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04-08-2009, 04:01 PM
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#1
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Dryer sheet aficionado
Join Date: Jun 2008
Posts: 49
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Immediate Annuities
Has anyone bought any immediate annuities lately? I just retired last week & am getting a lump sum payment that I am going to roll over into an IRA for now. Now that rates are low I am not sure if I should wait a year or so. Which insurance companies have you used?
My 401K went down 25% in the last year that I don't have desire to jump in the market with my pension.
Thanks for any advice.
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04-08-2009, 04:20 PM
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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: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
Posts: 6,674
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Hey sailfish,
Welcome here.
I recommend that you not jump into anything, especially an IA at this time. Read as many of these books as you can before you jump into something like an IA that can lock you into a long-term mess that you may not be able to untangle.
Investment Books
__________________
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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04-08-2009, 04:22 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
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I haven't bought one myself but I understand that Vanguard has some very low cost immediate annuities that you may want to look into.
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04-08-2009, 10:11 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Oh no! Someone just said the "A" word!
Sailfish, I have not been on this forum long, but I quickly learned that it is a fighting word. Search for the word on this site and you will know why.
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04-09-2009, 03:24 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: Jul 2005
Posts: 6,189
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i like immeadiate annuties, they are very useful for bolstering ones monthly withdrawl rate if you have no desire to leave any of that money to heirs. ... they can allow you a withdrawl rate you just cant do on your own and still provide a high degree of certainty that if you live to 120 you wont run of of money.
forget about death benifits and return of principal protection, all that will lower your return to the point you could do this on your own without giving up the return of your money. if it was me and im doing it i want the biggest gosh darn payment i can get so i have more to spend in retirement then i otherwise may on my own investing..
the big advantage of an immeadiate annuity over investing on your own is they have something in the equation you can never duplicate in your investing.
A BIG PILE OF DEAD PEOPLE
that money is thrown back in to give you those larger then you can do on your own withdrawl rates
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04-09-2009, 06:17 AM
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#6
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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: 11,327
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We haven't had a fight discussion about SPIAs in a long time. I suspect with their portfolios decimated no one wants to dedicate a big chunk of cash to one until they recover a bit. Also, I haven't looked lately, but with interest rates low I would expect the rates are not great.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
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04-09-2009, 06:35 AM
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#7
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Recycles dryer sheets
Join Date: Nov 2004
Posts: 150
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Annuity
Back in 1972 I started an annuity with TIAA, and up until a few months ago kept adding to it (along with some CREF stocks and CREF bonds). I was not aware of the general distaste of some/many to an annuity all these years until recently, and if I had, I probably would have NOT invested that way. I'm beginnng to think it's fortunate I did not read all the negative reviews of annuities, because then I would have never had the "peace of mind" I do now knowing I will receive a lifetime income. Just to play it safe though, I've decided to live off the annuity interest (thereby keeping the principal intact), and will only annuitize as I get closer to 70. Even so, the interest gives my about $2,500/month take-home, which is still alright
I'm single, have no heirs, and am a healthy guy of 62. I still like to work, but prefer not to be concerned with money. My annuity has allowed me to foster my love of animals by working at an animal shelter (at minimum wage) for fun. In August I will go off to the Meditteranean to teach physics, and while the money is alright, i'm doing it for fun. Using the annuity the way I am gives me the freedom to work or not to work and not care about salaries.
Cheers,
Rob
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04-09-2009, 06:37 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2005
Posts: 6,189
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Dont confuse an immeadiate annuity with all the other annuity types... there are no other fees,... its all built in to the withdrawl rate...if you are happy with the rate thats the deal
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04-09-2009, 06:59 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,071
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Quote:
Originally Posted by Rob
Back in 1972 I started an annuity with TIAA, and up until a few months ago kept adding to it (along with some CREF stocks and CREF bonds). I was not aware of the general distaste of some/many to an annuity all these years until recently, and if I had, I probably would have NOT invested that way. I'm beginnng to think it's fortunate I did not read all the negative reviews of annuities, because then I would have never had the "peace of mind" I do now knowing I will receive a lifetime income. Just to play it safe though, I've decided to live off the annuity interest (thereby keeping the principal intact), and will only annuitize as I get closer to 70. Even so, the interest gives my about $2,500/month take-home, which is still alright
I'm single, have no heirs, and am a healthy guy of 62. I still like to work, but prefer not to be concerned with money. My annuity has allowed me to foster my love of animals by working at an animal shelter (at minimum wage) for fun. In August I will go off to the Meditteranean to teach physics, and while the money is alright, i'm doing it for fun. Using the annuity the way I am gives me the freedom to work or not to work and not care about salaries.
