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08-10-2008, 08:57 AM
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#21
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 49,309
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__________________
Numbers is hard
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08-10-2008, 09:00 AM
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#22
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 46,597
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Quote:
Originally Posted by Rich_in_Tampa
Gary, you're right - annuities are a hot button around here and we run into this kind of dialog often.
There are many who believe that SPIA (not variable) annuities have a place for certain investors, usually no more than 20% or so of the nest egg; combined with social security some day, that may well cover your basic living expenses. Then, you can invest your other assets more aggressively without worrying about paying for food during a bear market.
The "sleep well" factor for some people is priceless. The point behind the resistance here (among others) is that you can achieve a similar result at lower cost by selecting the correct retirement strategy for yourself. Annuities might cost 6% up front, and 2-3% a year or more, largely "hidden" in the rate of return. Also consider the solvency risk of the insurance company 25 years from now, the loss of estate value by giving up a lot of money to an annuity then dying early, Just some stuff to factor in.
I am leaving open the possibility of limited annuitization as I approach 65 and beyond, depending on the details of health, market performance, life situation, size of the nest egg, etc.
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Sounds like a good plan, though to me 75 sounds better than 65 as a time to re-examine annuities.
As many here may recall, at one time I was planning to buy a fixed, immediate, lifetime, semi-inflation-protected annuity with 25%-30% of my TSP upon retiring at 61. I would never consider trusting an insurance company with more than that percentage - - too many eggs in one basket, sort of opposite to diversification on investments. My reason for wanting an annuity was that the annuity would give me a reliable income, probably of more than 4%, and I was contemplating a more or less bare bones ER with familial longevity so I felt I needed that.
Due to unexpected and un-planned-for events, I now have considerably higher net worth than a year ago. So, I think that I can afford to keep a considerable amount in fixed income and Wellesley (VWIAX), which will provide both the income I need and the flexibility of making changes if/when they seem advisable to me. I can always buy an annuity later, if I want to, and I'll get a better yield later if/when I do. Another factor for me is that right now, it is very difficult for some New Orleans residents to muster up that kind of trust for any insurance company. Enough said on that topic but I find it difficult not to be cynical about insurance companies.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
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08-10-2008, 09:06 AM
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#23
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Hey, when's the last time you got something for nothing?  ...
(BTW, the reduction in payment is $15/month - I can afford that "because I'm worth it!")....
Additional note due to your comment (on SPIA's) - there is no "fee schedule" involved (unlike VA's). What you are originally quoted as a monthly income include all fees (regardless of any increase, in the future). Another "fact" thrown around here.
- Ron
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08-10-2008, 09:09 AM
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#24
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 49,309
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Quote:
Originally Posted by rs0460a
Hey, when's the last time you got something for nothing?
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As best I can recall, it was on a Saturday night my junior year in college...
__________________
Numbers is hard
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08-10-2008, 09:14 AM
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#25
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by Want2retire
Due to unexpected and un-planned-for events, I now have considerably higher net worth than a year ago. So, I think that I can afford to keep a considerable amount in fixed income and Wellesley (VWIAX), which will provide both the income I need and the flexibility of making changes if/when they seem advisable to me. I can always buy an annuity later, if I want to, and I'll get a better yield later if/when I do.
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Makes sense. You are making adjustments to "your plan" due to a change in circumstances. Just as I eliminated all (term) life insurance when I retired, you have to "adjust your horizon" based upon the facts you know, not the facts that "may be" in the future.
Again on SPIA's - you looked, you considered, you made a decision, based upon current "factors". Those previous factors have now changed, and you changed your direction. No problem with that, IMHO.
- Ron
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08-10-2008, 09:21 AM
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#26
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
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__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.
As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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08-10-2008, 09:23 AM
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#27
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 46,597
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Quote:
Originally Posted by rs0460a
\Again on SPIA's - you looked, you considered, you made a decision, based upon current "factors". Those previous factors have now changed, and you changed your direction. No problem with that, IMHO.
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Thanks - - I think a lot of ER forum members MEAN that each person has a different situation and should weigh the pros and cons, but they don't always say that because they see that for themselves, and so many others (especially our younger members), a fixed lifetime annuity wouldn't work. (Or, they see the inexperienced being taken advantage of with variable annuities - - some people lump these together, when they are really very different products.) So, a lot of ER forum members seem to diss annuities a bit.
In my opinion fixed lifetime annuities are an option that bears consideraton. Even if they they are not appropriate at the present time for many/most of us, circumstances change and some day an annuity might be perfectly appropriate.
(I know, you guys, I know, "or pigs may fly"  )
I will definitely revisit the idea, since it is my nature to check and double-check my financial plan from time to time. I might get one in my 70's, or ideally around 85 if the idea of more money fires me up at that age.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
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08-10-2008, 09:32 AM
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#28
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
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Heard on the radio (must be true) that some insurers are not charging enough in fees to stockpile for the upcoming, long-lived boomers collecting their payouts til age 90.
Personally I am not so sure that we will live quite as long as "they" say. My guess is that we'll live a year or two longer, but hopefully with better quality of life in the final years, followed by a rapid decline and demise. If my guess is right, it could be worse.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.
