Is an Annuity a good way to get over a SWR of 5%?

[MasterBlaster]

Quote:

Originally Posted by Cut-Throat Understand that we are talking about someone who is age 62 or greater! - When the rules change, it will be for those well under that age. Certain politicians have found out how popular it is to mess with SS.

You may or may not be right here.

It just may be that SS gets capped at X dollars a month. When there won't be enough to go around it just may not be the best position to be in to be getting more than everyone else. Why should someone else get less just cause you are older than 62. That is one of the options that congress has to "fix" SS.

again - The SS as annuity is not a risk free option

[REWahoo]

Quote:

Originally Posted by Cut-Throat I played around with some numbers on my spreadsheet and with a 2% 'real' return on the invested money lowers the payout at age 70 to about 8%. The amazing part is that to lower the payout of the 'annuity' to under 4% you have to earn over 19% 'Real' interest(over inflation) every year on the money you took from SS for the 8 years until age 70! - very doubtful indeed! I think I now understand why a lot of 'Financial writers' advise the delay of S.S. to age 70, if you can afford it!

We've probably had a half-dozen or more threads on this subject in the past couple of years and each time it comes up it seems like a few more light bulbs go off on the forum. In my case it was this discussion that helped me understand the possilbe benefits of delaying. As stated in that thread, this is a complex subject and it takes a while for some of us non-MENSA types to get a grasp on the subject.

Quote:

Originally Posted by MasterBlaster Why should someone else get less just cause you are older than 62.

That is the way it is now. Most pension systems work this way also. Older people planned on benefits and can no longer adjust to them being changed. - And they Vote!

Quote:

Originally Posted by REWahoo! As stated in that thread, this is a complex subject and it takes a while for some of us non-MENSA types to get a grasp on the subject.

You have the natural ability to call me an idiot, and somehow I feel good about it! 8)

Quote:

Originally Posted by MasterBlaster It just may be that SS gets capped at X dollars a month. When there won't be enough to go around it just may not be the best position to be in to be getting more than everyone else. again - The SS as annuity is not a risk free option

Understand the Social Security is one of the only fiscally sound programs that the government is running. Won't be running in the red until 2041. Where do you think they get the money for the $200 Billion Deficit that the government is racking up today?

Also, Social Security is not the problem. Bush Jr. wanted to 'put a feather in his cap' by being the Neocon who got the FDR program eliminated. - If he was really concerned with finances of the govenment, he would have addressed Medicare first (the real problem) - Social Security only needs a few tweaks, like what was done in the early 80's.

BTW- There are no risk-free things in Life.

[REWahoo]

Quote:

Originally Posted by Cut-Throat You have the natural ability to call me an idiot, and somehow I feel good about it! 8)

Well, it takes one to know one. At least I lumped you in with some pretty good company!

[MasterBlaster]

CT:

Can't you have a simple discussion without bringing in your bizarre worldview ?

BTW:

I disagree with you about when SS goes into the red. Some of us know that the "trust fund" was spent long ago. I predict around 2017 as the year in which the Chinese and others quit buying US gov't bonds. That will be the year when major changes are introduced. Major changes are inevitable.

Quote:

Originally Posted by MasterBlaster CT: Can't you have a simple discussion without bringing in your bizarre worldview ? BTW: I disagree with you about when SS goes into the red. Some of us know that the "trust fund" was spent long ago. I predict around 2017 as the year in which the Chinese and others quit buying US gov't bonds. That will be the year when major changes are introduced. Major changes are inevitable.

I just told you what happened last year, if you were paying attention. Nothing but history.

Bizarre World views is when someone predicts that they know what will happen in the year 2017!

[HFWR]

I know I'm gonna regret this... NOT!! :P

I'm to the right of CT on most issues, but I'll have to agree that getting rid of SS was/is one of the goals of the so-called "neocons"...

One of the first things the Iraqi "administrator" (Bremer?) did upon arriving in Iraq was institute a flat tax! Just what was needed to restore the economy...

Of course, since most of the industrial base had been "flattened", maybe it was appropriate... :P

[astromeria]

Neocons are primarily concerned with world domination foreign policy. It's trditional conservatives and garden-variety libertarians who want to destroy undermine confidence in get rid of finagle to the advantage of the well-off privatize Social Security.

[donheff]

This is just a thought experiment for me since I already have a good COLAd pension and don't need an annuity. But the more I read these threads, the more I think that if I was that proverbial 65 YO single guy with $1M I would get one. At 65 I would have to be prepared for a possible 30 years in retirement - thus I would start out with around $40K in withdrawals from a $1M portfolio. If the market went south early on, I would be a basket case, worrying about my future. If the market went well for 8-10 years, I could gradually start increasing my withdrawals - probably just when I can no longer make use of the extra dough.