Cheers,
Rob
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This is the biggest argument for an IA. The auto-pilot philosophy. One that has always made some sense to me. If I ever do buy one, it will only be a small one. Just enough to add to my SS to give me an adequate allowance.
__________________
Retired 3/31/2007@52
Investing style: Full time wuss.
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04-09-2009, 07:14 AM
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#10
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Recycles dryer sheets
Join Date: Nov 2005
Posts: 331
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Quote:
Originally Posted by mathjak107
the big advantage of an immeadiate annuity over investing on your own is they have something in the equation you can never duplicate in your investing.
A BIG PILE OF DEAD PEOPLE
that money is thrown back in to give you those larger then you can do on your own withdrawl rates
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This is very true.
In my case, I'm still weighing it. What I do is take a large portion of what I've have, and go out about 30 years in my case. I'm 56. So that makes 86 for my wife and myself. I divide this amount by about 360 months and then add a bit. This gives me a guaranteed monthy withdrawal. Keep money aside for something big, like a good vacation, car, etc.
I see what about 4% interest can generate from this large sum. If I like it, or need to add some, I simply add a bit.
You can annuitize things yourself, not all of the "dead folks" money is thrown into your "live folks" payout, it goes to building up reserves, profits and money for the horsethieves to invest in MBSs and the like.
Also, most people buy annuities, but don't fully understand what they buy. Learn to read contracts, practice this, ask many questions. Be rock solid sure about what you are purchasing. Ask if an upfront fee is taken out for the agents commissions. There are so many different annuity products that it can make your head spin.
jug
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04-09-2009, 07:33 AM
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#11
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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 donheff
We haven't had a fight discussion about SPIAs in a long time. I suspect with their portfolios decimated no one wants to dedicate a big chunk of cash to one until they recover a bit. Also, I haven't looked lately, but with interest rates low I would expect the rates are not great.
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True, but many SPIAs aren't the high-fee products that are pushed by salescritters and which are appropriate for almost no one.
Depending on the prevailing interest rates and the degree to which one is worried about out living their money, using an SPIA for part of their retirement income stream can work well, particularly if they aren't too concerned about passing wealth to their potential heirs.
But right now, with long term Treasury rates (a key driver of payout in an SPIA) looking so pathetic, this isn't the time I'd want to be buying one.
__________________
"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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04-09-2009, 07:52 AM
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#12
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Quote:
Originally Posted by ziggy29
But right now, with long term Treasury rates (a key driver of payout in an SPIA) looking so pathetic, this isn't the time I'd want to be buying one.
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The TSP offers fixed immediate lifetime annuities as a withdrawal option. Earlier in 2009 the annuity interest rate (used along with your age in computing monthly payments) was the lowest it has ever been, at least since 1989. I haven't looked at earlier rates.
__________________
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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04-09-2009, 07:59 AM
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#13
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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 Want2retire
The TSP offers fixed immediate lifetime annuities as a withdrawal option. Earlier in 2009 the annuity interest rate (used along with your age in computing monthly payments) was the lowest it has ever been, at least since 1989. I haven't looked at earlier rates.
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Could you please post the link to that? I no longer have an account and I couldn't find the interest rate page in the public TSP area.
FYI, interest rate in June (corrected) 2007 was 5.25% when I purchased my single life annuity. What is it now?
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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04-09-2009, 08:40 AM
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#14
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Quote:
Originally Posted by freebird5825
Could you please post the link to that? I no longer have an account and I couldn't find the interest rate page in the public TSP area.
FYI, interest rate in July 2007 was 5.25% when I purchased my single life annuity. What is it now?
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The (updated) present annuity interest rate is available here. Click on "What's New", then "Current Information", and it is about the 7th bullet down. You got a great deal! It was 3.125% for annuities bought in April, 2009, and 2.75% for annuities bought in March, 2009.
As for the historical information - - I copied it to my retirement spreadsheet from a listing I found on the TSP website many years ago, and I have been updating it each month myself using the figures available at the webpage above. So, I don't know if it is on the website any more or not. I didn't miss a month until February, 2009, so my data has one missing month. That is the only gap in my time series. And, 2.75% is lower than any other from 1989-present.
__________________
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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04-09-2009, 09:03 AM
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#15
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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 Want2retire
The (updated) present annuity interest rate is available here. Click on "What's New", then "Current Information", and it is about the 7th bullet down. You got a great deal! It was 3.125% for annuities bought in April, 2009, and 2.75% for annuities bought in March, 2009.
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Yep. Using 5.25% as the rate I'd be slightly inclined to purchase an SPIA with a portion of my retirement accounts when I hang it up. At 3% or so, it's a no-go.
