Insured & Uninsured Income Streams: Combination to ensure security for retirement

[brewer12345]

Insurance companies should be affected by CDO failures, but the difference is that in the case of insurance companies, comparatively, more regulations are in place to curb such risks. There are capital requirements. The types of investments that may be done are also governed. There are reinsurers, guarantors and shareholders to share the risks. There is a constant flow of funds in the form of premium payment by policyholders. These make insurance companies safer than those other institutions (eg ordinary trading companies) that don't have these, or are not required to have these. Theoretically, the only risk-free investment is government bonds, because the government can print money. Beside this, all other investments carry some risk in different degrees. So the meaningful argument is not to find a 100%-risk-free non-government-bond investment. It's meaningful only if it's about risk management. In this case, diversifying a portion of your nest egg to high-quality annuities is a calculated risk. Putting everything into uninsured portfolio of stocks and bonds may not be a good idea from the perspective of sound risk management.

Sweetheart, I have probably forgotten more about life insurers than you ever learned. I have definately seen enough of them from the inside to be very, very particular about which ones I would take exposure to and very skeptical about the value of many insurance products. While there are a lot of safeguards set up, things are not as cut and dry as you suggest.

 

[Gumby]

I am very fortunate to be in such a situation without having to actually buy any annuities as by my reckoning I am age 53 and have 5 annuities in the pipeline:

Soc Security (self & DW) starts any age after 62

...

I would only count social security as an annuity if you like buying them from B rated insurers. The US Government's promise of payment is suspect at best for those currently under 55.

 

[Alan]

I would only count social security as an annuity if you like buying them from B rated insurers. The US Government's promise of payment is suspect at best for those currently under 55.

There is no way the US is going to default and stop paying SS. It may well get smaller but if you truly believe that SS is going to stop altogether , then you must have trouble sleeping at night.

I have a question for OP - since you are planning to retire at 35 and have annuities as an insured source of a significant slice of your needs, how much are you planning to spend on buying these annuities?

 

[Gumby]

No trouble sleeping at night. My retirement plans have never assumed a dime from social security. If I get any at all, it will just be extra drinking money.

 

[twaddle]

What do you think?

I think you might even survive the Welcome Wagon! Congrats!

I like the idea of longevity insurance, but I'm not crazy about the costs, and I'm not sure I should buy it until it's clear I'll need it.

For example, you say you want to retire at 35. Are you planning to buy an SPIA at age 35? If so, would you be happy with a 3.5% inflation-adjusted income?

 

[Alan]

My retirement plans have never assumed a dime from social security. If I get any at all, it will just be extra drinking money.

Since you are eligible to receive SS in a mere 13 years [-]you can [/-] I fully expect you will have plenty of drinking money.

 

[haha]

I am VERY resistant and indeed openly hostile to the notion that these products are good because their premium structures "force" me to save or because they lock me in with high fees and surrender charges that they "protect" me from my emotional inclinations to make bonehead moves in the market. Insulting.

Although this does not apply to you, it is established fact that it does apply to a great many people. So for the population at large this is a relevant issue.

Ha

 

[haha]

So I give up on Kansas - move to Puerto Vallarta or Cabo - buy some immediate annuities in Euro's, Swiss Franc's, Singaphore $, - and have my American SS.

If I'm not as dumb as O.J. - I'm good to go from 64 to when I croak with not too much fear from the French problem my fellow Brit's feared in the 80's. I.E. pension/inflation adjustment in home currency while you lived in another country/another inflation rate/variable currency conversion over time.

This has better odds ? than a worldwide diversified portfolio - with a current yield of 3% (U.S. $). I'm thinking of a Swede who posts at Raddr's forum.

heh heh heh - .

Uncle Mick, I know there is important information buried in this post. But it seems that you have used a cypher, and I don't have the key.

Could you help?

 

[REWahoo]

Uncle Mick, I know there is important information buried in this post. But it seems that you have used a cypher, and I don't have the key.

Could you help?

Of course my Sony Greenspan Translation Tricorder is only a 2005 model and isn't always 100% accurate in decoding unclemic, but it's better than nothing...

Psst. Wanna buy a slightly used Sony?

 

[twaddle]

You guys have been around for how many years now? And you still can't translate UM-speak?

The "Swede" refers to that Ben guy (whom I thought was a Dane). Ben likes a 10x10 allocation. UM likes the idea of living off your investment yield. Translation: diversify and live off the yield instead of buying an annuity.

 

[haha]

You guys have been around for how many years now? And you still can't translate UM-speak?

The "Swede" refers to that Ben guy (whom I thought was a Dane).

To a Finn like UncleM, Denmark is just SW Sweden.

