Prudential White Paper on Maximizing Soc Sec

[Nords]

A bedrock axiom of psychology is that you don't ever change anyone's mind by presenting novel arguments. You persuade by recasting your new information in old clothes, the old clothes that the person you are trying to persuade is already used to wearing.

Ironic that you'd use the word "axiom", where truth is assumed without being proven (maybe because it can't be proven).

"When the facts change, I change my mind – what do you do, sir?" - JM Keynes

I've learned to pay attention to that dislocating confusion caused by the "Whoa..." of absorbing new info and adjusting your perception of reality. As for recasting info, I'm not sure how that works. I prefer the approach of critical thinking-- spit it out, let people look at it, and let them make up their own minds. If it's worthwhile then it doesn't need to be sold to be appreciated.

In our capitalist economy, almost all or maybe even all information is from an interested party. What makes Bogle or Bernstein more reliable sources of information than the people who wrote the White Paper being discussed?

Well, for starters I don't have to buy anything from them to learn what they're thinking or to see what they're doing. And if they persuade me to their way of thinking, they don't profit from my change of perspective.

Another thing that makes them considered to be more reliable is their track records. That's why I trust Bernstein & Bogle more than, for example, Robert Kiyosaki.

It is just possible that NT is on to something with his mention of fear. Let's wait a few months. If the equity markets continue down we'll se how impervious to fear we all are.
Anyway, this whole retirement thing is about fear. Fear that we won't have enough, fear of cat food, etc. etc. Let's be realistic. Fear of lost sleep, fear of husbands’ or wives’ disapproval and disappointment if things go seriously wrong.
There is a social psych concept called “anchoring”. Basically it means that people set narrow limits around their expectations. Based on recent experience, statements of prominent people or on who knows what. Any discussion of possibilities outside these limits is ignored or attacked.
Then reality comes along and does a lot of limit resetting for folks.

Absolutely, and thousands of posts go a long way towards working through that fear.

Or that fear can be used to attack other people in retaliation for them pointing out your fears.

When an argument is refuted on its merits, that refutation is well done. When an argument is refuted by attacking the merits of the poster who puts it up, it's an indication that there's nothing in the article that can be attacked...

 

[cute fuzzy bunny]

Hey Ha...if you actually look at anything I wrote, I commented on things missing from the equation and making sure people had all the data. Most of the fire and brimstone came from the pro-annuity folks, at least it did at first.

I'll share a comment I sent to one of the moderators.

I have absolutely no problem with someone who is a regular contributor to this board airing out something useful...ideas, products, whatever. I dont even mind if they're a salesman of the product, as long as they tell the whole story, all the ups and downs, and arent spamming.

When its someone who only pops up when the topic of conversation is something they sell, without telling the whole story, playing to fears, or simply spamming a product or service...I'm compelled to fill in the blanks and try to offset the fear.

The problem with the "safety" of such a product, in this instance, is that I think for a fair percentage of people...especially those living in high cost areas that can see higher local inflation rates, is the slow loss of buying power over time. Is it "safe" for aunt sally to have to sell her house and move to the boonies because she cant afford to live where she is now any longer, because her annuity payments CPI adjustment just hasnt kept up?

Just an up-and-up statement: We take the risks and the risk premium, and smooth out the peaks and valleys to pay you a reduced but consistent amount.

That has value.

By the way, I believe the default rate on quality insurance companies is pretty low. Even during the Depression a lot of the larger insurance companies kept paying. That turned out to be a good deal.

As far as concern over fund companies, in the case of vanguard, you're a coop part owner of the firm (sort of) and you own the underlying stocks, bonds and other investment vehicles of the mutual funds you own. Theoretically, if the company simply ceased to be, you'd be entitled to those assets. I wouldnt bet on it working smoothly or easily, or actually getting everything. I also would really, really doubt it'd ever come to that.

 

[bosco]

As a person with no dog in this fight whatsoever (I have a decent pension coming which I could begin at any point), and for whom an annuity purchase makes absolutely no sense, allow me a couple of comments.

I think that this board is an amazing source of information about many things. But there is definitely a well-honed sense of what is "politically correct" and anyone who does not toe that line gets beat up pretty badly.

For example, market timers, those who tout annuities to name a couple of examples. I think there is a place for both in these discussions.

All approaches carry risks and have benefits. Our financial and emotional needs are all different. It doesn't hurt any of us to see these various points of view. It is not necessary for the "gatekeepers" of the forum to chase off those who might spout "disinformation" that the rest of us might be too stupid to recognize (that was sarcasm, in case you missed it). Chasing off overt spamming is, however, appreciated.