As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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08-10-2008, 09:36 AM
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#29
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 46,597
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Quote:
Originally Posted by Rich_in_Tampa
Heard on the radio (must be true) that some insurers are not charging enough in fees to stockpile for the upcoming, long-lived boomers collecting their payouts til age 90.
Personally I am not so sure that we will live quite as long as "they" say. My guess is that we'll live a year or two longer, but hopefully with better quality of life in the final years, followed by a rapid decline and demise. If my guess is right, it could be worse.
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That is so true!! Probably it could be worse, but I guess we will find out as the years pass. At least, some of us will.
The other thing is, who's to say that the next industry to experience mass failures and failure to meet shareholders' and other obligaions might not by the insurance industry? I can see it now - - huge government bail-outs for every insurance company except the one that holds my annuity, which goes bankrupt with the executives departing with multi-bazillion dollar parachutes and annuities paid at pennies on the dollar... (shudder). I would feel that less likely if my planned ER was for only 10 years, rather than 35 years or so which is my present timeframe.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
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08-10-2008, 09:38 AM
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#30
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 49,309
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Quote:
Originally Posted by Rich_in_Tampa
Just to be sure, is that the last time you got something for nothing, or just the last time you got something?
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I got married the week prior to the beginning of my senior year. I'll let you figure out the rest.
__________________
Numbers is hard
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08-10-2008, 09:41 AM
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#31
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by Want2retire
Thanks - - I think a lot of ER forum members MEAN that each person has a different situation and should weigh the pros and cons, but they don't always say that because they see that for themselves
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Meaning "the filters of their own lives". Yes, unless you understand that concept, you may not be "comfortable" with other peoples concepts/decisons.
- Ron
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08-10-2008, 01:09 PM
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#32
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
Posts: 6,551
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If you are determined to pour your $ into an annuity, take a peek at this Vanguard page. This could be your most cost-effective option for an annuity.
https://personal.vanguard.com/us/acc...sOVContent.jsp
__________________
Part-Owner of Texas
Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx
In dire need of: faster horses, younger woman, older whiskey, more money.
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08-10-2008, 01:13 PM
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#33
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
Posts: 6,551
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Quote:
I can see it now - - huge government bail-outs for every insurance company except the one that holds my annuity,
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Most states have an insurance guaranty fund that insurance/annuity companies pay into, but seldom tell you about. Your state department of insurance will have all of the details.
__________________
Part-Owner of Texas
Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx
In dire need of: faster horses, younger woman, older whiskey, more money.
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08-10-2008, 02:20 PM
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#34
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Thinks s/he gets paid by the post
Join Date: Jun 2002
Posts: 1,555
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Quote:
Originally Posted by REWahoo
I wouldn't go so far as saying everyone here hates annuities, but many of us think there are much better ways to manage your retirement funds.
As to what makes sense, that varies greatly by individual. When it comes to annuities, zero is the right number for me but that isn't the case for everyone. I suggest a balanced, diversified approach and would strongly advise against placing a large chunk of your nest egg in any one basket.
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For Gary K,
If you do go with an annuity, be very careful about expenses. Most annuities have ridiculously high ones. Look at TIAA-CREF, Vanguard and Fidelity (where you would buy them directly rather than though a highly compensated salesperson.)
The following web site was started by some teachers who were getting screwed over because their 403B plans were tied up in annuities. I recall that it had an awful lot of good annuity info (they even published a study I put together to try to convince my daughter's employer to use TIAA-CREF rather than the provider they had). Even though it's primarily focused on public-employee 403B plans, it had a lot of good annuity info. (I haven't visited it for ages).
__________________
friar1610
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08-10-2008, 03:18 PM
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#35
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Full time employment: Posting here.
Join Date: Feb 2006
Posts: 987
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Quote:
Originally Posted by friar1610
The following web site was started by some teachers who were getting screwed over because their 403B plans were tied up in annuities. I recall that it had an awful lot of good annuity info (they even published a study I put together to try to convince my daughter's employer to use TIAA-CREF rather than the provider they had). Even though it's primarily focused on public-employee 403B plans, it had a lot of good annuity info. (I haven't visited it for ages).
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Here's another good site, IMHO on the subject of SPIA's:
Immediate Annuities in Retirement
Bob has done a good job in putting together a lot of the pro/con's this subject is sure to generate and let's you look at the option to see if it fits your "future needs".
- Ron
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08-10-2008, 09:01 PM
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#36
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Thinks s/he gets paid by the post
Join Date: Jun 2002
Posts: 1,555
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Quote:
Originally Posted by friar1610
For Gary K,
The following web site was started by some teachers who were getting screwed over because their 403B plans were tied up in annuities. I recall that it had an awful lot of good annuity info (they even published a study I put together to try to convince my daughter's employer to use TIAA-CREF rather than the provider they had). Even though it's primarily focused on public-employee 403B plans, it had a lot of good annuity info. (I haven't visited it for ages).
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That site, which I left out of my earlier post, is 403(b)wise . The Leading Source of 403(b) Information on the Web
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friar1610
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