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Old 07-19-2015, 03:41 PM   #21
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FWIW... recent Consumer Reports article w/suggestions for retirement income, including annuities.

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Old 08-04-2015, 09:15 PM   #22
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Bumping this thread: I just read an article in Money Magazine (yeah, I know - financial porn). I gleaned one thing on the choice between pension vs lump sum: Most companies will give you the lump sum based on their average cost for the equivalent "annuity" (aka pension). Since they have multiple participants, they know the actuarial issues (how many will die young, how many will hang on to 98, etc.) Thus their average cost turns out to be much LOWER per person than if you tried to structure your own "pension" of equivalent monthly payout. So, right off the bat, they will most likely offer you a much lower lump sum than what would be required to cover yourself out to 98 (or whatever you figure is your date of demise.) For all their faults, Money does a better job of 'splaining this than I can so YMMV.

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Anything which can be used can be misused. Anything which can be misused will be.
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Old 08-05-2015, 12:57 AM   #23
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Immediate annuities don't make sense. They are pushed under the guise of guaranteeing that you won't outlive your money. They'll say to a 65 year old "Wouldn't you rather get 6.5% per year rather than 4%"? The problem is that by the time you get to be about 87 or so a bond/stock balanced portfolio will start to outpace the annual fixed payments of that annuity. And by that time you can INCREASE your withdrawals from the bond/stock portfolio. Soon that annuity is paying the equivalent of 3% when you're 90 years old, then 2.5% when you're 95. That's just when you're gonna need that extra money most to pay for caretakers, higher insurance, etc. So you won't outlive your money BUT you'll be living in poverty. Guaranteed!
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Old 08-05-2015, 06:47 AM   #24
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Koolau, I actually think Money is quite good and would attribute being a longtime subscriber with now being ER. I concede that you need to read between the lines and ignore their hottest stocks lists and such nonsense that they need to to sell magazines.

ETF, the problem with your statements is that you are assuming that the future is like the past. While that may well be, I'm sure that there are a whole bunch of folks that were retirement age in Japan 15 years ago that would take issue with your statement that "a bond/stock balanced portfolio will start to outpace the annual fixed payments of that annuity" and would have been better off with an annuity than a balanced bond/stock portfolio. You may well be right, but who knows what the future will hold. All that said, I agree with you that I would prefer a balanced bond/stock portfolio to an immediate annuity, but I recognize that there are some risks associated with that choice and I'm willing to take them.

If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

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