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Scott Burns Article........
Old 08-20-2008, 08:52 AM   #1
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Scott Burns Article........

http://www.dallasnews.com/sharedcont...1.4d65299.html

He discusses using part of your money to buy a life annuity to help you not outlive your money........
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Old 08-20-2008, 08:56 AM   #2
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Excerpt from the article
Fret a little bit less about dying broke by Scott Burns

A new study indicates that most Americans will die broke. You may think that's just more bad news, but read on. I'll tell you why things may be better.
...

The study concludes that households with a defined-benefit pension as well as Social Security and retirement savings are far less likely to outlive their savings than households that don't have a defined-benefit pension.



A married couple with pre-retirement earnings of $75,000 who will have a pension has a 31 percent chance of outliving their assets. The same couple without a pension has a 90 percent chance of outliving their assets.
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Old 08-20-2008, 09:13 AM   #3
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Haha, no kidding. Another article saying that no American saves so don't trust yourself to do it and just get a pension. Nothing wrong with pensions, but it just has a very self-selecting / skewed data set. I don't think many of the people on this board are in the same boat as those being sampled by this study.
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Old 08-20-2008, 09:20 AM   #4
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FD - re: the OP, a hint about what the article contains is helpful.
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Old 08-20-2008, 10:18 AM   #5
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What the article states is that because of the dying out of pensions, a life annuity is beneficial. Can we all agree on that?
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Old 08-20-2008, 10:26 AM   #6
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Haha, no kidding. Another article saying that no American saves so don't trust yourself to do it and just get a pension. Nothing wrong with pensions, but it just has a very self-selecting / skewed data set. I don't think many of the people on this board are in the same boat as those being sampled by this study.

Your comments just make me chuckle. The people on this board are no different than any other investors. Instead of paying someone to advise you on finances though, you come to a free board, and get the advice of anonymous people who have no financial gain one way or the other in your success, AND no vested interest in your success.
As to boards I follow, I'd say on here there are some very smart or well read people, and there are plenty who haven't a clue. Just like the real world.
I can tell you first hand though, those who have a pension are MUCH more easily able to handle the swings in the market, and retire well.
The real point of the article is that Scott Burns has realized what he has denied for years, annuities have their place, and in this market it's a big one (that last part is my opinion).
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Old 08-20-2008, 10:30 AM   #7
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What the article states is that because of the dying out of pensions, a life annuity is beneficial. Can we all agree on that?
Sure. The idea of a fixed income stream for life, if COLA'd, is beneficial. This will come at the expense of limiting your potential upside but could save you from a disastrous downside. As much as I'd love to have people rush out to buy an annuity, I have a hard time seeing why one couldn't accomplish this on their own if they chose.

In fact, the 4%/95% planning number does fairly well long term at providing a steady stream of income with less upside risk.

I know this is simplistic, but it seems that the main benefit of buying an annuity from an external party is that company is arbing the mortality pool. Obviously, if you're attempting to do this yourself, then you have significant risk with either dying too soon or too late... but actuaries get to assume that, given a large enough contract holder base, the mortality tables will hold true.

The downside with buying from the external company is that you take on carrier risk and lose some yield to expenses.
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Old 08-20-2008, 10:38 AM   #8
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I am not talking about people's general knowledge of the markets, more that people here are more frugal and are better at saving and are more aware/knowledgeable/interested/concerned in saving and financial independence. A very self-selecting sample of people on this board, I believe.
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Old 08-20-2008, 10:40 AM   #9
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Sure. The idea of a fixed income stream for life, if COLA'd, is beneficial. This will come at the expense of limiting your potential upside but could save you from a disastrous downside.
How many COLAd pensions are left, 1%

Quote:
As much as I'd love to have people rush out to buy an annuity, I have a hard time seeing why one couldn't accomplish this on their own if they chose.
Many are attempting, how many are succeeding is the big question.......

