Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
it is not part of the allocation . it is part of income , like ss is or a pension .
once it is an annuity it is not part of the portfolio so to speak . it is treated more like an income source as a pension , alimony , ss or rental income would be . it is no longer an asset that gets stress tested or rebalanced to maintain an allocation ..
Last edited by mathjak107; 12-25-2018 at 10:20 AM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,101 posts, read 7,565,597 times
Reputation: 9835
Income.
Just for fun. Our GLWB VA's, I kept track of the account values from 2009-present. Since October and the Market declines, I haven't been as diligent in tracking the liquidation-account value. Many of our annuities will be entering the withdrawal phase during 2019 thru 2023, thus the account value has little meaning while the Income value is now paramount.
I would count the cost as part of the fixed income portfolio if you are trying to allocated between equities and bonds. I would also count social security and a pension as part of the fixed income assets.
My logic is to say how much in assets would I need to get this amount of income. If your income sources are large enough you go toward 100% equity, but be sure to have a good emergency fund available.
That really is not a good idea . Income is income . You can’t rebalance an annuity , you can’t rebalance a pension or ss . There are reasons they are not included in the calculation. You also can’t spend more in some years then others like the actual money .
What they do is reduce the needs from your portfolio which should be stress tested for the amount and allocation you need from it . That is always less ss ,pension and annuity income since only the portfolio portion gets stress tested.
So if you need 100k and ss, pension and annuity income is 60k you need to set up a portfolio allocation that has at least a 90% chance of providing 40k .. so you need 1 million in at least a 40/60 allocation .
This is already after subtracting out income . There is a very very good reason for this
A safe withdrawal rate assumes under worst case outcomes you end 30 years with one dollar left .you don’t actually have that lump sum to spend down from the annuity or ss so you can never use it to calculate. It is solely income only and reduces your needs from your stocks and bonds . It is not replacing them or any part of them
Last edited by mathjak107; 12-25-2018 at 01:02 PM..
That really is not a good idea . Income is income . You can’t rebalance an annuity , you can’t rebalance a pension or ss . There are reasons they are not included in the calculation. You also can’t spend more in some years then others like the actual money .
What they do is reduce the needs from your portfolio which should be stress tested for the amount and allocation you need from it . That is always less ss ,pension and annuity income since only the portfolio portion gets stress tested.
So if you need 100k and ss, pension and annuity income is 60k you need to set up a portfolio allocation that has at least a 90% chance of providing 40k .. so you need 1 million in at least a 40/60 allocation .
This is already after subtracting out income . There is a very very good reason for this
A safe withdrawal rate assumes under worst case outcomes you end 30 years with one dollar left .you don’t actually have that lump sum to spend down from the annuity or ss so you can never use it to calculate. It is solely income only and reduces your needs from your stocks and bonds . It is not replacing them or any part of them
This is why people need to understand the how and why things are done certain ways . Many like to find ways to turn things in to assets that should not be as far as being assets go ,so we can feel good . But there are a lot of reasons we don’t start taking income sources and start calculating lump sum values for them and incorporating those numbers in to a retirement portfolio calculation which is based on sustainability of a big ole pile of assets
Last edited by mathjak107; 12-25-2018 at 02:53 PM..
Yes , you bought a pension . It no longer is a portfolio investment that gets calculated for success rate nor gets rebalanced nor has sequence risk .
if you have greater income sources you may decide you want a more aggressive portfolio just as if you had a large pension . But it itself is not part of that portfolio
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,101 posts, read 7,565,597 times
Reputation: 9835
Some pensions are better than others.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
