer better value.
I can actually see QLACs becoming a very common. Advisors and retirees will grab onto the backstop they provide and the RMD tax savings. The worry would be that people might try to take a too much income before the QLAC pays out or take on too much risk in their remaining portfolio. Of course whether people need a QLAC when all research shows that as we get older we spend less is arguable. Insuring against specific happenings like long term care might be better value. And you might want to insure against a market crash by shorting or buying an SPIA.....there's lots of different risks.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 09-28-2015, 08:34 AM   #34
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by ETFs_Rule View Post
QLAC is just another fancy name for an annuity. Insurance companies are not playing Santa Claus. They are laughing all the way to the bank with Longevity Annuities too. No different.
I liked this guys video (thanks for posting it). I happen to be one of those that doesn't see much value in annuities- especially deferred (QLAC) annuities. However, SPIAs are something I would consider if I felt our projected income stream was threatened in the future as we age (lesser of two evils - running out of money or inflation risk).

Deferred Annuities (QLACs) appear to be getting some steam with the ability to be used within one's IRA. It also appears that they are more favored with insurance companies than retirees (wonder who pushed the Treasury to get favorable treatment done). The link below is Mike Kitces view of them from July 2014. It pretty much sums them up objectively. Can't say I would run out and by one...

https://www.kitces.com/blog/why-the-...nt-income-yet/
__________________
fritz is offline   Reply With Quote
Old 09-28-2015, 09:58 AM   #35
gone traveling
 
Join Date: Jun 2015
Location: seattle/dahlonega
Posts: 77
Quote:
Originally Posted by ETFs_Rule View Post
QLAC is just another fancy name for an annuity. Insurance companies are not playing Santa Claus. They are laughing all the way to the bank with Longevity Annuities too. No different.
Annuities actually do work for some people, don't hate.
__________________
hurricane harry is offline   Reply With Quote
Old 09-28-2015, 03:04 PM   #36
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by hurricane harry View Post
Annuities actually do work for some people, don't hate.
I hate many annuities and lots if people have been ripped off by annuity sales people over the years. But QLACs are far simpler, cheaper and more regulated than other annuities so we shouldn't lump them in with variable annuities. If the "hate video" was specific to variable annuities I'd be 100% behind it, but it isn't and people should look at a range if income solutions including annuities for retirement income.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 09-28-2015, 03:11 PM   #37
Dryer sheet wannabe
 
Join Date: Dec 2009
Posts: 16
Quote:
Originally Posted by fritz View Post
I liked this guys video (thanks for posting it). I happen to be one of those that doesn't see much value in annuities- especially deferred (QLAC) annuities. However, SPIAs are something I would consider if I felt our projected income stream was threatened in the future as we age (lesser of two evils - running out of money or inflation risk).

Deferred Annuities (QLACs) appear to be getting some steam with the ability to be used within one's IRA. It also appears that they are more favored with insurance companies than retirees (wonder who pushed the Treasury to get favorable treatment done). The link below is Mike Kitces view of them from July 2014. It pretty much sums them up objectively. Can't say I would run out and by one...

https://www.kitces.com/blog/why-the-...nt-income-yet/

Well, as I said, I did buy one as soon as they hit the market which is only in the last couple of months. That's one of many errors int he Kitces paper on the subject. As a customer who's been studying the upcoming QLACs for a long time, I found his post to be well-written but just full of significant errors. Starting with the one about if it was so great, why hasn't anyone bought it yet....I've followed Treasury since 2012 so I do know that even after they finally approved this reg, then it was almost a year before the insurance companies came up with offerings. Like I said, tons of errors in his blog post.
__________________
BobbinChina is offline   Reply With Quote
Old 09-28-2015, 05:56 PM   #38
gone traveling
 
