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Old 05-28-2008, 03:24 PM   #21
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Originally Posted by Texas Proud View Post
That is not the question above.... you never said you were investing the other in a SPIA nor that it would make up for the gap in WD...

Your question was which was better as listed... and it is easily the larger portfolio with a higher WD as you can spend more money each year...

As for you possibly current question.... if you annuitize your whole portfolio you 'do better'... but I would not do it myself..

The annuity was implied- you were supposed to figure that out.

Anyway, I guess "better" can be very subjective. For some, who want to stress consumption, and consumption only, at a desired level through out retirement, a nearly full inflation adjusted annuitization might be a good answer.
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Old 05-28-2008, 03:42 PM   #22
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Originally Posted by Texas Proud View Post
As for you possibly current question.... if you annuitize your whole portfolio you 'do better'... but I would not do it myself..
When I "purchased" my SPIA last year, I had to "attest" that current annuity's (including the one I was "buying") did not represent more than 50% of the value of my curent retirement assets.

As stated before, an annuity (and I refer to an SPIA only!) should not "consume" your entire retirement assets.

Anyway, in my/DW's case, we went with 10% of our retirement assets at the time of purchase. Will we "buy more" (e.g. ladder) in the future? Who knows.

- Ron
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Old 05-28-2008, 04:08 PM   #23
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Rs, was your SPIA inflation adjusted, e.g., tied to CPI? If not, what was your thought process on that? Is there a payback calculation to determine the approximate time it takes to get back the inflation premium, assuming a given level of inflation? I suppose there is.
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Old 05-28-2008, 04:16 PM   #24
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Originally Posted by cashflo2u2 View Post
The annuity was implied- you were supposed to figure that out.

Anyway, I guess "better" can be very subjective. For some, who want to stress consumption, and consumption only, at a desired level through out retirement, a nearly full inflation adjusted annuitization might be a good answer.
Then a lot of people missed it...

To the changes... if your spending is the 'same'... then you would have to do the math like you have asked... the lower WD has a big benefit if you live long enough... you can be more aggressive and still have a bigger cushion to make mistakes...

And you are right 'better' is subjective...
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Old 05-28-2008, 05:12 PM   #25
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The annuity was implied- you were supposed to figure that out.
Actually I thought you were considering paying off the mortgage (thus reducing the nest egg but needing a lower withdrawal rate) vs. not paying off the mortgage (thus keeping the nest egg but needing the higher withdrawal rate to make payments on it). I would never have figured out you were talking about an annuity....
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Old 05-28-2008, 05:40 PM   #26
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Rs, was your SPIA inflation adjusted, e.g., tied to CPI? If not, what was your thought process on that?
No, my SPIA is not tied to inflation. In my situation, my goal was to provide me with immediate "guaranteed" income (beyond my retirement portfolio) up to the point of SS (in 10 years).

In addition (as you have already found) the purchase of the SPIA increased the "survivorability" of my retirement plan/portfolio.

It winds up being a tool to fix a "situation". Is it for everybody? Of course not, but in our case it works well.

- Ron
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Old 05-28-2008, 07:13 PM   #27
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I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .
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Old 05-28-2008, 09:28 PM   #28
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Originally Posted by cashflo2u2 View Post
I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .

I believe your assumption is incorrect. I'll take you up on that bet as long as you assume the burden of proof.
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Old 05-28-2008, 10:35 PM   #29
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Originally Posted by cashflo2u2 View Post
I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .
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I believe your assumption is incorrect. I'll take you up on that bet as long as you assume the burden of proof.
I'll take some of that bet also.

For quite some time I have thought I would put my DW into a SPIA with about 10% of our portfolio about the time she turns 70. Since I do not have surviorship on my Government pensions, it would offer some stability for her.
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Old 05-29-2008, 05:36 AM   #30
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I believe your assumption is incorrect. I'll take you up on that bet as long as you assume the burden of proof.
Not necessarily. You and the pakrat could be the 1%.
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Old 05-29-2008, 08:02 AM   #31
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I think the second option is better. I have not read all the posts yet (I am halfway thru page 1). I assume I can allocate the 2% SWR portfolio more aggressively and live off the yield. So the 12% reduction in value can probably be overcome with a little time.

If going for a 2% SWR, I would be investing with a dividend centric philosophy
If going for a 3% SWR I would allocate between stocks and bonds, and the stock positions would also be dividend heavy.

IMO any SWR 3% or under can be sustained with dividends. Anything higher than 3% and more than likely shares will need to be sold at some point to generate income.
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Old 05-29-2008, 09:55 AM   #32
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Originally Posted by cashflo2u2 View Post
I'll bet that 99% of the people here and everywhere, that are knowledgeable on retirement distribution, are so hide bound dead set against annuities that even if they ran Firecalc and it proved that a small portion of retirement portfolio invested in a SPIA improved their returns and survivability, they still would not do it. The analysis worked that way for me-should be the same for everybody .
Probably not 99%.

I think quite a few people here are concerned that those who don't know enough to run FireCalc or anything else, might buy an immediate, fixed, lifetime annuity before learning enough about investing to know if that is a wise decision. I think the only reason they aren't worried about them buying something else while in the learning process, is that buying an immediate, fixed lifetime annuity is an irreversible decision.

I am still considering an immediate, fixed, lifetime annuity although now, due to my changed financial situation, it doesn't seem prudent in my case any more. I still run the numbers every now and then to reassure myself, but I doubt I'll ever buy one. Maybe I will change my mind once I am 85 or so.
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Old 05-29-2008, 11:44 AM   #33
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I am still considering an immediate, fixed, lifetime annuity although now, due to my changed financial situation, it doesn't seem prudent in my case any more.
Exactly! The problem with comments on "annuities" (IMHO) are that people make statements on the "suitability" of the product, without understanding (or investigating) the product as related to "their situation".

A couple of examples:
- Some folks do not segragate SPIA's from deferred annuities. While I would not consider a deferred annuity, in some situations, for some folks (who are still wor*ing and have exhausted their annual contributions) it may make sense.

- Some folks don't understand that you don't necessarily "loose if you die". These are often the folks who want to ensure they have an estate to pass on to the "next generation". I understand this concern, however there are SPIA's that address this concern. As a disclaimer, my/DW's remainder estate is going to charity, so even though I ensured that our SPIA would have "value" for at least its 28+ year term, it was not a major consideration in our decision to "buy" the product.

It's sort of like buying a car. Does everybody purchase the same car? Of course not. Some buy new, some used. Some foreign, some domestic. Some luxury, some not. Some fuel efficient, some not.

If you are still working, in construction, and need to have a heavy-duty vehicle, you will probably buy a HD pickup/SUV.

If you work in an office, some miles away from where you live, you may want a sub-compact.

If you are retired (like me ) and drive limited mileage, you may want a luxury SUV (like my Caddy ).

Everybody dosen't need the same vehicle. Everybody dosen't an annuity (any type).

It all depends what works best in your situation and to meet your end-goals.

Regards,

- Ron
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