Ok, don't kill the newbie for the stupid question but who is Wade Pfau?

[daylatedollarshort]

Are you kidding? The posts/threads that criticize brokers and high-fee FAs must number in the thousands, and they can be much more harsh than the treatment Pfau has received.

My post didn't say anything about brokers and high-fee FAs.

 

[rodi]

The argument for SPIA annuities is a lot stronger in a better interest rate environment. It's hard to argue for them in the current environment.

Like others have mentioned - I will continue to re-evaluate my view of SPIA annuities as I go forward... but Pfau seems to play off of fear to pitch them - disregarding historical market returns, and apparently, disregarding current annuity returns.

I'm a fan of the 3 legged stool approach - I have a very small non-COLA pension and some rental income - so my 3rd leg is very short and I'm tilting over... but I can't find a rational argument for purchasing a SPIA in the current rate environment. That said, I'll continue to re-evaluate. But I still don't trust Pfau because he doesn't seem to be considering current interest rates, disregards historical market returns, and seems to be in bed with the annuity insurance companies.

I'm not saying he's a fraud - just saying I don't trust him or agree with him.

 

[nun]

It would be very interesting to see the personal portfolios and AAs of all these financial gurus. Then we'd see if they practice what they preach. I tend to believe that Bogle's portfolio is just as he describes it.

Me and My Money: Jack Bogle | Reuters

FYI here is a post by Wade Pfau over at Bogleheads that describes his current investment approach and a possible one for the future. Here is alink to the thread.

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=175623

"Re: Is Wade Pfau right about annuities over [bond funds] in a retirement portfolio?
Postby wade » Wed Oct 14, 2015 9:21 pm

I'm 38, and it is hard to say what sort of new financial products will exist in the future. As I'm now I'm a Vanguard investor. But I would like to believe I'd be willing to incorporate income annuities over time. There is the behavioral hurdle of losing those assets from the financial statement, but mortality credits are a very attractive source of additional returns. I'm quite sold on Moshe Milevsky's idea to bring back tontines, as it allows mortality credits to be obtained without using an insurance company."

 

[ETFs_Rule]

His predisposition towards recommending annuities does make me question his objectivity. Whenever I hear the name Wade Pfau the following song immediately pops into my mind:

Agreed. I think Wade Pfau is a sock puppet of the insurance industry. He has this "study" showing how (I believe it was) 6% withdrawals can often lead to failure of a portfolio. Well no sh**t! You're supposed to take out 4%! He conveniently never talks about what happens later in life when accepting fixed 6% payments with an annuity.
Income annuities only guarantee poverty later in life.

 

[daylatedollarshort]

FYI here is a post by Wade Pfau over at Bogleheads that describes his current investment approach and a possible one for the future. Here is alink to the thread.

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=175623

I thought there were many good points in that thread. Thanks for the link. If we end up spending more of our portfolio than planned, I would consider annuities for longevity insurance when we are older.

 

[ETFs_Rule]

I thought there were many good points in that thread. Thanks for the link. If we end up spending more of our portfolio than planned, I would consider annuities for longevity insurance when we are older.

Again, it's NOT longevity insurance. It insures that you will live in poverty when you get older.

 

[daylatedollarshort]

Again, it's NOT longevity insurance. It insures that you will live in poverty when you get older.

I don't think so. The people in the thread weren't talking about putting their entire portfolio into annuities. Many were suggesting they were a better deal when one is older. I'd have to run the numbers for myself when the time comes, but I would run the numbers and not just go by conventional wisdom that annuities are bad, because conventional wisdom is not a good substitute for a detailed spreadsheet analysis.

 

[ETFs_Rule]

I don't think so. The people in the thread weren't talking about putting their entire portfolio into annuities. Many were suggesting they were a better deal when one is older. I'd have to run the numbers for myself when the time comes, but I would run the numbers and not just go by conventional wisdom that annuities are bad, because conventional wisdom is not a good substitute for a detailed spreadsheet analysis.

That's like saying every football team needs a few bad players.

Detailed spreadsheet analysis -- Thank me later -- http://yourinvestmentadvise.com/28-72-history.html

 

[daylatedollarshort]

That's like saying every football team needs a few bad players.

Detailed spreadsheet analysis -- Thank me later -- http://yourinvestmentadvise.com/28-72-history.html

Is that your site? And your name is etfs-rule? I'm going to take a wild guess here that this may not be a completely objective analysis.

 

[ETFs_Rule]

Is that your site? And your name is etfs-rule? I'm going to take a wild guess here that this may not be a completely objective analysis.

I'm going to guess that you're an insurance salesman. That site has numbers. Let me help you out... numbers don't lie. Numbers are not biased. It was you yourself who asked for spreadsheet analysis. I found you spreadsheet analysis.

 

[daylatedollarshort]

I'm going to guess that you're an insurance salesman. That site has numbers. Let me help you out... numbers don't lie. Numbers are not biased. It was you yourself who asked for spreadsheet analysis. I found you spreadsheet analysis.

Actually I said I would run the numbers for myself, as I have no preconceived bias one way or the other. Many factors would need to be looked at like inflation and alternative option projections with various reiterations under different scenarios. That is what we did with our pension decisions.

 

[ETFs_Rule]

Many factors would need to be looked at like inflation and alternative option projections with various reiterations under different scenarios.

Run all of the historical back testing you want. Nobody has ever run out of money by following the 4% rule and taking a low risk approach to bond / stock allocation. An annuity is fool's gold. Yeah they give you 6.5% or whatever to start. But eventually inflation will leave that fixed annuity payment seeming like less than 3%. Meanwhile you're taking out perhaps double what the annuity pays with a simple bond/stock mix just when you need it most at age 90 and beyond. Again, historical returns are not "biased". The numbers are the numbers. They don't lie, distort the truth or have an opinion. A SPIA is not muddled like other annuity products. Very cut and dry mathematics.

 

[bmcgonig]

That's like saying every football team needs a few bad players.

Detailed spreadsheet analysis -- Thank me later -- http://yourinvestmentadvise.com/28-72-history.html

Well the first problem with the example is that you chose the starting year of 2000 and then also use an annuity payout of 6.3 %. The 10yr was returning 6.5% at the beginning of 2000 so that the annuity payout would be more like 10%.

Second issue I see is that you claim that 2000 would be worst case scenario for your portfolio. However since it's mostly bonds I would suggest using two 14 year periods (as you do in ur example) and begin in 1966 or 1967. Your selected period was a bull market for bonds.

Numbers don't lie, but sometimes assumptions fib...


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[nun]

Numbers don't lie, but sometimes assumptions fib...


Sent from my iPad using Early Retirement Forum

<mod edit> If anyone says that annuities are anything less than "the spawn of the Devil" they are quickly accused of being an "insurance salesman". There is no doubt that many terrible annuities have been sold over the years, along with may terrible actively managed mutual funds, so people must understand the assumptions being made by people that proselytize for one asset class over another.

As an example I bought a TIAA-Traditional (a deferred annuity) back in 1987 and it has returned an average annual of 5% and is now returning 4%. It has been a good core fixed income for me. Starting retirement with bond rates so low I feel far happier with my 30% fixed income allocation in that deferred annuity than in a bond fund right now. YMMV

 

[Ronstar]

Thanks for participating.

Porky Pig Cartoon Ending "That's All Folks!" - YouTube