Join Date: Nov 2013
Location: Los Angeles
Posts: 202
Quote:
Originally Posted by nun View Post
QLACs have tax, cost and simplicity advantages over many other annuities. If you are ok betting that you'll live into your 90s you can get an IRR over 25 years of 5%. Is that worth it? A QLAC might make it easier for people to plan their withdrawal rates from other investments. There is no silver bullet in retirement planning and annuities might be appropriate for some retirees who worry about running out of money or who have a more liability matching outlook. As with everything keep costs to a minimum and know what you are buying and why you are buying it. Simply posting videos that trash annuities and push equity and bond mutual funds ignores that people's circumstances vary greatly.
What tax advantages? Paying the HIGHER ordinary income tax rate? I don't consider that any "advantage". A separate account of bond/stock index funds is taxed at the normal capital gains tax rate. I'll take that ANY day!
Anything investing that involves an insurance contract is NOT going to have any kind of cost advantage. That's for sure!
These insurance products can be expected to return about 3% if you live long. I'm not talking about interest rate return. I'm talking about return on investment. As far as interest payment rate, these insurance products are fools gold, like the video explains. Eventually that fixed payment rate will stink!
You said "annuities might be appropriate for some retirees who worry about running out of money". Again, name for me a period in the past in which a conservative portfolio of bond and stock index funds would have run out of money. This didn't even happen if you started in 1969, the worst time in history to retire! You REALLY sound like an insurance salesman.
__________________
ETFs_Rule is offline   Reply With Quote
Old 09-28-2015, 06:40 PM   #39
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by ETFs_Rule View Post
What tax advantages? Paying the HIGHER ordinary income tax rate? I don't consider that any "advantage". A separate account of bond/stock index funds is taxed at the normal capital gains tax rate. I'll take that ANY day!
We are talking about tax deferred accounts and RMDs so capital gains don't come into it. If you want to reduce your RMD a QLAC will help with that. Now if you invest the RMDs you'll be paying capital gains and dividend tax rather than having the QLAC money grow tax free for say 20 years....of course lets hope you live that long.

Quote:
Anything investing that involves an insurance contract is NOT going to have any kind of cost advantage. That's for sure!
I was comparing the costs of QLACs to variable annuities

Quote:
These insurance products can be expected to return about 3% if you live long. I'm not talking about interest rate return. I'm talking about return on investment. As far as interest payment rate, these insurance products are fools gold, like the video explains. Eventually that fixed payment rate will stink!
For the example given in the first post the $50k invested at age 65 would have had to grow at 5% over the 26 years from 65 to 91 to provide the $27k income from age 85 to 91. That is not a fantastic return (but it is tax free compounding) and mortality credits make up a lot of it. But annuities are insurance, not investments. Immediate annuities online quote gives numbers the same as used in the article.

Quote:
You said "annuities might be appropriate for some retirees who worry about running out of money". Again, name for me a period in the past in which a conservative portfolio of bond and stock index funds would have run out of money. This didn't even happen if you started in 1969, the worst time in history to retire! You REALLY sound like an insurance salesman.
You assume that everyone makes sensible decisions with their stock and bond portfolio and that the future will be at least as good as the past and that people want to live off a total return portfolio rather than something closer to a liability matching approach. A QLAC also firms up the time that the retiree needs to plan to withdraw from other investments, this might be attractive to some. Annuities are expensive (particularly variable and indexed varieties) and fixed ones without a COLA have poor returns today no matter how long you live, but sometimes people want insurance rather than investments.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 09-28-2015, 06:52 PM   #40
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by ETFs_Rule View Post
What tax advantages? Paying the HIGHER ordinary income tax rate? I don't consider that any "advantage".
If, as some posters have stated, you can buy this inside your IRA, then it is taxed the same as any other $ you withdraw from your IRA, capital gains, dividends, or otherwise. Therefore, while it's not an "advantage" tax-wise, it surely isn't a disadvantage.