CFB, you have made a lot of valid points. An annuity seems to, on average, pay less. That is the price you pay to saddle a company with a certain type of risk. The purchaser is left with other types of risk. Annuities make no sense, either financially or emotionally, for me but might for some.

Most of these numbers, however, have been bandied about on a pre-tax basis which is all that Firecalc is equipped to do. The one point however, that has not been adequately rebutted by the critics of the original poster is the notion of taking an annuity as a play to avoid paying as many taxes on social security benefits (which, if I recall from the original article, seems to be one of the main selling points of the annuity).

This is a tough one to debate since no when knows what the tax structure will be X years down the road.

Bottom line--I vote that everyone make an effort to ENCOURAGE differing points of view and stay as civil as possible in doing so. More than civil, even.

I've followed this debate fairly closely but to be honest, have not run any numbers of my own. Nor do I intend to. I waste spend enough time running my own scenarios that are actually relevant to my life. Even so, I often learn something by carefully following both sides of such a debate. It is a bit disconcerting, however, when I get the feeling that things are teetering on the edge of civility.... Although this one seems to have recovered.

just my $.02

 

[BigMoneyJim]

Bottom line--I vote that everyone make an effort to ENCOURAGE differing points of view and stay as civil as possible in doing so. More than civil, even.

I agree; that's more or less the message I meant in my earlier post, although after rereading it I don't think I made my point well--if at all.

 

[donheff]

Bottom line--I vote that everyone make an effort to ENCOURAGE differing points of view and stay as civil as possible in doing so. More than civil, even....

It is a bit disconcerting... when I get the feeling that things are teetering on the edge of civility.... Although this one seems to have recovered.

just my $.02

Well said Bosco. We don't need anymore Trombone Al's fleeing the board. But the strong opinions are useful as well, so lets not get too tame.

 

[youbet]

Having followed along with this for days..........

I appreciated the Prudential article. The discussion of possible reasons to postpone SS was very interesting. The tag at the end suggesting a Prudential annunity to cover the time gap while waiting for delayed SS to start was expected and, in my mind, quickly dismissed as only one alternative. Just an expected "yawner."

I looked forward to more discussin regarding possible advantage, pros and cons, of delaying SS. But it seems it wasn't to be. Emotions ruled (I expected all cap typing to begin) and the anti-annutity shouting match began.

Sure wish we could have discussed the pros and cons of delaying SS. The anti-annuity stuff was boring old hat.

 

[REWahoo]

Sure wish we could have discussed the pros and cons of delaying SS.

youbet, there have been a number of discussions in the past year or so on delyaying SS. Here are a couple:

http://early-retirement.org/forums/index.php?topic=4943.0
http://early-retirement.org/forums/index.php?topic=5764.0

If you search you can probably locate two or three more.

 

[Martha]

A bedrock axiom of psychology is that you don't ever change anyone's mind by presenting novel arguments. You persuade by recasting your new information in old clothes, the old clothes that the person you are trying to persuade is already used to wearing.

Ironic that you'd use the word "axiom", where truth is assumed without being proven (maybe because it can't be proven). 

"When the facts change, I change my mind – what do you do, sir?" - JM Keynes

Old thread started by CFB at http://early-retirement.org/forums/index.php?topic=5688.0 pointed to a study which shows how difficult it is to get people to change their mind and people will ignore facts that don't fit their position. They just don't hear or process the new facts.  People get married to their own position.

A peculiarity of human nature.

 

[cute fuzzy bunny]

Indeed Martha...that was my response to several PM's and EM's of others expressing frustration at the seeming inability of some folks to listen to and incorporate criticism, adequately answer questions and the full avoidance of some comments...the process that people go through to form ideas.

Bosco, etc...I hear you. Now look at the two threads where the ideas were brought up. In the first one, the idea was aired and some suggestions and criticisms were applied. I've re-read them (again) just now and I dont see any hostility or threats (at least not at first), just a straight up challenge to some aspects and ideas.

Instead of listening to and incorporating these suggestions, criticisms and other aspects, some of the annuity supporters became threatened, somewhat hostile (growing to very hostile) and felt they were "refuting the challenges" when they were really doing nothing of the sort.

The act of attaching yourself to your ideas, feeling personally threatened when they're "questioned" and lashing out at the 'threatener" is the classic embodiment of the theory put forth in the article Martha found and linked to.

Then an annuity salesman, maybe more than one, posted an article he wrote for a company he works for which sells annuities. Several low/no post "lets hear the man!" users came to the original posters support. Thats happened before and a lot of times when its investigated, the low/no post users were phonies.

