Managed payout funds off to a rough start

[WilliamG]

I thought that the distribution was always going to be revised on an annual basis tied to the NAV at that time; i.e., folks will be getting their x% next year but it will be less than the past year. Kinda like an RMD that fluctuates with market value. If so, does anyone know when this revision takes place; i.e., maybe now on calendar year or on a fiscal year based on when the funds started?

[Gearhead Jim]

My understanding was that the distribution would be tied to NAV, but loosely. The idea was that "normal" fluctuations in NAV would not change distributions, only very large or prolonged changes. Speaking of which...

[rgarling]

Quote:

Originally Posted by WilliamG I thought that the distribution was always going to be revised on an annual basis tied to the NAV at that time; i.e., folks will be getting their x% next year but it will be less than the past year. Kinda like an RMD that fluctuates with market value. If so, does anyone know when this revision takes place; i.e., maybe now on calendar year or on a fiscal year based on when the funds started?

This is true. According to the prospectus, the payout will be adjusted annually and tied to the previous 3 year fund performance:

=========

It is possible for a Fund’s monthly distributions to increase or decrease from one year to the
next because the scheduled monthly distributions during any calendar year are based on the
Fund’s performance over the previous three years. There can be no assurance, and there is
no guarantee, that the Funds will provide a fixed or stable level of cash distributions at any
time or over any period of time. An investment in a Fund could lose money over short,

intermediate, or even long periods of time.

[FinanceDude]

Quote:

Originally Posted by Rich_in_Tampa The MPFs implied a commitment to distributing anywhere from 3 to 7% a year with annuity-like reliability. The solo investor hopefully makes no such assumptions in hard times.

Looks like they were trying to mimic a VA at lower cost..........:confused:

[WilliamG]

Thanks rgarling. That is what I was remembering. Funds were begun in May 2008, and I was wondering what the timing was of recomputing distribution based on performance. Also, wondered if they prorate this 3 year average first 2 years or stay the same for 3 years. Maybe folks who purchased funds can tell us?

[Rich_by_the_Bay]

Quote:

Originally Posted by FinanceDude Looks like they were trying to mimic a VA at lower cost..........:confused:

That's my take, too. Or even an "almost fixed" annuity given the gradual changes. And in the long run it will probably happen but I doubt their target market for this was looking for such a wild ride. Best publicity I've seen for a SPIA if true assured lifelong income is what they were looking for.

[WilliamG]

Just got word from my Vanguard Adviser hotline by Dan Wiener that this year's distributions will be down about 16-17% from last year and I infer from that that the reset is done on the calendar year.