Quote:
I know this is simplistic, but it seems that the main benefit of buying an annuity from an external party is that company is arbing the mortality pool.
Insurance is transference of risk, plain and simple. Buying a life annuity means transferring the risk from you to someone with more money. there is of course a cost to that. Many folks on here happily self-insure their retirement income streams, that's their right..........

Quote:
The downside with buying from the external company is that you take on carrier risk and lose some yield to expenses.
Don't worry, I'm sure the govt will get into the annuity business in a a much bigger way in the future..........
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Old 08-20-2008, 10:44 AM   #10
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Any dependable income stream does wonders for a SWR's survival rate.

As long as you dont pay too much for the income stream, or the income stream ends up being someone elses...
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Old 08-20-2008, 10:45 AM   #11
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How many COLAd pensions are left, 1%
Well, to put it another way, I see very little utility in a flat pension unless both the payouts are more than I want and the timeline is short. Inflationary pressure is easier to handle on a flat income stream over 10 years than it is over 30 years.

I wouldn't know about COLAd pensions. I'm one of those gen-x "what's a pension, why would I stay at one company forever, what's in it for me" types.
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Old 08-20-2008, 10:49 AM   #12
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very little utility in a flat pension unless both the payouts are more than I want and the timeline is short.
Which is why these are better bought when in your 60's or 70's. You'll get a better rate, the loss of buying power wont be as bad, and you're probably going to die around 82 like everyone else anyhow.

I sort of get stuck on the part where I'm pretty sure I can find someone better than an insurance company to leave a chunk of money to when I die.
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Old 08-20-2008, 10:50 AM   #13
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I sort of get stuck on the part where I'm pretty sure I can find someone better than an insurance company to leave a chunk of money to when I die.
Forced annuitization is not manadatory with many companies........
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Old 08-20-2008, 10:53 AM   #14
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I guess the why is obvious. It never gets stated in the article.
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Old 08-20-2008, 11:07 AM   #15
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Originally Posted by CitricAcid View Post
Haha, no kidding. Another article saying that no American saves so don't trust yourself to do it and just get a pension. Nothing wrong with pensions, but it just has a very self-selecting / skewed data set. I don't think many of the people on this board are in the same boat as those being sampled by this study.

I would love to see the article that says that NO American is saving... I have seen some where they say the savings rate is negative, but not "NO AMERICAN IS SAVING"....


And as to the article of most people dying broke.... well, most people are LIVING broke... I remember when Bill Gates was over $100 billion in assets... there was an article that said he had more money than the 'poorest' 100 million Americans.... but that there were a big percent who had negative net worth... or broke... so, live broke, die broke... not a problem for most of them...
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Old 08-20-2008, 11:15 AM   #16
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A new study indicates that most Americans will die broke.

That's my plan....well maybe two nickels for my eyelids.
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Old 08-20-2008, 11:29 AM   #17
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I have seen some where they say the savings rate is negative
And thats pretty much BS too. All they're measuring is total payroll on one side and total expenditures on the other side.

Any expenditures for appreciating assets arent counted. So your home equity isnt considered "savings".

I'm sitting in a half million dollars that doesnt count. :
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Old 08-20-2008, 11:39 AM   #18
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And thats pretty much BS too. All they're measuring is total payroll on one side and total expenditures on the other side.

Any expenditures for appreciating assets arent counted. So your home equity isnt considered "savings".

I'm sitting in a half million dollars that doesnt count. :
Darn guvmint statistics..........
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Old 08-20-2008, 11:44 AM   #19
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How many COLAd pensions are left, 1%
Not counting the military or the postal service, the Federal Government is the largest employer in the US. Add military in, then teachers, and state and county and municipal workers, you have well more than any paltry 1% who are drawing COLA pensions or some sort. FD, you just aren't hanging with right crowd.

Ha
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Old 08-20-2008, 11:49 AM   #20
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GM has a nice pension....for now.
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