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Old 10-06-2012, 08:46 PM   #41
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Our personal retirement plan... stops at 85. Nine more years. Living beyond that is unlikely, and can't think of anything we'd be interested in doing that would cost more than our SS...
Worst case, enough to buy candles for the cave, and ramen soups.

Life is hard, and then you die!
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Old 10-06-2012, 10:13 PM   #42
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Originally Posted by haha View Post
My main comment was that this may or may not be a good investment, but it is not an inflation hedge, as it it not linked to inflation. In fact, a big inflation wipes it out. whether you use zeros or this product. An inflation linked one might be excellent, however.

Ha
It's true that inflation is the big risk to an annuity. However, inflation-protected annuities are only better if they are priced correctly, but they are not, according to Wade Pfau.

With the characteristics of this case study, what I find supports my earlier intuition that optimal retirement income strategies consist of partial annuitization with SPIAs. More strongly, it consists of mixing stocks with fixed SPIAs. I was surprised that fixed SPIAs perform better than inflation-adjusted SPIAs, but Joseph Tomlinson explains that this is because inflation-adjusted SPIAs are relatively overpriced.

Retirement Researcher Blog: An Efficient Frontier for Retirement Income

So inflation-protected SPIAs have the same problem as TIPS. They should currently be cheap because inflation is low and has been low for almost 30 years. But they are, in fact, not cheap because investors believe (incorrectly, in my opinion) that inflation will be high in the future.
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Old 10-06-2012, 10:20 PM   #43
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Our personal retirement plan... stops at 85. Nine more years. Living beyond that is unlikely, and can't think of anything we'd be interested in doing that would cost more than our SS...
Worst case, enough to buy candles for the cave, and ramen soups.

Life is hard, and then you die!
Assuming you have average health at age 76 you individually have almost a 50% chance of living past 85. As a couple, the odds of one of you surviving past 85 would be much higher.
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Old 10-07-2012, 02:12 AM   #44
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Hello Dino - I have begun to buy deferred annuities this year (as documented in other threads). I am 47 and the payout from the annuities will start in 2027 when I turn 62. The rate is about 12%.
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As far as I can understand, it is a deferred annuity where you put a lump sum down in your fifities or sixties and begin to collect a pretty good payout at age 85 (if you live that long). Anyone have any experience with them? Opinions? It seems to be a good way to avoid running out of cash in your later years.
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Old 10-07-2012, 11:42 AM   #45
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Hello Dino - I have begun to buy deferred annuities this year (as documented in other threads). I am 47 and the payout from the annuities will start in 2027 when I turn 62. The rate is about 12%.
Obgyn65,
What plans did you buy? I am 45 and bought 4 this year that I plan to start taking income from at 65. The companies were Equitrust MarketTwelve Bonus Index w/ Income for Life (expected roll-up of 7.63% with bonus), the Midland National MNL Capstone 14 with Retire X-Cell Rider (expected roll-up of 7.26%), Aviva Income Preferred Bonus with Income Edge Plus (expected roll-up of 7%) and the Prudential X Series w/ HD Lifetime Income (expected roll-up of 5.87%). I caught some of the products on the way down such as the Aviva which had recently reduced. Since I bought Prudential has discontinued that plan, Midland reduced their rate and Aviva reduced their rate again.

I would love to know what you found that has 12%? I had specifically asked for products with 20 yr roll-ups so if yours has 15 yrs max then I wouldn't have seen it but I would still be interested in it.

Thanks!
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Old 10-07-2012, 02:35 PM   #46
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Does that 12% return partially include a return of your initial principle ?

It does seem too good to be true otherwise.
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Old 10-07-2012, 04:38 PM   #47
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Does that 12% return partially include a return of your initial principle ?

It does seem too good to be true otherwise.
It would have to include principal. My interpretation is that the initial premium is accumulated for 15 years, i.e., from age 47 to age 62 and then annuitized at an annual rate of 12% of the initial principal. It is not really a 12% return, but something less than that depending on the value of the principal at age 62. Is the 12% payout a guarantee or a projection?
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Old 10-07-2012, 05:40 PM   #48
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Hello - I had a look at a couple of companies, including Hartford, MetLife, and New York Life. The terms of their deferred annuities were broadly similar. The payout in 15 years is about 12%..
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I would love to know what you found that has 12%? I had specifically asked for products with 20 yr roll-ups so if yours has 15 yrs max then I wouldn't have seen it but I would still be interested in it.

