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Re: Millionaires
Old 03-21-2007, 10:54 PM   #21
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Re: Millionaires

Quote:
Originally Posted by jdw_fire
I don't know where you get your information re fees but per Vanguard "Expenses for the fixed income option are incorporated into the initial quote." Which means when they say that for a price of $100k now they will pay you 428.79/mo (5145.48/yr) adjusted annually for CPI for the rest of your life provided you are currently 60yo the fees have already been removed i.e. you get the whole 428.79/mo. (note that is >5.1% SWR)
JDW...

The reason it is higher than 5.1 is that they are amortizing the principal to be zero when your expected death comes... and they have a pool that protects them from 'ruin'... you don't have that pool... so if you expected death is say 80 when you are 60... you only take 4% to make sure you can have money from 80 to 90... they don't need this....

Yes, I can see a benefit of an instant annuity that pays for your life... since my mom is 87, my two grandfaters lived to 96 and 88... and others have lived well into their 80s.. I might gamble... But, my dad died at 63 from cancer... so it is not a guarantee at all... and we all have to be aware of that 'bus' that might hit you...
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Re: Millionaires
Old 03-22-2007, 03:29 AM   #22
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Re: Millionaires

Quote:
Originally Posted by Texas Proud
JDW...

The reason it is higher than 5.1 is that they are amortizing the principal to be zero when your expected death comes... and they have a pool that protects them from 'ruin'... you don't have that pool... so if you expected death is say 80 when you are 60... you only take 4% to make sure you can have money from 80 to 90... they don't need this....
Remember the context of my statements; 1) I am comparing the annuity to a pension which exhibits the same characteristics & 2) I am asking SteveR if he feels the same way about an annuity as he does about a pension...
Quote:
Originally Posted by SteveR
As was said before, a COLA pension is worth a lot especially over time since it will, by definition, keep up with inflation while your investment nest egg may not. In that respect, it is worth far more than a similar pile of assets used to create a SWR of the same annual amount over time.
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Re: Millionaires
Old 03-22-2007, 07:40 AM   #23
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Re: Millionaires

Quote:
Originally Posted by jdw_fire
Remember the context of my statements; 1) I am comparing the annuity to a pension which exhibits the same characteristics & 2) I am asking SteveR if he feels the same way about an annuity as he does about a pension...
I am only commenting on your statement of over 5.1% SWR... you had said it like it was some higher percentage than what someone would do normally...

For you other statment... who cares... You either have a pension or you don't... If you have one, great... maybe you can cash it out and use the money to buy an annuity, but why??

And, if you get $500 per month from a pension or $500 per month from an annuity and they BOTH are index for inflation (using the same index of coures).. then you are neutral on them (except for maybe tax reasons... pensions are 100% taxed)...
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Re: Millionaires
Old 03-22-2007, 07:50 AM   #24
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Re: Millionaires

Excluding the house in the millionaire calculation is customary. But the practice preceeds the introduction of the reverse mortgage.

Regardless of wether or not you "count" home equity ... as boomers over indulge and face the prospect of being a Walmart greeter, there will most likely be a BOOM in reverse mortagages. Can't wait to see how "creative" the mortgage industry becomes (again).
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Re: Millionaires
Old 03-22-2007, 12:39 PM   #25
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Re: Millionaires

Quote:
Originally Posted by Texas Proud
I am only commenting on your statement of over 5.1% SWR... you had said it like it was some higher percentage than what someone would do normally...
Did you even read this thread? As I said
Quote:
Originally Posted by jdw_fire
If you read the post I was responding to, SteveR said "it is worth far more than a similar pile of assets used to create a SWR of the same annual amount over time" refering to a pension. By making this statement he put a value on the pension and I was just trying to pin that value down and compare that value to the cost of an annuity. He may not have stated it explicitly but he implied that he would trade "a similar pile of assets used to create a SWR of the same annual amount over time" for the pension he described and I was interested in knowing if he felt the same way about an immediate annuity that made the same payments.
The value of a CPI adjusted pension (lifetime income stream) has been hypothicated as being worth 25 times the annual payout. By his post SteveR implies that he values a COLAed pension is worth more than that. However at that valuation a pension with current annual payments of $40k would be worth $1M and my post was pointing out that a 60yo man could buy an CPI adjusted immediate anniuty that would pay a COLAed $40k/yr for less than $800K. Thus if someone had
Quote:
Originally Posted by jdw_fire
"a similar pile of assets used to create a SWR of the same annual amount over time"
he could buy himself a faux COLAed pension (an annuity) and still have money left over.



Quote:
Originally Posted by Texas Proud
For you other statment... who cares... You either have a pension or you don't... If you have one, great... maybe you can cash it out and use the money to buy an annuity, but why??
I was not even suggesting that if you had a COLAed pension you should cash it out and get an annuity. I was suggesting that if you had
Quote:
Originally Posted by jdw_fire
"a similar pile of assets used to create a SWR of the same annual amount over time"
and you believed what SteveR said about the value of a COLAed pension then you could in essence buy one.



Quote:
Originally Posted by Texas Proud
And, if you get $500 per month from a pension or $500 per month from an annuity and they BOTH are index for inflation (using the same index of coures).. then you are neutral on them (except for maybe tax reasons... pensions are 100% taxed)...
At the federal level pensions and annuities are taxed the same, if you used pretax money to fund either then all the money coming to you is taxed as normal income. If you used after tax money to fund either then the money coming to you is prorated between return of principal & income and you pay taxes on the income.
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Re: Millionaires
Old 03-22-2007, 09:12 PM   #26
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Re: Millionaires

So my COLA pension which started this year at 33K plus full medical bennies free to me and my wife. If I live to 100 that would be 50 years and what over a 2 million payout?

I have to just live a month and they will send me a check, then live another month and another month on and on and on and on.......

Now I did quit working 24/7 at 50 years of age and left the rat race soooooo I should have better health with less stress, right?
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Re: Millionaires
Old 03-24-2007, 04:24 PM   #27
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Re: Millionaires

Quote:
Originally Posted by newguy888
So my COLA pension which started this year at 33K plus full medical bennies free to me and my wife. If I live to 100 that would be 50 years and what over a 2 million payout?
That's good ballpark figure. Payout like this is waning since it's very expensive to continue to pay out benefits and money without anything in return (I think) or any increase in productivity.
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