Thats happened a good number of times.

Thats bullshit.

That the poster of the annuity stuff rarely surfaces to participate in the community except for a few times a year when buying annuities comes up doesnt improve things much.

My take - for what its worth - for anyone who is not a salesman, pimp or whore that only shows up when its time to pitch their product, who is willing to be a community member, who doesnt prop up fake users to support their own claims, that puts out a reasonable idea, thought or process that may be contrary to the "groupthink", that is willing to listen to criticism, provide actual data/theory/information that is sound and reasonable...I frankly dont see where that runs into much trouble here, beyond a fairly strong scrutiny.

When you're whoring a product, making up fake users, floating an idea without data, your data consists of web sites that think UFO's are real and nazi zombies are being hoarded by the US government, your data consists of 'gut feelings', you lash out at people who bring up stuff that contradicts your idea or you're "just not interested in/prepared to defend your ideas because you people arent interested in anything except a 'win'"...well...yeah, you're gonna have problems here.

I seem to end up in a lot of these because i've got a good bullshit detector and unfortunately I dont give up until the conversation is really, truly no longer productive. Unfortunately everyone walks away thinking I picked on the person. If you re-read almost any thread, I'm quite rarely the first person to be hostile. Very rarely.

Now look at the annuity conversation and then look at the one regarding the Wellesley fund returns. One of the posters there contradicted my opinion. That poster actually knows what he's talking about, does a lot of work to prove his points, listens to suggestions and criticisms and actually incorporates them. No nazi zombies or "gut feeling" involved. If I say "X" and he says "no, its Y", I trust his knowledge and participation level to the point where I know "Y" is probably a lot closer to the truth. I learned something, clarified a position and everyone walked away smarter.

 

[haha]

"I wish they all could be California Girls" ...

 

[New Thinking]

Bunny - Just to clarify, I didn't post the link to the paper, Hogwild did. I wouldn't come to this site and "push" my ideas. I merely commented on them since others were discussing them already. I thought that others could learn about what I had discovered..Chiefly that many do not understand Social Security options, taxes, and the interplay between other types of retirement income and SS.

I don't post often, as I am not an expert in all types of issues affecting ER. (I also do not have the time). I do believe that some of my thoughts made add value..These tend to be on SS and immediate annuities.

 

[hogwild]

Bunny - Just to clarify, I didn't post the link to the paper, Hogwild did.  

Right, pretty good response from a first new topic, huh?

Just for the record, I am in no way associated with Prudential or any other financial or insurance firm.  I'm in telecommunications.

I do appreciate all the discussion.  I have learned much, from both the original document I posted the link to and the responses from forum members.  I especially like the idea of the IRA-Roth conversions over the period between ER and full SS.  Thanks to Nords for that.

My personal opinion on immediate annuities is simply that I am glad the option is available.  I don't know that I would ever utilize them, but I am certainly open to doing the analysis to see if they would work in any scenario that I may encounter during my retirement.

On the issue of when to take SS, I am fairly convinced that full retirement age is best - at least for me.  It just works out that way in my calculations.

I sincerely hope that no one will be intimidated into discontinuing contributing to this forum.  I don't believe there is anyone that knows it all and cannot learn something.  We were all low/no posters at one time right?

 

[haha]

New Thinking-

I remember some of your earlier posts about SS. SS is a very specialized area- the laws are complicated, the issues are involved- what with spousal decisions, and various arcane choices-including "File and Suspend” which I had never even heard of. I did read much of Alicia Munnell’s very impressive work.

I am 65, but several years ago I decided that a US Govt backed annuity with a true uncapped COLA was definitely a gift, so I decided to wait until 70 to start drawing, unless good stocks come to sell at PEs of 7, which seems like a fairly long shot. From my POV, the usual discussion which mostly begins and ends with “take it now, that way you will be sure of getting at least some” fails to address the main financial risk of a self funded retirement-longevity, especially survivor longevity for a couple.

We talk a lot about diversification, and in my mind this is the ultimate diversifier. My SS won't be huge, even at 70, but it would be enough to fund a tight lifestyle. And for sure it will pay my Medicare and Medigap premiums.

So I sincerely hope you will continue to post. Speaking only for myself (who else could I speak for?) it matters not one bit how much you post on other topics, or how much face time you put in. Value is not particularly linked to word count.

I am almost certain that a good understanding of SS will do more for many of us than “knowing” just what % of assets should be in international small cap, vs something else.

