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Old 01-13-2016, 07:35 AM   #21
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Interestingly, that inflation adjusted annuity is right about equivalent to a starting 4%/yr SWR. For a lot of people, that annuity hurdle will start looming with any significant downturn.
Yes. I'll probably calculate my annuitization hurdle based on a fairly Spartan monthly spend rate. If someone is retiring with a 4% WR and they are already at that very bare-bones spending level, then there's no room for a downturn.
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Old 01-13-2016, 11:00 AM   #22
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+1

I noticed yesterday that the outfit that Vanguard uses for generating their SPIA quotes includes a few with inflation adjusted annuities. You do pay a significant premium. Using me (67) and DW (63) a representative income (AIG) for $1M with a 20 year guaranteed payout and 100% survivor was: $4605.40/mth with no inflation adjustment; $3,609.41mth with 2% annual increase; $3,289.66/mth CPI-U adjusted. So, at our age a 28% reduction in starting income for the full inflation protection. That hit should decrease with age. Also, if you found yourself panicking and turning to an SPIA late in life it could be safer to select a fixed annuity. I went with 20 years guaranteed and a joint annuity to reflect my biases. Going joint life only would add $67.47/mth to starting CPI protected income at our age.

Interestingly, that inflation adjusted annuity is right about equivalent to a starting 4%/yr SWR. For a lot of people, that annuity hurdle will start looming with any significant downturn.

Note: you need to sign on to Vanguard to use the quote generator.
Great post.

Doesn't surprise me. That's why I'm advocating keeping track - it literally takes me 20 seconds/quarter to get a quote (plot automatically updated) while I am already reviewing my investments/net worth quarterly. How that's like work is absurd beyond me. Not sure what the downside is, even if you think you're immune (a few seem to).
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Old 01-14-2016, 06:13 AM   #23
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Quote:
Originally Posted by donheff View Post
+1

I noticed yesterday that the outfit that Vanguard uses for generating their SPIA quotes includes a few with inflation adjusted annuities. You do pay a significant premium. Using me (67) and DW (63) a representative income (AIG) for $1M with a 20 year guaranteed payout and 100% survivor was: $4605.40/mth with no inflation adjustment; $3,609.41mth with 2% annual increase; $3,289.66/mth CPI-U adjusted. So, at our age a 28% reduction in starting income for the full inflation protection. That hit should decrease with age. Also, if you found yourself panicking and turning to an SPIA late in life it could be safer to select a fixed annuity. I went with 20 years guaranteed and a joint annuity to reflect my biases. Going joint life only would add $67.47/mth to starting CPI protected income at our age.

Interestingly, that inflation adjusted annuity is right about equivalent to a starting 4%/yr SWR. For a lot of people, that annuity hurdle will start looming with any significant downturn.

Note: you need to sign on to Vanguard to use the quote generator.
Help clarify this for me please.
Does this mean that if you paid a single premium of $1 Million, in return you and your wife would $4605.40/ month with no inflation adjustment, for 20 years? IF either one of you were to die, the survivor would continue to receive that pay-out until s/he died, but at the end of 20 years it stops, no matter what?

The lesser amounts would work the same way, except would increase with inflation adjustments?
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Old 01-14-2016, 06:32 AM   #24
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Help clarify this for me please.
Does this mean that if you paid a single premium of $1 Million, in return you and your wife would $4605.40/ month with no inflation adjustment, for 20 years? IF either one of you were to die, the survivor would continue to receive that pay-out until s/he died, but at the end of 20 years it stops, no matter what?

The lesser amounts would work the same way, except would increase with inflation adjustments?
We would get $4605.40/mth for as long as either of us lived (potentially 30+ years). If we both died in less than 20 years, the payments would continue to our heirs for the 20 year guaranteed period.

You can choose to guarantee for longer (e.g. 30 years) or shorter (e.g. 10 years) periods or for life only and the annuity amount will be adjusted to account for that. Life only got us an additional $69/mth IIRC.
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