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Old 08-11-2019, 02:15 PM   #41
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Since I don't invest, looking at probabilities gets me confused.

I am not much good at numbers, but FWIW... Federal IBond results

Jan 2001 $10,000 June 2019 $14,627 Inflation

Jan 2001 $10,000 June 2019 $27,848 IBond


I think that may be a compound interest rate of about 5.&%

We don't know what the future may hold, but feel relatively safe with the US Government guarantee.

The $70K we spent on I Bonds in 2001 and 2003, are returning about $1100/mo. now

Just one thing to look at.


The I bonds sold in the past paid a very high rate above inflation. The highest was in May 2000, which paid 3.6% above inflation. Whoo Wee!

I was ignorant, and was still busy licking my wounds from the tech stocks crashing from the top in March 2000, so did not buy any I bond until much later in 2003.

More recent I bonds just match the inflation rate. No real return for them. Recently, I bonds have gone up to 0.5% above inflation.
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Old 08-11-2019, 02:21 PM   #42
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Quote:
Originally Posted by imoldernu View Post
Since I don't invest, looking at probabilities gets me confused.

I am not much good at numbers, but FWIW... Federal IBond results

Jan 2001 $10,000 June 2019 $14,627 Inflation

Jan 2001 $10,000 June 2019 $27,848 IBond


I think that may be a compound interest rate of about 5.&%

We don't know what the future may hold, but feel relatively safe with the US Government guarantee.

The $70K we spent on I Bonds in 2001 and 2003, are returning about $1100/mo. now

Just one thing to look at.
That is pretty good returns. Wish I would have bought some then.
Just for comparison Wellesley would have returned; jan 2001 to date $34,755.
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Old 08-11-2019, 04:06 PM   #43
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Re: Taxes...

One of the nice things about being relatively poor, is that thus far, (since about 1998) we haven't had to pay federal or state taxes. Illinois does not tax social security, and the amounts we have received from other sources have been low enough to be under the taxable $$$. The small cash reserve we began with is now running out, so jeanie's annuity is picking up the slack. OMG! maybe have to pay a few hundred dollars in tax this year... but maybe not.

We budget about $45K/yr in expenses, but generally spend between $35 and 37K. Bad habits in frugality continue... not consciously but hard to shake.

My big, crazy, out of my mind expense, came this year, with the purchase of a Drone from Amazon. Oh... and an incredible $112 to fix the air conditioning on our 98 Lincoln Town Car. jeanie drives that, I drive the 96 Cadillac SLS. She could have driven it without the air, but I decided to indulge because I love her.

Hmmm... bet you never had to put cardboard inserts in your shoes to fill in the sole holes when you were a kid. It was all okay, and not problem, 'til a wet winter day when I was walking my regular mile to school.... in the slush.
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Old 08-11-2019, 04:40 PM   #44
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Hmmm... bet you never had to put cardboard inserts in your shoes to fill in the sole holes when you were a kid. It was all okay, and not problem, 'til a wet winter day when I was walking my regular mile to school.... in the slush.
You would lose that bet.
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Old 08-11-2019, 07:59 PM   #45
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Hmmm... bet you never had to put cardboard inserts in your shoes to fill in the sole holes when you were a kid. It was all okay, and not problem, 'til a wet winter day when I was walking my regular mile to school.... in the slush.
No, however I was in the 6th grade before I actually wore shoes to school. I was barefoot in HI for most of my childhood.

And I grew up with a Coleman cooler for a refrigerator. Saw my mother work 2-full-time jobs and a part-time one. Sometimes working for 32-hours straight.

I definitely know about poverty and getting out of it. And it takes hard work and determination, not benefits.
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Old 08-11-2019, 08:33 PM   #46
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When I ran the immediateannuities.com calculator on buying a annuity that I wouldn't start collecting on for 30 years, I got $229 as the highest payment, so that would indicate taking the pension is better. It's a pretty small amount though, and you might be able to do better investing on your own, so I don't think it matters that much.
+1

I've been through the small pension buyout offer twice already and I'm vested in 2 more that haven't made offers. I've done some research while evaluating the offers I've had. Companies are wanting to ditch pension obligations accrued years ago and there has been an increase in buyout offers over the last 5 years. Generally, it appears as though lump sum offers are less than the best prices for retail annuities. That was certainly true for both offers I received, was broadly true for posts I read in various forums and is true in the case of OP's offer.

If you think you will want annuity income in retirement, I would consider holding the pension. It is a better deal than you will find on the retail market. If you don't want an annuity, take the buyout. Generally, annuities under perform a well managed portfolio, but there are risks to consider. Some people want some annuity income at the prices that prevail, some want to go it on their own.