The reception given to ideas often has nothing whatsoever to do with the value presented. I like to remember that life is a very long game. Early declarations of what may or may not be helpful to just what % of the people are apt to be wrong. I believe we should give the Fat Lady time to get out there and sing.

Interestingly, in the 80s,when EE bonds gave one the higher of his going-in interest rate, or a transparently calculated floating rate, I tried to convince a lot of people that they were essentially long term high interest fixed rate securities with the upside in rates open, but the downside closed. I bought all I could, but it was a hard sell to family and friends.


Ha

 

[cute fuzzy bunny]

Ha -

I didnt say posting volume was the key, I said being a member of the community was. A lot of people post here once or twice a month. About stuff they arent selling.

I'd also like to back up a bit because I think we got a little carried away with ourselves on the "different thinking" being slapped back.

I read the posts made by myself, Nords and REWahoo on this and the other annuities thread. I didnt see any direct personal attacks, I didnt see anyone say that the idea of annuities was patently bad, that anyone was full of crap, or that the ideas and posts were unwelcome.

I saw posts and links to articles that gave a complete outline of the equation, quotes and posts from prior discussions that covered a broad swath of the issues, acknowledgements of the value and application of annuities and when to take social security, and cautions about the problems.

From other posters? "You're an egotistical, hypocritical liar that just doesnt like xyz".

That certainly encourages further constructive dialog.

Please quote me the post that indicated that "new ideas" arent accepted or allowed or are even unappreciated/discouraged, and where the first personal attack was filed.

Filling in the blanks, pointing out the caveats and pitfalls, identifying thin proofs or dataless conclusions and pressing someone to produce some sort of backup on their opinions and 'facts' does not equal suppression of ideas.

 

[BigMoneyJim]

I didnt say posting volume was the key, I said being a member of the community was. A lot of people post here once or twice a month. About stuff they arent selling.

To be fair, I think New Thinking has behaved himself just fine with respect to his work and this board. Not everyone reads all the posts. I certainly don't. And we all have our areas of personal expertise and personal interest (which may or may not overlap). If a poster has narrow interests in the board and behaves unspammily (you can look that word up...or not) that's fine. I've gone over the thread more than once with my spam detector and it looks clean to me. He may not be one of the more regular "community members" but he's no noob.

I have a predisposition for distrust of annuities and financial product sales people, so like I say I went over this more than once, but it's clean and even fully disclosed, and you're still throwing a few backhands in there. If you really want to slap around a financial prognosticator I know this great place and a great target, Mr. Town Sheriff.

 

[cute fuzzy bunny]

To be fair, I think New Thinking has behaved himself just fine with respect to his work and this board.... He may not be one of the more regular "community members" but he's no noob.

Is this the day to "read into" what I say?

What I said was:
"When its someone who only pops up when the topic of conversation is something they sell, without telling the whole story, playing to fears, or simply spamming a product or service...I'm compelled to fill in the blanks and try to offset the fear"

I did not attribute any of this to anyone in particular, it was a general comment.

Directly to the poster in question, I said I thought their paper was a little one-sided (a sales pitch one sided? You dont say!), suggested that anyone interested read a more balanced piece of information instead or in addition, and pointed one out.

And that I appreciate and more readily accept input from someone who is a regular forum member with more than one note to play.

and you're still throwing a few backhands in there.

Please quote the "backhand" I gave to New Thinking.

By the way, I have no aversion to annuities although I can live without financial sales people I've looked at annuities often. I took a good long look when I had the half million from my mcmansion sale, was single with no heirs and had 30-40+ years of ER ahead of me.

It boiled down to this: For an appropriate annuity product they would give me 25-35% less than I could make on the money myself in a very low volatility low cost income mutual fund and at the end of my life I'd have nothing to give to a family member, friend or charity. But I could count on a check every month.

It wasnt for me. Not because of slimey sales people, one sided papers or stories, half the data, or any other reason other than it didnt make any financial sense to me at all. I decided that if I couldnt take the massive volatility : of a frickin income fund that I should get a job and get back to work.

But I did say at least a handful of times in the last week during these discussions that I could see that they could be useful to some people in some circumstances.

I guess in short hindsight, its a good idea I decided to keep self managing my money. Got married 2.5 years later and I have a kid now. Wouldnt it be swell if I had bought an annuity with no survivorship...

 

[BigMoneyJim]

I'm with ya 100% on annuities, CFB. I don't see that I'll ever need 'em, but I listen in periodically to double-check. And I think they're a bad deal in general for what people want them for.

