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Old 08-22-2008, 11:03 AM   #81
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With another guy in the group siphoning money off all of the others and keeping whats left when they're all dead.
In the real world possibly yes, in principle no. If the only mutual funds you came across had unacceptable charges, does than mean mutual funds are a bad idea or does it mean charges need to be brought down through competition?
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True if you bought an inflation adjusted annuity and your spending/personal inflation rate matches the CPI. By doing that, your payments are much, much lower. Also, since part of your money goes to fund the insurance company's endeavors, your payment will also be much, much lower.
There is no reason why any significant amount of your money need go to the insurance company. My current favourite annuity has the insurance companies charges limited to 1% initial plus 0.05% per year thereafter. This seems a fair fee for the admin work the insurance company must do. (The insurance company also gets another 0.5% in fund management fees.)
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Fascinating. And I thought my system that produces superior and stable returns in all markets and will last for at least 50 years was a pretty good replacement with much higher returns than an annuity would pay me.
Whatever investment strategy you pursue outside an annutiy can, in principle (if not with actual available products), be pursued inside one. Imagine that you pursue your strategy, but there was a legal way to promise someone that you would bequeath the balance of your assets to them when you die. In return for this promise, which costs you nothing while you are alive, they pay you money which you can spend while you are alive. This is the essence of what an annuity is about, and by definition it can only increase the income you get during your life. (In the real world of course, there are charges... I'm only advocating the principle of annuities, real-world products are another matter.)
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Here comes the hamstringing of the alternatives, so as to assure the table is tilted. Do I get to add in the fees and expenses built into the annuity, and the loss of principal to the self generated income so we're comparing like with like?

Why wouldnt I add some equities to my investment, since they're demonstrated to improve returns without significantly changing risk? Why wouldnt I use a bucket strategy or a black swan strategy to greatly improve my long term returns without impacting my short term returns?
You're talking about the real world again, instead of the principles involved. By all means estimate the income you can generate on the basis of investing in whatever you like, but don't then be unfair by comparing the result to an annuity that invests in government bonds. The fair comparison is with an annuity that invests in exactly the same things. Would you argue that bank deposit accounts have terrible returns because your SP500 tracker is expected to return so much more?
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Old 08-22-2008, 11:05 AM   #82
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I think you could be of great help on here. Get one of your ACTUARIES on here to answer our questions........
What's the difference between an actuary and an accountant? The accountant has more personality.
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Old 08-22-2008, 11:06 AM   #83
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What's the difference between an actuary and an accountant? The accountant has more personality.
Truer words never spoken!
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Old 08-22-2008, 11:11 AM   #84
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OK, here's a real life result.....
Vanguard ........YTD......................1 year
500 Index VFINXStock–12.05%–11.17%




Allianz Variable Annuity portfolio +6% 1 year guaranteed step up base for future income

Which would you rather own today?
Hey Art, you never did mention, which Allianz product and which money managers? (and for morbid curiosity, which riders?)

I ask because I noticed that the investment option comparison for the AZL TargetPLUS Balanced fund is down almost 5% YTD and is down more than it's index.
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Old 08-22-2008, 11:13 AM   #85
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What's the difference between an actuary and an accountant? The accountant has more personality.
The actuary tells you the DAY you will die, and the accountant says the IRS is going to KILL YOU this year..........
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Old 08-22-2008, 11:18 AM   #86
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I think most retirees want to preserve their standard of living. A non-cola annuity or pension provides cash flow - not income - which loses purchasing power to inflation. You should spend only part of the cash flow early in retirement, reinvesting the rest into your portfolio for higher cost future spending.
In essence, you have a withdrawal rate from the cash flow just like from a portfolio.
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Old 08-22-2008, 11:21 AM   #87
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Out of curiousity, did you select a 15 year time span because it worked out in your favor?
Nope, just because it was a long time period with no funny business. It includes four market corrections/downturns, economic booms and busts, and several bubbles that burst.

I could go back even further than 15 years but I dont think that'd make your case any easier.
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Old 08-22-2008, 11:22 AM   #88
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Hey Art, you never did mention, which Allianz product and which money managers? (and for morbid curiosity, which riders?)

I ask because I noticed that the investment option comparison for the AZL TargetPLUS Balanced fund is down almost 5% YTD and is down more than it's index.
I was referring to Allianz Vision. I didn't pick a portfolio because they're all down (I haven't actually checked this but I'm assuming), so the guaranteed 6% annual step up is in effect. One rider, the lifetime income rider.
However, there are other companies that would have been preferable in today's environment. ING or AXA for example could have been a 6 1/2 or 7% step up. I just grabbed Allianz for quick reference.
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Old 08-22-2008, 11:23 AM   #89
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Read my sig line.......... I'd be happy to do that fund-to-fund comparison for interested parties.......
You apparently missed the sig line I had for the past week or so

"But Vanguard funds get all the girls..."
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Old 08-22-2008, 11:25 AM   #90
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You apparently missed the sig line I had for the past week or so

"But Vanguard funds get all the girls..."
I don't want ALL the girls, just certain ones........
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Old 08-22-2008, 11:28 AM   #91
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Nope, just because it was a long time period with no funny business. It includes four market corrections/downturns, economic booms and busts, and several bubbles that burst.

