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Old 03-17-2008, 08:56 PM   #21
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I see Ron, but maybe you started out that way. I am 5 years into retirement and want to buy a SPIA and said purchase will change my AA depending on how I do it.
In that case (and I would do this if/when I purchase additional SPIA's in the future) would to pro-rate withdrawls from my 60/40 mix, resulting in no change to my/DW's retirement portfolio.

- Ron
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Old 03-17-2008, 09:44 PM   #22
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Originally Posted by rs0460a View Post
In that case (and I would do this if/when I purchase additional SPIA's in the future) would to pro-rate withdrawls from my 60/40 mix, resulting in no change to my/DW's retirement portfolio.

- Ron

Yes, that was my original question, and most replies said to take it out of the fixed income portion and leave a larger equity allocation due to treating the annuity as a bond holding (which would gradually reduce over the years). However, your reply has me thinking the other way now. I never met a fence that I didn't want to straddle!!
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Old 03-18-2008, 06:41 AM   #23
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most replies said to take it out of the fixed income portion and leave a larger equity allocation due to treating the annuity as a bond holding
Well, the "others" can give their opinions (and are certainly entitled to them!). What I offer is a fact and detail of a "real life situation".

I don't consider any form of retirement income in my AA. By the time me/DW turn 70, 90-100% of our income will be coming from our formerly named income sources. If that income is considered to be coming from the "bond portion" of our portfolio, it would turn out that our actual "remaining" portfolio would be almost 100% equities. Now, do you believe anybody at age 70 (or older) should have a 100% equity stake? Maybe you do, but I don't.

I'm looking for "survivorability" of that portfolio till I/DW pass, and I'm not really interested in how the "guaranteed" income (SS, etc.) is viewed. That's why my target will remain 60/40 (at least in early retirement, where I am now).

That's why we don't consider any income (SS, SPIA, pension, etc.) as part of our AA.

- Ron
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Old 03-18-2008, 09:03 AM   #24
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I'm looking for "survivorability" of that portfolio till I/DW pass, and I'm not really interested in how the "guaranteed" income (SS, etc.) is viewed. That's why my target will remain 60/40 (at least in early retirement, where I am now).

That's why we don't consider any income (SS, SPIA, pension, etc.) as part of our AA.

- Ron
One thing I noted was that the survivability of my portfolio actually increased with the purchase of a SPIA with about 15% of the portfolio. That is according to firecalc- of course that assumed keeping the same ration as you suggested. I assume that is because the SPIA creates and income stream of over 9% while I am dis-accumulating at the rate of a little over 3%. The annuity guy at VG told me that if I live with a 3% dist. rate on my current portfolio I probably don't need an annuity. That's the beauty of dealing with a non commission seller.
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Old 03-18-2008, 09:14 AM   #25
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One thing I noted was that the survivability of my portfolio actually increased with the purchase of a SPIA with about 15% of the portfolio. That's the beauty of dealing with a non commission seller.
You are correct on the survivability issue. I use FIRECalc (along with VG's F.E. and Fido's R.I.P.) and all show an "enhanced estate value" ...

BTW, I did not go with VG on the SPIA (don't want to get into an argument on the "supplier"). All I can say is shop around (if you are serious on investment in an SPIA). There are more than one "provider" that can give you a "good deal"...

- Ron
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Old 03-18-2008, 11:05 AM   #26
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BTW, I did not go with VG on the SPIA (don't want to get into an argument on the "supplier"). All I can say is shop around (if you are serious on investment in an SPIA). There are more than one "provider" that can give you a "good deal"...

- Ron

I got a quote from NYL, Fidelity and went on Annuities.com, but none beat VG. I'm open to suggestions on who else to check with. TIA.
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Old 03-18-2008, 12:11 PM   #27
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I got a quote from NYL, Fidelity and went on Annuities.com, but none beat VG. I'm open to suggestions on who else to check with. TIA.
John Hancock (offered via Fidelity) was an additional company I considered.

I had the papers to sign (from Fido, for J.H.) to be returned within a week. The day I was to put them in the mail, Fido called me and gave me a better return from their own company.