Quote:
Originally Posted by ETFs_Rule View Post
A separate account of bond/stock index funds is taxed at the normal capital gains tax rate.
Ummmm...nope! Show me a bond that is taxed at "normal" capital gains tax rates.


Quote:
Originally Posted by ETFs_Rule View Post
I'll take that ANY day!
I would also take any bond any day that is taxed at "normal" capital gains tax rates.


Quote:
Originally Posted by ETFs_Rule View Post
Anything investing that involves an insurance contract is NOT going to have any kind of cost advantage. That's for sure!
Anything that involves an insurance contract (when examined by educated readers of this forum) is NOT going to have any kind of investing advantage. That's for sure!

Don't combine investing and insurance, and don't confuse the two. Insurance is for insurance. Investing is for investing. A SPIA or this deferred annuity product are essentially "insurance" for guaranteeing at least some income stream to live off of. I don't see people talking these products up as a way to reach the top 1%-2% of net worth individuals. Rather, people talk about them as a way to INSURE against not having at least some steady income stream to live off of.


Quote:
Originally Posted by ETFs_Rule View Post
These insurance products can be expected to return about 3% if you live long. I'm not talking about interest rate return. I'm talking about return on investment. As far as interest payment rate, these insurance products are fools gold, like the video explains. Eventually that fixed payment rate will stink!
Oh, so you're talking about interest rate payments? I suppose you would more strongly suggest people instead simply pluck it all down on 30 year Treasury bonds, paying.....wait for it......3%?

Oh, so we shouldn't buy 30 year treasuries, and instead just by 5 year Treasuries and wait for the interest rates to rise? Of course, the 1.5% for 5 year is just as good as the 3% 30 year. And it would have been great if someone just stuck to that plan in 2009/2010, as they waited for the inevitable interest rate reversion in...oh, yeah, rates are still non-existent.


Quote:
Originally Posted by ETFs_Rule View Post
You said "annuities might be appropriate for some retirees who worry about running out of money". Again, name for me a period in the past in which a conservative portfolio of bond and stock index funds would have run out of money. This didn't even happen if you started in 1969, the worst time in history to retire! You REALLY sound like an insurance salesman.
Do you read what you are quoting? The other poster said "annuities might be appropriate for some retirees who worry about running out of money." Name for me a 30 year period in which a portfolio DIDN'T suffer a large swing in value or volatility. You have to live off of your portfolio for 30-40-50 years. You must live every day with the volatility. Some people can handle more than others. Just as some people don't want to live below a certain threshold of standard of living, some people don't want to live below a certain "worry" of income.

Can you explain what they are supposed to do as they are worrying themselves to death as the market gyrates 20%-30% or more? you don't know what the market will do, but you do know that there is a way to help insure you have at least some income that you can depend on (based on the claims-paying ability of the regulated insurer).

I can show you how many homes have been damaged by earthquakes in St. Louis from the New Madrid fault over the past 50 years. ZERO. Obviously, it was a waste to buy earthquake insurance. And, if an earthquake did happen, it likely wouldn't level everything. But, if someone is worried about earthquake damage, it might be appropriate to buy insurance to give them peace of mind and unload that risk onto someone else. Just as with any other insurance product, be it long-term care, or umbrella insurance, or a host of other items or risks to insure against.

Yes, there is a trade-off and a cost for that peace of mind. But some people (including me) would see value in SOME level of protection/peace of mind.
__________________

__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
The Longevity Annuity chinaco FIRE and Money 7 11-06-2010 02:48 PM
Annuity post to end all annuity posts... Midpack FIRE and Money 61 07-09-2008 08:29 AM
Rolling over annuity money to Variable Annuity?? bigcedargrandma Hi, I am... 4 03-20-2008 07:39 AM
Longevity Annuity FIRE'd@51 FIRE and Money 14 08-15-2007 06:07 PM
longevity insurance ats5g FIRE and Money 17 02-06-2004 08:28 AM

 

 
All times are GMT -6. The time now is 03:42 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.