Thanks!
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Old 10-07-2012, 05:40 PM   #49
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No return of principal as far as I know.
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Originally Posted by MasterBlaster
Does that 12% return partially include a return of your initial principle ?

It does seem too good to be true otherwise.
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Old 10-07-2012, 05:42 PM   #50
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Yes. Guaranteed in writing.
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It would have to include principal. My interpretation is that the initial premium is accumulated for 15 years, i.e., from age 47 to age 62 and then annuitized at an annual rate of 12% of the initial principal. It is not really a 12% return, but something less than that depending on the value of the principal at age 62. Is the 12% payout a guarantee or a projection?
Bruce
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Old 10-07-2012, 06:31 PM   #51
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You say the payout in 15 years is 12%. 12% of what and for how long? There is no way you can be guaranteed a payout of that magnitude without a return of principal.
Bruce
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Old 10-07-2012, 08:06 PM   #52
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Hello - I had a look at a couple of companies, including Hartford, MetLife, and New York Life. The terms of their deferred annuities were broadly similar. The payout in 15 years is about 12%..
Thanks! Can you give me the exact name of the program so I can try to get ahold of the materials? I'm sure you know how it is. These companies have 100s of programs and slogging through the details can be difficult.
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Old 10-07-2012, 08:19 PM   #53
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Thanks! Can you give me the exact name of the program so I can try to get ahold of the materials? I'm sure you know how it is. These companies have 100s of programs and slogging through the details can be difficult.
I hope you don't really believe a company can guarantee you 12% income in an environment where 10-year Treasurys are yielding about 1.5%.
Bruce
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Old 10-07-2012, 08:34 PM   #54
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What I'd be interested in: A pooled fund through an insurance company available for purchase by folks who are presently my age. Invested in (and secured directly by) stripped TIPS that mature in the year I turn 85. In that year the insurance company cashes in the stripped TIPS and distributes the proceeds to all surviving members of the pool. They can use the funds to buy an immediate annuity that will provide income for the rest of their lives. I'm 51 now, so approx 1/2 of the "class" will be dead by age 85. If I put $50K into this and it only barely keeps pace with inflation (the insurance company keeps any real growth as their piece of the pie), I can expect to get $100K (because only half us are alive to get a payout) in 2012 buying power when I'm 85.
Anyway, I'm sure if this could be profitably sold that some companies would already be doing it.
Sounds like a great Kickstarter project. The challenge would not be getting a certain dollar amount, but rather a certain headcount.

Preferably of overweight smokers who can't do math...
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Old 10-07-2012, 08:37 PM   #55
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Yes. Guaranteed in writing.

I think you should take the time to read the other 200 pages of disclosures before you bet on 12%.
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Old 10-07-2012, 08:39 PM   #56
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Thanks! Can you give me the exact name of the program so I can try to get ahold of the materials? I'm sure you know how it is. These companies have 100s of programs and slogging through the details can be difficult.

I think the name of the program is the Bookmaker Program. Go see the guy with the long trench coat that hangs out at the corner pub.
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Old 10-07-2012, 11:03 PM   #57
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Sending you a personal message with the exact name of the deferred annuity.
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Thanks! Can you give me the exact name of the program so I can try to get ahold of the materials? I'm sure you know how it is. These companies have 100s of programs and slogging through the details can be difficult.
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Old 10-07-2012, 11:20 PM   #58
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So if you give $30,000 today for example and the payout in 15 years' time is $3,600 a year, what is the rate ?
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You say the payout in 15 years is 12%. 12% of what and for how long? There is no way you can be guaranteed a payout of that magnitude without a return of principal.
Bruce
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Old 10-07-2012, 11:23 PM   #59
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Well I am one of the most conservative investors on this website, but I am still willing to put some money into deferred annuities each year until I reach 62. I am not suggesting anyone here does the same.
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I think you should take the time to read the other 200 pages of disclosures before you bet on 12%.
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Old 10-07-2012, 11:29 PM   #60
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It's ok to disagree with me. I like deferred annuities because I am still relatively young, so the payouts in 15 years are significant. Does not work for everyone in every situation though. I will not invest more than $250k-300k in all (maybe 10k-20k a year until I reach 62 - if I reach that age).
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I think the name of the program is the Bookmaker Program. Go see the guy with the long trench coat that hangs out at the corner pub.
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