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A Variable Annuity that Works
09-21-2009, 05:57 AM
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#1
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Recycles dryer sheets
Join Date: Mar 2006
Posts: 206
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A Variable Annuity that Works
From 3 strategies to guarantee income in retirement - Sep. 21, 2009 This is the way to make a
variable annuity work - just have 150%!
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I'm trying to find myself.* Have you seen me anywhere today?
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09-21-2009, 06:06 AM
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#2
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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: 50,022
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Even investing 100% in annuities and the other 50% in stocks and bonds you only have a 92% chance... 
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Numbers is hard
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09-21-2009, 06:17 AM
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#3
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,501
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 Yes, especially if your state only guarantees the first $100,000 of an annuity in the event the company offering it craters before you are 95.
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Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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09-21-2009, 07:03 AM
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#4
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
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Based on this post, I am slicing and dicing: 100% in stocks, 100% bonds, 100% cash, 100% annuities, and 100% in pork bellies.
__________________
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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09-21-2009, 07:22 AM
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#5
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Why would someone conclude the variable annuity works when you can increase the chances of success from 92% to 99% by replacing it with an immediate annuity?
I have some reservations about these calculations, but even if I accept them at face value, it seems like all this is doing is telling us that an immediate annuity is better than a VA. And it doesn't account for the chance of an insurer to fail and it doesn't account for people who want to preserve capital to pass to their heirs.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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09-21-2009, 08:14 AM
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#6
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
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 Quote:
Originally Posted by ziggy29
Why would someone conclude the variable annuity works when you can increase the chances of success from 92% to 99% by replacing it with an immediate annuity?
I have some reservations about these calculations, but even if I accept them at face value, it seems like all this is doing is telling us that an immediate annuity is better than a VA. And it doesn't account for the chance of an insurer to fail and it doesn't account for people who want to preserve capital to pass to their heirs.
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Uh... Ziggy. Re-read the thread (especially the arithmetic) with your sarcasm radar turned up a notch  .
__________________
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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09-21-2009, 08:16 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Posts: 2,526
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Finally I understand the power of leverage...
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09-21-2009, 08:19 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 1,183
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Sign me up!
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09-21-2009, 08:22 AM
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#9
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Quote:
Originally Posted by ziggy29
Why would someone conclude the variable annuity works when you can increase the chances of success from 92% to 99% by replacing it with an immediate annuity?
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Quote:
You need more income than Social Security and pensions will provide, but you want access to more of your savings than Strategy 2 allows.
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"I'll go broke eight times as often, but look at how much more money I'll have!"*
Quote:
Originally Posted by ziggy29
I have some reservations about these calculations...
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150% of the people who make these math errors suffer a 200% loss of credibility... 92% of the time.
* This endorsement has been brought to you by the Variable Annuity Sales Association. Remember to check out our equity-index products, too!!
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*
Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."
I don't spend much time here— please send a PM.
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09-21-2009, 08:31 AM
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#10
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Dryer sheet aficionado
Join Date: Jun 2008
Posts: 49
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Immediate annuities right now only pay 4-5 % not 8%. Big difference. I just checked last month for a joint IA for wife & myself.
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09-21-2009, 08:43 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Feb 2003
Posts: 2,395
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Mysto - Many thanks for revealing the secret of making 100% --> 150%. All I have to do is make a pie-chart with four sections!
I'm going to get to work on it right away. I'm gonna make one apple, one cherry, one...
__________________
-- Telly, the D-I-Y guy --
Two fools dancing on the hands of time
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09-21-2009, 08:48 AM
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#12
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by Rich_in_Tampa
Uh... Ziggy. Re-read the thread (especially the arithmetic) with your sarcasm radar turned up a notch . |
It's not the sarcasm radar -- it's the early morning lack of coffee. 
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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09-21-2009, 01:39 PM
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#13
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Recycles dryer sheets
Join Date: Mar 2006
Posts: 206
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Quote:
Originally Posted by sailfish
Immediate annuities right now only pay 4-5 % not 8%. Big difference. I just checked last month for a joint IA for wife & myself.
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The article is correct. 65 year old male gets about 7.9%. You are right though, a joint annuity pays about 5% for the same age group.
Rich - you forgot foreign and gold - You'll need at least another 200%
Telly - I like pecan
I just posted this to show off the financial experts that all told us about the recession - right after it crashed - but they did it 800% 
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I'm trying to find myself.* Have you seen me anywhere today?
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09-21-2009, 01:56 PM
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#14
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
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That graphic is hilarious, Mysto--good catch! And several hours later, the 150% portfolio is still on the CNN website.
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“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
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09-21-2009, 03:34 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 1,183
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Quote:
Originally Posted by Bestwifeever
That graphic is hilarious, Mysto--good catch! And several hours later, the 150% portfolio is still on the CNN website.
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And I notified them right after I posted. But remember, CNN the most trusted...
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09-21-2009, 04:58 PM
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#16
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,331
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Cynics. I read the literature and with the variable annuity you do get an extra 50% so there is no math error.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
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09-21-2009, 05:03 PM
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#17
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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: 50,022
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Quote:
Originally Posted by donheff
Cynics. I read the literature and with the variable annuity you do get an extra 50% so there is no math error.
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If this thread tracks with history a swarm of professional annuity salespersons will be along shortly to show us the error of our cynical thinking.
__________________
Numbers is hard
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09-21-2009, 05:09 PM
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#18
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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Quote:
Originally Posted by Telly
Mysto - Many thanks for revealing the secret of making 100% --> 150%. All I have to do is make a pie-chart with four sections!
I'm going to get to work on it right away. I'm gonna make one apple, one cherry, one...
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banana cream and lemon meringue, please. 
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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09-22-2009, 05:55 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 1,183
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Dear Ms. XXXXXX,
Apparently the numbers for Strategy #3 were incorrectly entered when posting the online version. The percentages for Strategy 3 on page 94 in the October issue of MONEY do indeed add up to 100%. I’ve sent a note to the online folks asking them to correct the numbers. Thanks for alerting me, and I hope I caught you before you rushed out and invested 150% of your money.
Regards,
Walter Updegrave
I plan to write back and tell him I took my HELOC and IRA and bet the farm so I could invest 3 times as much!  At least he was trying to correct it and still has a sense of humor!
BUYER BEWARE is the rule. 
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09-22-2009, 06:00 PM
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#20
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
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Connie, that's a very funny response!
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“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
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