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Old 01-14-2012, 11:11 AM   #41
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Originally Posted by Lagniappe View Post
I plan to look at annuities for small percentages of my portfolio (5-10% per annuity) every 5 years starting at age 60. So at age 60, if the rates are good, I might annuitize 5%. At age 65, another 5%, age 70 add 10%, etc. As I age, I would like to have less and less of my portfolio subject to poor financial judgement and/or scammers.
So there are no poor financial judgements and/or scammers associated with annuities?
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Old 01-14-2012, 11:16 AM   #42
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Good point. But hopefully I'll be less senile when evaluating them.
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Old 01-14-2012, 11:23 AM   #43
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Originally Posted by MichaelB View Post
$100K, @ $674 monthly for 15 years gives 2.68% annual rate of return according to my HP 10B (before tax).
Can you direct me to an on-line calculator I could plug that into?

I've got the option to buy service credit on my pension; $120,000 @ $ 850 monthly for life (beginning at age 56). Just wondering what I would need to earn on my own investments to do as good...
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Old 01-14-2012, 11:29 AM   #44
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I'd be interested in seeing your list of other paths given a situation similar to Rescue's ( and many of the rest of us).
Sure, except I won't present a list since there's an implication that the list would be "all-inclusive" and in fact there is a seemingly infinite array of withdrawal possibilities. I'll just talk about what we actually did.

In our case, we chose to start SS at 62 since DW is subject to GPO. Since she can't collect on my SS as a survivor, and has little SS on her own due to WEP, starting my SS at 62 maximizes protection for her should I die first. I've covered that strategy on other threads.

To cover the years between my retirement date and 62, we used the strategy of simply having a higher WR until SS kicked in. I use a 50 - 50 AA and, despite the attention getting slump in portfolio value in 2008 and 2009, it seems to have worked out OK.

If we didn't have the GPO/WEP issue and therefore were going to delay SS to 66 or even 70, I'd have continued on the same way since it seemed to be working OK for us.

Circumstances are different for everyone. If a person could replace his SS (say $20k/yr) with an annuity funded by only 10% of his FIRE portfolio (as in an earlier example given by another poster), that implies a pretty hefty FIRE portfolio, way more than I have.

Wouldn't it take about a $3M FIRE portfolio so that 10% of it would buy an annuity = to a $20k COLA'd SS income?
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Old 01-14-2012, 11:34 AM   #45
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So there are no poor financial judgements and/or scammers associated with annuities?
There are risks involved with everything in life.

The trick is to measure those risks, and are you willing to take them.

If not? Then live in a cave ...
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Old 01-14-2012, 11:43 AM   #46
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At this point, I would say that SS would be the only portion that could be deemed an annuity. No plans to go with something additional in the future, but I've learned to never say never.
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Old 01-14-2012, 11:43 AM   #47
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Yes, I got this, thank you Rich.
Your post:
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Thanks Michael. When I enter 62 year old Male, and, for example, Deposit $100,000 in Indiana in the same website http://www.immediateannuities.com/ I get $549 per month for Single Life Income with No Payments to Beneficiaries ("SL"). Do we agree this is equivalent to 6.5% a year? 6.5% looks better to me than my 3% average on CDs or munis... especially when I have no heir to worry about.
...suggests otherwise. You are comparing annuity distributions (earnings plus return of principle) with returns of 3% (CD interest alone).

Or maybe I have misinterpreted where you are going with this.
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Old 01-14-2012, 11:48 AM   #48
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Would be interested to know what percentage of your assets have you annuitized / do you plan to annuitize. Sorry, I don't know how to create a survey on this website.
I don't have a specific number in mind. There's no way I would buy an SPIA with current interest rates, but if rates are more favorable when I retire I'd probably be willing to consider it with up to (maybe) 1/3 of retirement assets (or as much as needed to generate the extra regular income I thought I needed, whichever is less).
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Old 01-14-2012, 12:06 PM   #49
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If all goes well and according to my plans, I won't annuitize at all. I have no pension, and Soc Sec doesn't figure prominently in our plans.

However, this is how I plan to assess whether to annuitize if ever http://www.schulmerichandassoc.com/M...cumulation.pdf. I can't recommend this 12-page article too strongly as a conceptual determinant basis to evaluate when/if to buy an annuity (and I've mentioned it on this forum several times before). It's not unlike Otar's Unveiling the Retirement Myth approach to annuitization for those who have read that, except almost 500 pages shorter!!!

And BTW, annuities are presently very expensive from an interest rate POV. Now is one of the worst times to sign up for an annuity, if you can possibly avoid or delay. Some people just can't sleep at night if they don't have predictable monthly checks coming in, for them an annuity might be the best approach, but not now if it can be avoided.
Pack-

This is a great article. Even though the article also acknowledges the "income stream" adjustment approach, it doesn't spend any time analyzing it. I would really like to see a paper discussing a combination of this "annuitization hurdle" approach and the "95% Rule" discussed by Clyatt.

