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Wow this is still going on? I don't think the argument is a 4% annuity will not beat a conservative stock/bond mix, at least I don't think it is. I think the argument for the 4% annuity is it is guaranteed 4% payout, which is obviously not the case with stock/bond. I also understand the main argument against annuities is the ridiculous fees they charge, am I right there?
spia's have no added or hidden fees just like buying a cd . the draw rate is the whole story .
the fact being argued is that when it comes to conservative portfolio's , success rates , draws and balances can be higher using partial spia's and your own investing than trying to do it solely with stocks and bonds . data has shown this to be the case over and over
I know we have done this a lot over the years, I think I even started my own thread. The overwhelming conclusion as I recall was they are not a good use of some of our money, and fees were the reason. So what is the trick to avoiding large fees? Can you buy direct and eliminate the sale commission?
avoid anything but spia's (single premium immediate annuities ) . they have no other fees attached . if you like the draw rate that is your deal . it is no different than buying a cd . that cd has all fees inclusive . the spia is no different , if you like the draw rate that is the deal . there is nothing else that comes out .
a 65 year old gets a 6.65% draw today and if it is a joint annuity that passes to an heir they get a draw rate of 5.60% , that is the deal there are no outside fees ..
Well last time I checked 5.6% was better than 1%. My initial plan was to take a portion of our house proceeds, maybe $100,000 and buy an annuity for emergency expenses. As we have no kids preserving our estate means little. I was talked out of it after a long thread here about it. But obviously I need to look at it again.
don't confuse a draw rate with interest . you are buying a pension in this case .
a pension fund you pay in to pays you x-amount of money a year . it is not a return , nor do you know the rate of return until you or you and your spouse die .
You can call it whatever you want. It's an inferior choice in the long run. You can backtest the returns of today's SPIA versus the worst time to begin retirement (1966). The SPIA got badly beaten.
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Well last time I checked 5.6% was better than 1%.
Putting money in a CD is not investing. That's a strawman argument to say that CD's only pay 1%. You invest in a low risk mix of bond and stock index funds as a comparison. See the video I posted earlier.
You can call it whatever you want. It's an inferior choice in the long run. You can backtest the returns of today's SPIA versus the worst time to begin retirement (1966). The SPIA got badly beaten.
Putting money in a CD is not investing. That's a strawman argument to say that CD's only pay 1%. You invest in a low risk mix of bond and stock index funds as a comparison. See the video I posted earlier.
over 1000 different scenarios were looked at and in most cases equities and spia's surpassed just stock ,bonds and cash .
I used the CD rate because a CD was mentioned. Low risk stocks and bonds still carry risk, an annuity is a guaranteed payout and there is value in that.. My plan is to utilize this $100,000 as further income and a payout of 5.6% will produce more income than a 4% withdraw from a low risk stock/bond portfolio. However when I contacted Vanguard I got a figure that was essentially a 5% payout not inflation adjusted. The inflation adjustment was something like $257/month to start again on $100,000. Why would I do that?. Now this figure will probably rise with time, and I only contacted one company, and it needs to. I don't think it is worth only a 1% difference to forfeit $100,000.
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