Just to show that rates change much like a mortgage (on a daily basis).

- Ron
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Old 03-18-2008, 09:12 PM   #28
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Interest rates are at historical lows. Annuities are paying historical lows.

Are your pants on fire? Wait. You'll get a better payout once the FED starts raising rates again.
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Old 03-19-2008, 07:30 AM   #29
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Interest rates are at historical lows. Annuities are paying historical lows.

Are your pants on fire? Wait. You'll get a better payout once the FED starts raising rates again.
Are you retired?

If you're still working, you are still getting a paycheck (e.g. "normal income").

If not, you may not understand that a SPIA is a "tool" to be used to set a base for current consumption.

In my case, I retired at age 59 (when I purchased the IA) with no income (other than a small VA disability payment).

I will not be drawing SS until age 70. That means that the remainder of my income must be derived from my retirement portfolio for 11+ years.

Using 10% of our retirement portfolio, I "purchased" a SPIA that "covers" 33% of our normal current monthly income. That is without concern of current market gyrations or other financial impacts. Remember, we still have 90% of our retirement investments (at a current 60/40 AA) still "in the market".

Can we do better if we wait? Sure/maybe. Will we have enough money to live on (in the lifestyle we wish) without the SPIA? Sure/maybe.

However the SPIA removes a portion of the daily "what if" and provides a good base (much like a pension would do, if I had one) and is just one more tool in my retirement financial toolbox.

Additionally, if interest rates "go through the roof", we have the option of purchasing another SPIA to take advantage of that sceniero. No need to play the "what if" game till it actually happens (increasing interest rates).

- Ron
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Old 03-19-2008, 06:26 PM   #30
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Are you retired?

If you're still working, you are still getting a paycheck (e.g. "normal income").

If not, you may not understand that a SPIA is a "tool" to be used to set a base for current consumption.
I am still employed but I understand the fear of depending on a "fixed income." It is a psycholocial torture chamber to depend on "the market." That's why the annuity business does so well. It still doesn't make it a "good investment."

You bought your version of "peace of mind." That's your choice. The basic math says that you would have been better off if you don't live about a decade past your "mortality table" life expectancy and invested for eternity at whatever the going interest rates where when you bought your annuity. It also assumes that your annuity company doesn't go under and stop your payments because the market didn't meet their expectations.

If you are happy with your annuity, that's great. Just don't expect me to encourage one to buy one since I've seen multiple relatives screw their finances with them.
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Old 03-20-2008, 04:20 AM   #31
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If you are happy with your annuity, that's great. Just don't expect me to encourage one to buy one since I've seen multiple relatives screw their finances with them.
Good point.

IMHO annuities can make sense for some people (using a portion of the portfolio). But the devil is in the details... and there are many things to consider. I would not put all of my assets in a SPIA.


Aside for looking at the basic financial aspect of an annuity (the payout)... you should consider how an annuity might constrain you. Imagine several life scenarios and how owning the annuity might help or hinder you. for example one scenario is you have a long healthy life. Another is you or spouse dies young. Another is you or spouse have some event where you need to get your hands on alot of cash in 15 years. Using scenarios will hep you to better understand the implications of owning an annuity and may help you to craft a more sound strategy of employing it.
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Old 03-20-2008, 07:57 AM   #32
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I would not put all of my assets in a SPIA.
You cannot put more than 50% of your retirement savings into all accumulated annuities (certified as part of the enrollment process).

"Another is you or spouse dies young. Another is you or spouse have some event where you need to get your hands on alot of cash in 15 years."

Our SPIA is set to receive payments for a guaranteed 28 year period. If either of us pass, the other still gets the payments. If both of us pass before the 28 period ends, our estate (recipients) get the remaining payments.

If we live longer than 28 years, the payments continue.

Again, an SPIA must be looked at from your indivudal requirements. If being used (as ours is) for base monthly income, the idea of "needing to get a lot of cash" does not matter. We won't be giving up our food/housing to buy a car, or spend a chunk of $$$ on an unnecessary purchase. That's not the reason you are buying a SPIA.

- Ron
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