Here's how they work, you give your money to a broker so he/she can find the one for you with the highest expenses. Then the broker sits back and collects your money via the ER.
Take some 5% 10 year CD's with Pen Fed and call it a day.
Retirement drawdown
- Thread starter willift
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Here's how they work, you give your money to a broker so he/she can find the one for you with the highest expenses. Then the broker sits back and collects your money via the ER.
Take some 5% 10 year CD's with Pen Fed and call it a day.
explanade
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So it's best to reinvest dividends and sell shares as needed, as opposed to cashing the dividends directly?
REWahoo
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If that's the case, I'm doing it all wrong since I'm cashing/spending the Wellesley dividends, not reinvesting them.
explanade
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Sorry I misunderstood you.
I guess if one should be so fortunate that one doesn't need all the annual dividend distributions to meet living expenses, you could reinvest the portion you don't need.
But dividend reinvestment option is all or nothing.
I guess if one should be so fortunate that one doesn't need all the annual dividend distributions to meet living expenses, you could reinvest the portion you don't need.
But dividend reinvestment option is all or nothing.
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
Not necessarily.
As an example, Wellesley pays quarterly dividends and you can easily change the designation (cash, reinvest) online provided you do so at least a couple of weeks or more in advance of the distrubution date. So if you were taking the dividends in cash the first part of the year and discovered at some point in the year you didn't need the income, you could make the change.
No such thing as a 5% 10 year CD with Pen Fed that I can see.
This has been an on going discussion on the forum. Trust me, Pen Fed has it.
Rich_by_the_Bay
Moderator Emeritus
Bucket? Don't you think you should watch your language?
So how does one get it then?
Rich_by_the_Bay
Moderator Emeritus
I'm guessing muchas cervesas.
This should help you out.
http://www.early-retirement.org/forums/f28/where-did-penfeds-promo-cds-go-51957-2.html#post976963
http://www.early-retirement.org/forums/f28/where-did-penfeds-promo-cds-go-51957-2.html#post976963
obgyn65
Thinks s/he gets paid by the post
Hello 73ss - when I enter $100,000 as the $ amount I want to invest for example in this link:
Immediate Annuities - Instant Annuity Quote Calculator.
I get $589 a month. That's a 7% yield. Why would I want to go with a 5% CD then (assuming I do not have any heirs) ?
Immediate Annuities - Instant Annuity Quote Calculator.
I get $589 a month. That's a 7% yield. Why would I want to go with a 5% CD then (assuming I do not have any heirs) ?
rescueme
Thinks s/he gets paid by the post
Please explain...
explanade
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You're not getting that payout as pure interest. It's a drawdown of principal.
So actually, you don't have to pay taxes on all that payout but you've surrendered your principal pretty much. You have to outlive that principal or the insurance company is going to make out.
So actually, you don't have to pay taxes on all that payout but you've surrendered your principal pretty much. You have to outlive that principal or the insurance company is going to make out.
Rich_by_the_Bay
Moderator Emeritus
That 7% includes the return of your own investment such that at the end of the contract you have a zero balance. A CD, bond, etc. pays interest and at the end of the maturity period your initial investment is intact. There are many other issues surrounding annuitiies - suggest you do a few searches here, as well as elsewhere.
The most common issues include huge management fees, resulting in poor net performance, immediate locking up of a large premium with early withdrawal penalties, carrier solvency risk (at least theoretically). All that aside, some feel that a fixed (not variable or indexed), single premium, immediate annuity has some place in one's overall plan. Caveat emptor.
rescueme
Thinks s/he gets paid by the post
Again, please explain (as I responded earlier in this thread)..
I/DW have an SPIA, and that is not within the constraints of our policy at all.
I'm just trying to understand the various comments on this thread that are saying SPIA's (specifically) are not an option for a retiree.
I am not willing to debate "assumptions", but I can respond with facts, based upon our reality.
However before responding to just "general comments", I would like to get a list of what folks think that an SPIA actually is - nothing more, nothing less.
LOL!
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An SPIA is an annuity where an insurance company pays you some of your money back along with interest each month. It helps transfer your longevity risk to the insurance company. They have a pool of SPIAs sold to the elderly. Some of the elderly are expected to die earlier than the others and when that happens the insurance company gets to keep the principal that they did not pay back. Some of the elderly live longer than the insurance company expected them to live, so the insurance company has to use some of the money from the dead elderly to keep paying the elderly who are still alive.
In some sense the age you get your SPIA does not matter. Payments will be lower if you get it earlier, but you will likely get more payments because you have less chance of dying earlier. Which is better: lower payments for a longer time or higher payments for a shorter time? It's all actuarily the same.
A good read on laddering SPIAs and all the riders that can be attached to them is found in Jim C. Otar's book: "Unveiling the Retirement Myth".
In some sense the age you get your SPIA does not matter. Payments will be lower if you get it earlier, but you will likely get more payments because you have less chance of dying earlier. Which is better: lower payments for a longer time or higher payments for a shorter time? It's all actuarily the same.
A good read on laddering SPIAs and all the riders that can be attached to them is found in Jim C. Otar's book: "Unveiling the Retirement Myth".
ERD50
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Another way to look at that is you can get a 10% yield from a simple checking account. Just take out about 9.95% of your principal each year (for ten years).
-ERD50
rescueme
Thinks s/he gets paid by the post
That’s not necessarily true. It depends on the contract. It's no different than buying a home for 0% down.
In our case, DW/me have a "life annuity" under our SPIA contract. We know exactly what we will receive in benefits (fixed payment, so we can take our monthly benefit x length of guaranteed period). If we live longer than the life projected period, payments continue at 100%. If one dies early, payments continue at 100% to the survivor. If we both pass before the calculated "life benefit period"? Payments continue (either monthly or lump sum) to our estate.
BTW, we know we will receive at least 2x our original premium, if we live or die; more than 2x if we beat the odds.
Again, I'm trying to understand what I give up. It's up to the insurance company (e.g. take on the risk) to ensure I get our contracted monthly benefit.
If they are able to invest and get gains better than I? Great. I really don't care. What I do care is to ensure a portion of my retirement income...
Brat
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Part of the money you are receiving is the return of your investment. For simplicity's sake I plugged in the $ for a fixed term. Abt 1.59% for 10 years simple interest. $115,080 received.
Put that same sum in a Pen Fed CD for 10 years and you will receive $150,000.
Put that same sum in a Pen Fed CD for 10 years and you will receive $150,000.
LOL!
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Everything I wrote is exactly true. You have riders on your annuities. Notice that I used the word "Some" and not "All". Your riders reduce the monthly benefit that someone without those riders would receive.
I like the idea of SPIAs. Nevertheless, I am sure that you do not believe that the insurance company has figured out how to give you a free lunch. They are in business to pay their expenses and make a profit from your business.
When both of you die after the guarantee period is up, the insurance company gets the money left over. That's what they get for accepting the longevity risk that you have transferred to them. They also get some of the average investment return and some upfront fees, so they invested less than your entire amount to start with. They have pooled your money with that of many others, so on average they come out ahead.
That's not to say that you are not getting something in return. That peace of mind that you have transferred longevity risk to them is worth something to you, but you did not get it for free. The price you paid seems to be well worth it to you and the price they charged seems to be well worth it to them.
