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the more conservative the portfiolio you intend to use the bigger the bang from an spia and the bigger the pile at the end .. immediateannuity,com the biggest seller shows a 5.78% withdrawal rate for a 65 year old male.
try running that withdrawal rate on your own portfolio for 30-35 years and see how long that lasts. you will have zero for heirs quite often .
a 70/30 or 80/20 mix may benefit a little , a 40/60 and lower will benefit alot. a 60/40, 50/50 mix will get a greater success rate but not as big a jump as the 40/60.
with low rates and high stock valuations new retirees like us may end up spending down at an alarming rate early on.
to me the biggest factor down the road is not the success rate but the "wife factor" i mentioned above.
wives will appreciate at least getting a monthly check in the mail box that covers their basic expenses, your wife will freak on her own with a 60/40 mix of stocks the first big drop if she counts on that portfolio to pay the bills and she is alone..
you can take that to the bank.
Last edited by mathjak107; 01-06-2015 at 04:02 AM..
A SPIA is insurance against running out of money. There is no real ROI. Take a step back and look into the logic of it.
I can annuitize $250,000 at age 62 and get around $1100 a month for life for my wife and I. I get my money back in 18 1/2 years. After that, I'm making money, although the returns divided by the 18 1/2 will be paltry. To get the equivalent income elsewhere requires a 4 1/2 % return yearly. On average, that should be doable, but what happens if the markets have a big correction or enter a bear market
Look no further than the 2000's which had "big corrections". You were able to take out 5 1/2% even from a 50/50 portfolio and still retain your original principal after 14 years. With a 33/67 portfolio you could probably take out more. Then you were 14 years closer to death and able to take out even more and keep pace with inflation. If you live to be 95 then how much are those FIXED annuity payments going to be worth when factoring in inflation? That's the other issue discussed in the Forbes article.
After 18 1/2 years you are finally earning a little bit of ROI but the returns are very muted even if you live to be 120. That's the point of the Forbes article. Your ROI can never recover from making zero ROI in the first 18 1/2 years.
I show a 50/50 mix for someone who retired year 2000 ,4% withdrawal , inflation adjusted has spent down 60% of all their funds in the first 15 years with barely a 1.77% real return,.
with no cuts they will be broke well before.
but putting that aside here is something else to lean about retirement.
the good up years have to pay for the future down years.
peter lynch declared the safe with drawl rate back in the 1980's to be 7%. after all 17 years of great markets made that conservative.
then the downturns came and that was far from the case so he withdrew that comment.
without knowing if we are headed for another crappy 15 year period you can't say what you can spend. you do not know until your period is over
We've been over this before. I located that chart that I posted in another thread. It was actually a 25/75 portfolio. Very low risk and it survived the crappy period just fine. Again this is how annuities are sold by commission hungry salesmen. They sell fear of the stock market while ignoring bonds. They also ignore the elementary strategy of rebalancing.
Inflation does not discriminate.
Those fixed SPIA payments will suffer due to inflation as the annuitant gets older. Inflation is one more reason to avoid an annuity. Thanks for bringing up inflation.
if you are trying to show something about retirement i have zero clue what the chart you posted is supposed to mean.
a retirement period spans 30 years and at any point it has to be able to absorb the worst times frames to date, which by the way had nothing to do with 2008 . that was good compared to the 1965-1966 time frame .
retirees had 20 sucky market years and then got slammned on top of it with double digit inflation creaming their account balances as they had to pull 2x the money out to pay bills.
retirement calculating has to include inflation adjusting. when you use an spia and your own investing you inflation adjust your draw.
don't waste our time trying to prove anything with whatever that thing is you posted.
if you want to do your own research and numbers crunching throw the allocations and draw you want to try into something like firecalc and post your results.
like i said you are dabbling in an area you know zero about and you just keep proving it to us more and more.
Last edited by mathjak107; 01-06-2015 at 05:26 PM..
a retirement period spans 30 years and at any point it has to be able to absorb the worst times frames to date, which by the way had nothing to do with 2008 . that was good compared to the 1965-1966 time frame .
retirees had 20 sucky market years and then got slammned on top of it with double digit inflation creaming their account balances as they had to pull 2x the money out to pay bills.
retirement calculating has to include inflation adjusting. when you use an spia and your own investing you inflation adjust your draw.
Nice slight of hand! You cherry pick short time periods. Notice what happens after poor performing period... The markets BOUNCE BACK! Don't waste our time making blanket statements without providing data.
75/25 portfolio returns:
1965_ +3.64%
1966_ minus 0.31
1967_ +4.77%
1968_+5.16
1969_minus 5.82
1970_ +13.45
1971_+10.90
1972_ +27.22
Inflation effects both the SPIA and a 75/25 portfolio!
short time frames? 1965-1995 is short? that is a rolling 30 year time frame which represents a standardized retirement time frame . it is also the time frame the 4% rule is based on.,
back to the classroom for you , like i said stop trying t5o prove things wrong and start to learn about what the trinity study is all about . do a little learning about bill bengens's work.
then you will understand a bit about why what you are trying to post is nonesense and how the pieces of the retirement puzzle fit together.
until you learn the basics behind what is being said continuing this discussion with you is silly.
retirement math is pulling whatever draw you want each year , subjecting it to the market,inflation and interest rates and seeing your balance. take a raise by the amount of inflation and start the process over
at the end of 30 years see what is left.
the single biggest factor will not be any kind of average return. it will be the sequences of whatever gains and losses you have as they come in that order while you are spending down and inflation adjusting.
whetrher or not any money is left by the end of 30 years is what this entire discussion is about.
Last edited by mathjak107; 01-07-2015 at 01:58 AM..
Nice slight of hand! You cherry pick short time periods. Notice what happens after poor performing period... The markets BOUNCE BACK! Don't waste our time making blanket statements without providing data.
75/25 portfolio returns:
1965_ +3.64%
1966_ minus 0.31
1967_ +4.77%
1968_+5.16
1969_minus 5.82
1970_ +13.45
1971_+10.90
1972_ +27.22
Inflation effects both the SPIA and a 75/25 portfolio!
this has zero to do with retirement draw rates. in fact it is off base from this discussion it has less than zero to do with it.
i just have no clue why you refuse to learn the basics of safe withdrawal rates and just keep posting the same off base comments that are not even related.
in fact it is only in the interest of education that i am even continuing to comment .
why not start with this, it is a very good place to begin and moshe milevsky is one of the most brilliant researchers in the financial world. his words effect the entire planning industry.
Last edited by mathjak107; 01-07-2015 at 02:07 AM..
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