Ha

 

[samclem]

I'd like to add that with the biomedical field's rate of progression, we can only expect to live longer. So, any swr for 30 years or even 40 years are no guarantee of a secure stream of retirement income, especially for ER. For example, I plan to ER at 35, in 5 years. A 30-year stream of income can only last me till age 65, and a 40-year one, age 75. This is not even going to cover the current expected lifespan of people in developed countries such as US and Singapore. But it's different in the case of an annuity. It's a contractual obligation that an insurer must deliver the income, even if I live to 100 or more. And, looking at the present research, there is a high chance we will have the technology to extend our life beyond 100, in the next few decades.

Wow, those insurance companies must be brilliant:
a) They have apparently already priced into their contracts the assumption that many people will live to be 100 years old. I didn't think of that! That finally explains why annuities cost as much as they do.

Already, better-educated people are able to extend their lifespan by improving their calories intake, antioxidants intake, health screening and illness preventions, and air and water quality.

b) So, "better educated" people will live longer, thereby costing the annuity issuers more money. In this case, it would seem logical that the annuity sellers would concentrate on selling more policies to less educated people.

And, that's where I'll leave that.

 

[Dawg52]

So when is someone going to mention the creative use of annuities to ward off lawyers, creditors, and other various and sundry bloodsuckers encountered in America?

Yes, what about this? If you are sued for some unfortunate event, are immediate annuities exempt from the calculation of your net worth and potential payout from a lawsuit? OJ comes to mind. I don't think his NFL pension can be touched.

Not a good reason for having an annuity as a simple umbrella policy is a better way to go, if you have enough coverage. If I were going to make an argument for annuities, I would say it might be a good way to help put things on auto-pilot. As we get older, that will probably be more appealing. But Unclemick's approach is probably the way I will go. Convert to a target fund and let the fund do it's thing as it spits off dividends.

 

[haha]

Yes, what about this? If you are sued for some unfortunate event, are immediate annuities exempt from the calculation of your net worth and potential payout from a lawsuit? OJ comes to mind. I don't think his NFL pension can be touched.

It undoubtedly varies by state, but I have a good friend now retired from legal-beagling who set up many of his defendant clients with immediate annuities to shield those assets.

Ha

 

[REWahoo]

The "Swede" refers to that Ben guy (whom I thought was a Dane).

I would have sworn there was a Norwegian in there somewhere...

 

[twaddle]

I would have sworn there was a Norwegian in there somewhere...

Pffft. She's about dividends! The Swede is about globally diversified yield. OJ is about annuities. And to get past the snake, you throw the bird and say "xyzzy!" Oh, wait. That's a different game.

 

[FIREd]

Yes, what about this? If you are sued for some unfortunate event, are immediate annuities exempt from the calculation of your net worth and potential payout from a lawsuit? OJ comes to mind. I don't think his NFL pension can be touched.

In my homestate, it is my understanding that annuity payouts over $250 a month are fair game for creditor collection.

 

[haha]

Pffft. She's about dividends! The Swede is about globally diversified yield. OJ is about annuities. And to get past the snake, you throw the bird and say "xyzzy!" Oh, wait. That's a different game.

LOL

A FAQ on Mick-Speak!

Ha

 

[FinanceDude]

This thread is like rubbernecking at a fatal accident...........I just can't help myself..............

 

[unclemick]

LOL

An FAQ on Mick-Speak!

Ha

Nah. Everybody's doing fine translation wise. Have confidence in yourselves.

Oh - and no Missoula jokes. Please?

heh heh heh - .

 

[cute fuzzy bunny]

I'm pretty well educated and I just cant kick the dang bacon.

When the insurance companies stop erecting those humongous buildings full of expensive furniture and electronics, I'll start thinking I might talk to one of them.

 

[unclemick]

If Nords runs across Ben on another forum and he gets upset over Swede/Dane - just tell I am same guy who interchanged De Gaul/Bismark:

'God Looks After Drunkards, Fools and The United States of America.'

These things happen - plus I gave my 251,000 mile rusty pickup to the son of the woman who gave it to me at 180,000 miles - who is a foreman on the meat packing line that makes!!! - the raw meat cuts that become Oscar Meyer Center Cut Bacon or so he says.

heh heh heh - Bacon, annuities, dividends - we are doing good..

 

[cute fuzzy bunny]

I'm guessing a drunken fool from the USA is in good hands...and I own some Wellesley just to be sure!

Mmmm...sounds like bacon wrapped filet mignons for dinner. Maybe some roasted fingerling taters and a little asparagus with some bearnaise sauce appearing somewhere on the plate Dang daylight savings time is screwing up my dinner time...

 

[CyclingInvestor]

In my homestate, it is my understanding that annuity payouts over $250 a month are fair game for creditor collection.

In case anyone cares, here is a decent article on annuity creditor protection. A
state by state table is at the bottom.

Creditor Protection for Life Insurance and Annuities

 

[haha]

Mmmm...sounds like bacon wrapped filet mignons for dinner. Maybe some roasted fingerling taters and a little asparagus with some bearnaise sauce appearing somewhere on the plate Dang daylight savings time is screwing up my dinner time...

Those who live well live long. So maybe that bacon is watching over you.

Ha