I could go back even further than 15 years but I dont think that'd make your case any easier.
Well again you're correct, unless you're still comparing American Funds.

However, I'd love to know from everyone on this thread, for the next couple years, are you optimistic or pessimistic for the stock market? How much time may be lost if you're sitting in cash trying to time the market, or else just sitting in Index funds and taking the loss?
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Old 08-22-2008, 11:28 AM   #92
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There is no reason why any significant amount of your money need go to the insurance company. My current favourite annuity has the insurance companies charges limited to 1% initial plus 0.05% per year thereafter. This seems a fair fee for the admin work the insurance company must do. (The insurance company also gets another 0.5% in fund management fees.)
Then how do they manage to build all those big buildings and have their names put on major league stadiums?

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Whatever investment strategy you pursue outside an annutiy can, in principle (if not with actual available products), be pursued inside one.
I could live inside a whale too. Not sure why that'd be a good idea.

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You're talking about the real world again, instead of the principles involved.
Gosh darn it, I'm funny that way.

To make sure things are all evened up, I'll produce a long term bond fund alternative, if you produce an actuarial table that reduces the annuity payout by the account balance bequeathed to the insurance company when you die. Arranged by likelihood of death by a certain age.

Once people see that they have about a 2-3% chance of coming out on top with an annuity, they might rethink.

How does this sales pitch work for all y'all. "I have an investment here for you. You give me your money. I'll pay you a smaller percentage every month vs what you could take by investing prudently on your own and charge you extra. When you die, I keep the money. You have a 3% chance of coming out ahead. Ready to sign?"
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Old 08-22-2008, 11:37 AM   #93
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Then how do they manage to build all those big buildings and have their names put on major league stadiums?
Short all companies with stadiums or arenas named after them




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Once people see that they have about a 2-3% chance of coming out on top with an annuity, they might rethink.

How does this sales pitch work for all y'all. "I have an investment here for you. You give me your money. I'll pay you a smaller percentage every month vs what you could take by investing prudently on your own and charge you extra. When you die, I keep the money. You have a 3% chance of coming out ahead. Ready to sign?"
I really would need to see your statistics on this.

Here's your sales pitch......"How would you like to be assured that no matter what the market did from here on out, your income would be secure for yours and your spouse's life, and you could only get a raise in income, but never a reduction? Oh yeah, and all remaining money will go to your heirs. Oh, and the income base is guaranteed to double after 10 years. Yes, there is a cost for this security"
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Old 08-22-2008, 11:38 AM   #94
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BTW bunny, how much did your prudent investments earn you this year?
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Old 08-22-2008, 11:39 AM   #95
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Nope, but I'd short them if they were taking a bunch of my money and were more likely than not to keep it and not give it back to me.

Statistics? You're an annuity salesman who has never seen the IRS mortality tables?
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Old 08-22-2008, 11:40 AM   #96
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Then how do they manage to build all those big buildings and have their names put on major league stadiums?
Tires too... oh, wait, I think that's a stadium.

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Old 08-22-2008, 11:43 AM   #97
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BTW bunny, how much did your prudent investments earn you this year?
As far as I can tell, they're doing great. My short term bucket is still paying out exactly the same dividends and interest and since I wont be touching my long term buckets for another 20 years, what those are doing is only of mild interest.

Given only 70% of historic performance, by the time I'm 65 my long term bucket will have more money than we and the next generation or two will be able to spend.

In the meanwhile, by investing in a nice diversified portfolio, I was able to retire a multimillionaire at 39, then continue to grow my investments through both good and bad times by sticking with my plan.

I might need another sales pitch, but I'm pretty sure I dont get that done with a variable annuity.

Dance with who brung ya?
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Old 08-22-2008, 11:44 AM   #98
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Tires too... oh, wait, I think that's a stadium.
Yep, have a good look Allianz annuity holders...theres your money!

And its not even in this country!
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Old 08-22-2008, 11:53 AM   #99
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Nope, but I'd short them if they were taking a bunch of my money and were more likely than not to keep it and not give it back to me.

Statistics? You're an annuity salesman who has never seen the IRS mortality tables?
So I guess this means you don't plan to post any actual facts? OK
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Old 08-22-2008, 11:54 AM   #100
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As far as I can tell, they're doing great. My short term bucket is still paying out exactly the same dividends and interest and since I wont be touching my long term buckets for another 20 years, what those are doing is only of mild interest.

Given only 70% of historic performance, by the time I'm 65 my long term bucket will have more money than we and the next generation or two will be able to spend.

In the meanwhile, by investing in a nice diversified portfolio, I was able to retire a multimillionaire at 39, then continue to grow my investments through both good and bad times by sticking with my plan.

I might need another sales pitch, but I'm pretty sure I dont get that done with a variable annuity.

Dance with who brung ya?
I don't know how much you're adding annually, but how many down 11% years before you change your attitude?
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