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Re: Take a lump sum or pension payout
Old 06-11-2006, 03:20 PM   #41
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Re: Take a lump sum or pension payout

Were I he, if his employment and health are ok, I would work the extra three years.

Fixed immediate annuities were structured in the day when living more than 15 years after retiring was not common. We live longer today, inflation is an issue. Also, because we rarely die suddenly, many have extended periods of incapacity at the end of life - expensive.

There are no guarintees, each of us must consider our resources and risks and make a judgement call.
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Re: Take a lump sum or pension payout
Old 06-11-2006, 04:28 PM   #42
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Re: Take a lump sum or pension payout

Ran the numbers for myself (again):

Vanguard fixed immediate annuity with inflation adjustment, annual payment $3787.56+cpi per 100k invested
Same thing, joint with survivorship payment@100% $3302.52+cpi per 100k invested

Wellesley admiral shares current yield ~$4560 per 100k invested, plus an average historical ~6% annual capital appreciation While that might not cover future inflation if it goes hog wild or future returns arent as good, the average inflation long term is well below 6%.

So apples to apples, as far as I can see, not a good deal in my case given these options. No funny business with multiple buckets or accounts, no assumptions, no maybes, no 'potential', no three card monte.

I'm giving up the apples to apples even though I have the freedom to retain and liquidate the wellesley holdings, and I can leave the residuals to family, friends or charities on my demise.

The wellesley payouts are also partially stock dividends taxed at capital gains rates, not regular income like the annuity payments, so its somewhat more tax efficient as well.

Now if I'm 60, in great health, expect to live past 90, have a good sized portfolio so I can get the payout up to what I need to pay the bills and live the lifestyle I want, I dont want to ever think about my investments again and I cant stomach any volatility or uncertainty at all...then I might look a second time.
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Re: Take a lump sum or pension payout
Old 06-11-2006, 05:38 PM   #43
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Re: Take a lump sum or pension payout

Quote:
Originally Posted by Cute Fuzzy Bunny
Ran the numbers for myself (again):

Vanguard fixed immediate annuity with inflation adjustment, annual payment $3787.56+cpi per 100k invested
Same thing, joint with survivorship payment@100% $3302.52+cpi per 100k invested

Wellesley admiral shares current yield ~$4560 per 100k invested, plus an average historical ~6% annual capital appreciation* While that might not cover future inflation if it goes hog wild or future returns arent as good, the average inflation long term is well below 6%.

So apples to apples, as far as I can see, not a good deal in my case given these options.* No funny business with multiple buckets or accounts, no assumptions, no maybes, no 'potential', no three card monte.

I'm giving up the apples to apples even though I have the freedom to retain and liquidate the wellesley holdings, and I can leave the residuals to family, friends or charities on my demise.

The wellesley payouts are also partially stock dividends taxed at capital gains rates, not regular income like the annuity payments, so its somewhat more tax efficient as well.

Now if I'm 60, in great health, expect to live past 90, have a good sized portfolio so I can get the payout up to what I need to pay the bills and live the lifestyle I want, I dont want to ever think about my investments again and I cant stomach any volatility or uncertainty at all...then I might look a second time.
You need to get over your focus on retail annuities. It is highly unlikely Rollie is talking about a retail/commercial annuity. Did you not just see what JohnP just posted? That is precisely what I talked about earlier upthread. Lump sum equivalents offered by MegaCorp make it very difficult to beat the DB pension option sponsored and supported by MegaCorp.

When I looked at my options just 6-8 weeks ago when I retired, I was going to have to exceed an 8% return on my lump sum in order to match the cash flow of the DB pension payments. Cash flow equivalence on an absolute basis did not cross for over 25 years...and on a discounted basis, it would be even longer.

Point really is, don't confuse retail/commercial annuities with DB plans that had their mechanics pre-determined back in the 1960's (e.g. 1.6% x years of servce x average of best 5 years of compensation).
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Re: Take a lump sum or pension payout
Old 06-11-2006, 05:57 PM   #44
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Re: Take a lump sum or pension payout

I think the OP is considering his options at the time he retires, whenever that may be: lump sum or fixed immediate annuity.

The analysis needs to consider his and his wife's life expectancy and, for the lump sum how that would be invested. If the crossover date is 25 years the annuity is a slam dunk. If the crossover date is 15 years and they are in their early 60s, expecting to live into their early 90s, the annuity is a looser.
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Re: Take a lump sum or pension payout
Old 06-11-2006, 06:11 PM   #45
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Re: Take a lump sum or pension payout

Quote:
Originally Posted by AltaRed
You need to get over your focus on retail annuities.* It is highly unlikely Rollie is talking about a retail/commercial annuity. Did you not just see what JohnP just posted?* That is precisely what I talked about earlier upthread.* Lump sum equivalents offered by MegaCorp make it very difficult to beat the DB pension option sponsored and supported by MegaCorp.*

When I looked at my options just 6-8 weeks ago when I retired, I was going to have to exceed an 8% return on my lump sum in order to match the cash flow of the DB pension payments.* Cash flow equivalence on an absolute basis did not cross for over 25 years...and on a discounted basis, it would be even longer.

Point really is, don't confuse retail/commercial annuities with DB plans that had their mechanics pre-determined back in the 1960's (e.g. 1.6% x years of servce x average of best 5 years of compensation).
I gave up trying to figure out what to cut from your post.* Most of it is appropriate to my reply.

I don't believe CFB gave a true "apples to apples" comparison because the dividends are less secure than the fixed income "promise" of a highly rated annuity company.* In the same spirit, a "Megacorp" guaranteed annuity is not as good as a commercial annuity or the traditional DB pension which has a limited guarantee by the US government.* "Megacorp" can ebb and flow with their business and find themselves in the same shape as GM, United or Enron.* If they are paying a significantly higher rate than a triple-A annuity company, they must be eager to protect their capital.* BTW -- GM is paying a great interest rate on their bonds.* Also BTW -- they aren't triple-A rated.

I've worked at several different companies and they all talked about how "people are our most important asset" and "we will take care of our people."* When it came to real money, they still watched the market as for pay and benefits.* When I saw the upper reaches of management, the goal was to maximize profits and minimizing costs.* I wouldn't expect a sudden rush of largess for retirees.
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Re: Take a lump sum or pension payout
Old 06-11-2006, 07:54 PM   #46
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Re: Take a lump sum or pension payout

Here is an article, on this subject, that was on CBS Marketwatch today:

http://www.marketwatch.com/News/Stor...siteid=myyahoo
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