And that I appreciate and more readily accept input from someone who is a regular forum member with more than one note to play.

Please quote the "backhand" I gave to New Thinking.

Since you asked: For example, the sentence before your question, and:

I didnt say posting volume was the key, I said being a member of the community was. A lot of people post here once or twice a month. About stuff they arent selling.

Am I reading into those by thinking you mean that New Thinking is not a community member? It sounded to me like a veiled accusation that he's here to sell. I have counterpoints to those assertions if they are indeed assertions, but this thread probably isn't the place for them.

That said, I managed to give him a backhand or two myself in my first post in this thread; my intention for that post would've come through much better if I left out all the sentences but this one:

If I were to redesign this conversation I wouldn't make it as combative, but I think it's a good discussion.

 

[jeff2006]

If you re-read almost any thread, I'm quite rarely the first person to be hostile.  Very rarely.

What a coincidence that these nasty threads seem to follow you around like flies follow a garbage truck

 

[bosco]

If ego's upset you, I have to again apologize for your shortcoming and my unintentional antagonization of it. How many people do you know used to bring in $3B a year in business, got paid millions and retired at 39 who dont have at least a little bit of an ego?

Quite frankly, I find this absolutely classic. Translation = I apologize that you are such a bozo. Is it my fault I'm so damn good?

Really, CFB, since you obviously are fairly smart guy, maybe you can step back for a second and see what this kind of statement does to the emotional level of a discussion.

For the record, I get a lot out of your posts (as well as a lot of others) and am not interesting in starting a flame war. I offer this in the way of feedback. However, I'm suiting up anyway, just in case....

 

[poboy]

http://video.google.com/videoplay?docid=-9015039751037156260

Why do I keep thinking about this video?

 

[BigMoneyJim]

If I were to redesign this conversation I wouldn't make it as combative, but I think it was a good discussion.

 

[laurence]

 

[cute fuzzy bunny]

I'm with ya 100% on annuities, CFB. I don't see that I'll ever need 'em, but I listen in periodically to double-check. And I think they're a bad deal in general for what people want them for.

Since you asked: For example, the sentence before your question, and:

Am I reading into those by thinking you mean that New Thinking is not a community member? It sounded to me like a veiled accusation that he's here to sell. I have counterpoints to those assertions if they are indeed assertions, but this thread probably isn't the place for them.

That said, I managed to give him a backhand or two myself in my first post in this thread; my intention for that post would've come through much better if I left out all the sentences but this one:

Jim -

My problem with this thread is lack of context in reading my comments. That remark was in response to HaHa's "new ideas around here are not well accepted" comment. Ha has (perhaps legitimately) commented on this before. My remarks you quoted (in the context of this thread) were simply to note that perhaps a salesmans input would be better accepted if they participated in threads other than the ones involving the products they sell. In keeping with Nords' relatively anti financial salesperson comments earlier in the thread.

If you'll re-read "new thinking"s posts and my replies to him, I think I was pretty nice to him.

What a coincidence that these nasty threads seem to follow you around like flies follow a garbage truck

Just like its a coincidence that "people" like you with sub 5 post counts that only show up in annuity related threads seem to have so much to say. So are you the annuity sales person in "disguise", a friend, a co-worker, or just a random troll?

Quite frankly, I find this absolutely classic. Translation = I apologize that you are such a bozo. Is it my fault I'm so damn good?

Really, CFB, since you obviously are fairly smart guy, maybe you can step back for a second and see what this kind of statement does to the emotional level of a discussion.

Did you read what I was responding to?

It is you that appears not to want to give fair consideration to both sides

when someone stands up to you, you lie

you just make up "facts" to suit your mood

you have an ego problem or something that makes everyone who has a different idea from you wrong because you always have to be right?

you must have misunderstood them or your ego got in the way again.

I think my response was pretty darn polite considering that I didnt have one bad word to say about this poster, just some constructive criticism of his/her ideas, before I received this "healthy" outburst.

 

[jeff2006]

Just like its a coincidence that "people" like you with sub 5 post counts that only show up in annuity related threads seem to have so much to say.  So are you the annuity sales person in "disguise", a friend, a co-worker, or just a random troll?

I have nothing to do with the financial services industry, couldn't care less one way or the other about annuities, and don't know the author of the Prudential paper.

Here is the point: You are a rude guy who needs to clean up his act. I have no knowledge of your background. But a lot of the characteristics you show on this board suggest that you lack both a good education and, especially, a good upbringing.

This will be my last post directed to you, for the time being.

 

[73ss454]

Oh Boy! this should be good.