Has anyone seen such a paper or a discussion on this?
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Old 01-14-2012, 12:15 PM   #50
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I think I would buy SPIA annuities to cover the basics if I didn't have the pensions.
My thinking as well. SS + small SPIA = basic budget.

Quote:
Originally Posted by Lagniappe View Post
I plan to look at annuities for small percentages of my portfolio (5-10% per annuity) every 5 years starting at age 60. So at age 60, if the rates are good, I might annuitize 5%. At age 65, another 5%, age 70 add 10%, etc. As I age, I would like to have less and less of my portfolio subject to poor financial judgement and/or scammers.
Makes sense. I'm 5 years away from early SS and may put 5% towards a SPIA at that time. Possible another 5% a few years later. Then again, I might be dead by then. So who knows...........
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Old 01-14-2012, 12:23 PM   #51
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So there are no poor financial judgements and/or scammers associated with annuities?
There are. But I think we're usually talking about SPIAs here, and these aren't the high-commission, high-fee products that are often pushed by the annuity sales folks such as EIAs.
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Old 01-14-2012, 12:31 PM   #52
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There are. But I think we're usually talking about SPIAs here, and these aren't the high-commission, high-fee products that are often pushed by the annuity sales folks such as EIAs.

OTOH, we're ususally talking about relatively conservative, diversified, low cost, simple investments held with name brand investment companies such as Vanguard. Those are usually fairly free from scams and rip-offs as well. No?

Just keepin' it apples to apples........
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Old 01-14-2012, 12:32 PM   #53
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Sorry for the short message, typing from my iphone while traveling. Yes I consider the CD principal gone in my calculations, the exact same way as the principal invested in an annuity. I realize this may be a methodological flaw in my calculations.
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Your post: ...suggests otherwise. You are comparing annuity distributions (earnings plus return of principle) with returns of 3% (CD interest alone).

Or maybe I have misinterpreted where you are going with this.
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Old 01-14-2012, 12:43 PM   #54
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Sorry for the short message, typing from my iphone while traveling.
Hopefully not while DRIVING. We'd like to keep you around for awhile.
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Old 01-14-2012, 01:22 PM   #55
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There are. But I think we're usually talking about SPIAs here, and these aren't the high-commission, high-fee products that are often pushed by the annuity sales folks such as EIAs.
Exactly. Unfortunately, some (a lot) of folks combine any "annuity" in the same category.

That in itself requires a separate thread (of which, more than one are already in existance)...
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Old 01-14-2012, 01:38 PM   #56
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I have a VA which accounts for about 14% of my total portfolio. I don't envision annuitizing it during my lifetime. My expectation is that I will predecease my wife (based on the fact that we are roughly the same age but that women generally live longer.) At that time, I would expect her to annuitize it to make up some of the income she will lose when my military pension stops and she only gets what I have elected via the SBP.

In the event she predeceases me, I will likely use the accumulated value of the annuity to fund a few charitable things I'd like to do. That would accomplish my charitable goals and let me withdraw (not annuitize) the money such that the charitable deductions would negate the need to pay taxes on the withdrawals.
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Old 01-14-2012, 02:11 PM   #57
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0%. I retired 5+ years ago (no pension) with the (growth) dividend approach, and have been satisfied with the results. Any SS I eventually might see is viewed strictly as a bonus.
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Old 01-14-2012, 02:18 PM   #58
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We are fortunate enough to have three pensions and two SS income streams between DW and I. Between these 5 monthly checks, and the fact that I have yet to activate my own SS account, I doubt that I will ever have any other annuitization in the future.
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Old 01-14-2012, 02:27 PM   #59
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Sorry, I don't get it. Remember I don't work in finance so please be patient with me... If I enter "Female", 65 years, $100,000 (as an example) on this website Immediate Annuities - Instant Annuity Quote Calculator. I get $674 (about 8%) Guaranteed Income for a 15-Year Period Certain Only. Are you saying that your SIL got 0.08%, or did she get 8% ? Is it net or gross ? Is it paid monthly?
I did similar calculation and it fits the 3% bank saving rate. I did the calculation for a 45 yrs old with payout for 20 yrs period only. And after playing with numbers the actual interest rate is coming to 3%. So there is no excess return, only advantage I see if one is healthy and older (how much I am not certain).
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Old 01-14-2012, 02:42 PM   #60
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Can you direct me to an on-line calculator I could plug that into?
This will do it:
Annual Rate of Return Calculator - Financial Calculators from Dinkytown.net
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