If, on the other hand, I dumped $600K into an SPIA, I would get the same $40K, inflation protected withdrawl assured for life. I would no longer worry about Mr. Market going south. I could lead the retirement I would have funded with the full portfolio on the annuity alone. I would make sure to pick Brewer certified insurance companies and split the portfolio amoung two or three to take advantage of my state's insurance guarantee.

With my $400K remaining portfolio I could pull down an extra $16K/year for travel, that Lexus I could never afford, hookers in Thailand, or whatever caught my fancy. Or maybe I would just pull out $10K so I could keep building up a bigger estate to give to my kids or charity.

[Mr._johngalt]

Quote:

Originally Posted by Cut-Throat I just told you what happened last year, if you were paying attention. Nothing but history. Bizarre World views is when someone predicts that they know what will happen in the year 2017!

Or tomorrow for that matter. It's why I always make my predictions
non-specific as to timing.

JG

[modlair]

I don't know the answer to this question:

If an insurance company from whom you bought an annuity is sued out of existance somehow for something, is there any protection given that annuity? Meaning is there some kind of FDIC equivalent?

Quote:

Originally Posted by 2B I will say that FIRECalc favors taking the money at 62 based on my runs. Scott Burns advocates waiting until 70 if you have the cash to defer.

I played around with FIRECalc this afternoon and for me, It favors delaying SS to age 70. Gives me $2K more per year to be 100% safe over taking SS at age 62.

I only have a 55% allocation to stocks though.

[brewer12345]

Quote:

Originally Posted by rodmail I don't know the answer to this question: If an insurance company from whom you bought an annuity is sued out of existance somehow for something, is there any protection given that annuity? Meaning is there some kind of FDIC equivalent?

Sort of. Each state operattes a state guaranty fund that all of the insurers domiciled in the state pay into it. If an insurer blows up and there aren't enough assets to cover the policyholders, the state insurance commissioner will dip into the guaranty fund. I suppose you might see a state gummint also step into the breach, but that seems pretty unlikely to me. There are also per-policy limits to the amount covered by the guaranty funds.

So there is a safety net, but it is a far cry from the protection afforded by the FDIC. Insurer creditworthiness matters a lot more than bank creditworthiness.

[MasterBlaster]

Insurance insolvency:

Here's a link to read about it...

http://www.iii.org/media/hottopics/i.../insolvencies/

[mathjak107]

when you figured laying out the 150k did you also figure the 4-7% investment value that you are giving up by not taking ss at 62 and spending down your portfolio instead ?

Quote:

Originally Posted by mathjak107 when you figured laying out the 150k did you also figure the 4-7% investment value that you are giving up by not taking ss at 62 and spending down your portfolio instead ?

In my spreadsheet I used a 'real' investment return. Since SS has a CPI adjustment. I used 2% real. And yes you'd have to get 19% real to get a 4% SWR on the invested amt that would be the same as the SS delayed amt. So I used about $200K instead of 150K

[modlair]

Quote:

I don't know the answer to this question: If an insurance company from whom you bought an annuity is sued out of existance somehow for something, is there any protection given that annuity? Meaning is there some kind of FDIC equivalent?

In the link provided by MasterBlaster there is this:

"While all state funds cover homeowners and auto insurance claims, some other types of insurance may not be covered. The NAIC model law excludes annuities, life, disability, accident and health, surety, ocean marine, mortgage guaranty and title insurance, but some states that do not follow the guidelines of the model law in its entirety may include some of these types of insurance."

There is also talk of a limit of $100K in some states of coverage for a failed insurer. That would be what? 2-3 yrs payment?

Sorry guys, but my read on this is that all the folks who are buying an annuity for the "GUARANTEE" are not getting what they're paying for. It would not take much to have a couple of Florida hurricanes, a California earthquake and a prolonged market dive over maybe 4 yrs to put a LOT of these folks under.

[haha]

I have been on this board 3.5 years. Every time this discussion has come up, I have given the comparable annuity analysis that to me seemed to strongly argue for delaying, absent unusual circumstances, or a absent a strong fear that the rules would be changed to hurt the delayers.

Mostly what I had to say was ignored- the popular sentiment was always "Take it and run. You might die before you get your pound of flesh."

Now, sentiment has come almost all the way to a majority favoring delay.

What has happened to cause this change?

Ha