__________________
"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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04-09-2009, 09:06 AM
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#16
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Dryer sheet aficionado
Join Date: Jun 2008
Posts: 49
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Thanks for the responses
I have been reading a lot . Ed Slott, Ray Lucia, Paul Merriman.
I will wait about a year I guess as I will recieve a year's severance.I just hate getting such a low rate on a one year CD. I'll keep watching this board and chiming in occasionally.
Thanks again
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04-09-2009, 09:42 AM
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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: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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Quote:
Originally Posted by Want2retire
The (updated) present annuity interest rate is available here. Click on "What's New", then "Current Information", and it is about the 7th bullet down. You got a great deal! It was 3.125% for annuities bought in April, 2009, and 2.75% for annuities bought in March, 2009.
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TY I never thought to look there.
Re "great deal" - I guess I did.
Sometimes I get the lemonade instead of lemons.
I had some co-w*rkers telling me I was nuts to do the immediate fixed annuity option, I should roll it over, do something part time, blah blah blah. What they didn't realize is I had my own independent retirement portfolio built up besides the TSP. My intent was to use as little of the annuity as possible for living expenses and reinvest the rest via DCA. I am doing that now.
I already knew that I would be in a lower tax bracket (I estimated 15%) than when I was socking all that away. I started my TSP contributions at 5% for 2 years, then jacked it up to 10%. When we were allowed to increase it, I upped it every year in 1% increments to 15%. I even ran it at approx 19% after the IRS increased the annual amount. Oh yeah.
I found out how to do all this in one of my investing books, read years ago.
For others reading this, the TSP immediate fixed annuity option is as plain jane as they come. It is not like the other complicated annuity products you see out there today.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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04-09-2009, 10:41 AM
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#18
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Quote:
Originally Posted by freebird5825
TY I never thought to look there.
Re "great deal" - I guess I did.
Sometimes I get the lemonade instead of lemons.
I had some co-w*rkers telling me I was nuts to do the immediate fixed annuity option, I should roll it over, do something part time, blah blah blah. What they didn't realize is I had my own independent retirement portfolio built up besides the TSP. My intent was to use as little of the annuity as possible for living expenses and reinvest the rest via DCA. I am doing that now.
I already knew that I would be in a lower tax bracket (I estimated 15%) than when I was socking all that away. I started my TSP contributions at 5% for 2 years, then jacked it up to 10%. When we were allowed to increase it, I upped it every year in 1% increments to 15%. I even ran it at approx 19% after the IRS increased the annual amount. Oh yeah.
I found out how to do all this in one of my investing books, read years ago.
For others reading this, the TSP immediate fixed annuity option is as plain jane as they come. It is not like the other complicated annuity products you see out there today.
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Sounds like you are doing just fine. I had originally planned to get a TSP immediate fixed annuity, but decided for several reasons not to do so. One of those reasons is the low interest right now. Instead, I plan to withdraw my TSP as equal monthly payments (the amount of which can be changed once a year).
__________________
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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04-09-2009, 11:05 AM
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#19
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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 sailfish
I have been reading a lot . Ed Slott, Ray Lucia, Paul Merriman.
I will wait about a year I guess as I will recieve a year's severance.I just hate getting such a low rate on a one year CD. I'll keep watching this board and chiming in occasionally.
Thanks again
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Sorry for the side step there about TSP annuities.
Have you looked at GIC (guaranteed interest certificates) type products? Again, they are insurance company based products with the accompanying carrier default risk. I had one for a short time as a temporary holding area for a life insurance payout until I figured out what I really wanted to do. Interest rate was OK, but not spectacular. There were no withdrawal penalties involved that I recall.
It worked out well for me.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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04-09-2009, 12:19 PM
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#20
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Quote:
Originally Posted by Dawg54
This is the biggest argument for an IA. The auto-pilot philosophy. One that has always made some sense to me. If I ever do buy one, it will only be a small one. Just enough to add to my SS to give me an adequate allowance.
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Also known as the "blissful ignorance" philosophy?
The issue has come down to the usual personal choices, and it's cheaper to do for yourself (if you care to) than to pay someone else to do it. At least the expenses are a lot lower than when Milevsky castigated IAs in the 1990s, and he's recently returned to favoring annuities.
Sailfish, one of the newer investment books is Milevsky's "Are You A Stock or A Bond?", and you may want to read the annuity chapters before you start writing checks.
Quote:
Originally Posted by donheff
I suspect with their portfolios decimated no one wants to dedicate a big chunk of cash to one until they recover a bit.
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I'd be delighted if my portfolio had been merely decimated instead of halved...
__________________
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Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
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