One other generally true rule of thumb is that the best value in annuity is delaying Social Security. If a person wants more annuity, the first place to devote money is setting aside living expenses to delay SS. It makes no sense, generally, to buy an annuity or take a pension and also start SS early.
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Old 08-11-2019, 08:55 PM   #47
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One other generally true rule of thumb is that the best value in annuity is delaying Social Security. If a person wants more annuity, the first place to devote money is setting aside living expenses to delay SS. It makes no sense, generally, to buy an annuity or take a pension and also start SS early.

Good point, I didn't think about that. Pensions start at 65 and could help bridge the gap if I wanted to delay SS to 70.
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Old 08-11-2019, 10:13 PM   #48
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nope. if it was offered i'd absolutely do a lump sum rollover to a trad ira.
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Old 08-12-2019, 07:11 AM   #49
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6.5% was roughly the amount the $14k would need to compound at to get me to about $90k. Taking 1/20th of the $90k each year would get me $4500 a year for 20 years, assuming no return or inflation. ....
I would frame it this way. From the immediate annuities.com info in an earlier post we know that the payout rate for an annuity for a 65 yo is about 6.1% or so. $4,500/year divided by 6.1% is $73,770. For $14,000 to grow to $73,770 over 30 years would be a 5.7% return.
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Old 08-13-2019, 08:07 AM   #50
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Quote:
Originally Posted by imoldernu View Post
Since I don't invest, looking at probabilities gets me confused.

I am not much good at numbers, but FWIW... Federal IBond results

Jan 2001 $10,000 June 2019 $14,627 Inflation

Jan 2001 $10,000 June 2019 $27,848 IBond


I think that may be a compound interest rate of about 5.&%

We don't know what the future may hold, but feel relatively safe with the US Government guarantee.

The $70K we spent on I Bonds in 2001 and 2003, are returning about $1100/mo. now

Just one thing to look at.
Heh, heh, one of my few actual financial regrets is that we didn't jump on I-Bonds earlier and more often. Back in the early '00s, they were a really good deal, easy to get (just stop into a bank or even a credit union), could get $30K/social security number per year ($60k/couple), paid real interest PLUS inflation, easy to cash - back then, could get and hold pieces of actual paper, etc. Nice!

Now, they're hardly worth the (increased) effort. Not worth the low interest rate IMO. Still, so happy we bought what we did back in the day. Like money in the US treasury, just waiting for us to claim it. Don't suppose we'll out live them as they will stop generating interest in 2033 (for us). If we get close, we'll start cashing them, a few per year before '33 to titrate the taxes.

I don't think I'd bother buying any now, but YMMV.
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Old 08-16-2019, 04:51 PM   #51
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I agree. Roll it over into a Roth IRA. In 30 years you will not have to pay taxes on any of the money!
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Old 08-16-2019, 06:24 PM   #52
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and your heirs can inherit when you pass.
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Old 08-16-2019, 09:13 PM   #53
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Depends on what else you have lined up.
I took $1520 a month for life @ 55 rather than 280k cash. Annuity or cash balance. (my 2 options) Made a lot of sense 3 yrs ago when rates were 1.5%
With taxes etc. it worked out better for me. And at about the same 6.5% you are looking at.
Its a sliver of my retirement. But should get 30 yrs out of it anyway.
Anything over 19 yrs is gravy. Based on a 3% return it would peter out in 19 yrs.
So far so good. Have pulled about $55k out of it so far. So no complaints...
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6.5% Guaranteed yield?
Old 08-17-2019, 03:30 AM   #54
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6.5% Guaranteed yield?

In this age with low inflation, a 6.5% yield is very high. The current yield on investment grade industrial bonds is 3.3%



$375/m may seem low, but 14,000 $ isn't a lot either. I am living in Europe and part of my retirement is a quilt of state pensions from various countries where I have worked. Each one seems modest since I have worked 4-5 years in each country, but when I add them up, they contribute nicely. After all, the big picture is the sum of small pictures, so if you optimize each bit, it makes a difference.


Neglecting tax effects, 14k $, compounded over 30 years at 6.5% should give a capital of $ 92.600 in 30 years. If they continue to get a 6.5% yield, the annual yield will be higher than 4500, so the capital will continue to grow. But assuming a 20 year life expectancy, you would pull 90,000 out. They would hold a capital over, but if they really managed to get a 6.5% yield over 50 years, I think they have deserved it.



Have a look at the yield of your IRA. And run the calcs using that yield. If I use 4%, the capital will grow to $ 45,400. And once you start drawing your 4500, after 14 years, the capital will have been consumed, still assuming 4% after you retire.


If you can find a tame retirement/investment advisor, it might be an idea to bounce the question of him/her.
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Old 08-17-2019, 05:47 AM   #55
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I've rolled several small sums like this, just for simplicity, including one pension.

Also, I don't see any mention of pension risk. Many pension systems have always been overpromised and underfunded. Exactly the kind of risk I don't want to take, since almost all my former employers are gone.
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Old 08-17-2019, 09:36 AM   #56
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Lump sum.
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