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Location: Was Midvalley Oregon; Now Eastside Seattle area
13,060 posts, read 7,493,946 times
Reputation: 9787
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Quote:
Originally Posted by FREE866
Ha fair point! But you did refute my original statement on how "playing it safe" can hurt you and "guarenteed income" are sales pitches........the sales person , however made a lot in the form of Annual fees including sub account fees, M&E expenses, etc..if you call the annuity company NOT the salesperson they will give you the breakdown of what you're paying....call them and let us know what they say. I didn't care what the sales person or annuity co makes. All I was concerned was did this product make sense in our retirement plan and can I make acceptable growth (Income) with controlled risk. Please do not confuse Retirement Income goals with Investing.
variable annuities are very complex insurance products...they are basically mutual funds wrapped in an insurance contract and there are layers of fees for everyone! they are pitched as "all the growth and income with limited downside"...thats a fairy tale....and given it is tax deferred growth they should never be bought in an IRA...Well, What can I say, the product works and worked for us in this time period. I would argue that certain annuities are best done in IRA's. We also have 2 small GLWB non-qualified VA's from the same company and 2008 and 2011 vintage. Our strategy on these are different from the IRA annuities. My head is spinning on our choices on the monies (Actual Acct and/or Income Acct) within these annuities.
Sounds like you know a lot about annuities. Start another thread.
Edit: this is what I don't understand. If it's already dropped 50% how much worse can it get? Why wouldn't a person buy a lot instead of a little?
Fear is worst emotion. I thought somebody here sold at the low and went into cash, that person did the opposite of what one should do. I bought more when it drop but I didn’t go whole hog either, so I understand.
Ha fair point! But you did refute my original statement on how "playing it safe" can hurt you and "guarenteed income" are sales pitches........the sales person , however made a lot in the form of Annual fees including sub account fees, M&E expenses, etc..if you call the annuity company NOT the salesperson they will give you the breakdown of what you're paying....call them and let us know what they say
variable annuities are very complex insurance products...they are basically mutual funds wrapped in an insurance contract and there are layers of fees for everyone! they are pitched as "all the growth and income with limited downside"...thats a fairy tale....and given it is tax deferred growth they should never be bought in an IRA...
this is why i say without seeing this deal it is not worth even discussing .. these glwb with market investments show great numbers in the virtual account not your actual account .. you can only utilize the growth generally if you annuitize and they make sure you can't get to more then they want you too , ever
i was pitched one that promised me a minimum of 10% for 10 years or what my market investments did , which ever is higher ..needless to say when you looked under the hood -MEH
if i want an annuity i would get an spia ,, if i wanted an investment i would buy equities ...
If the market just dropped 50% something is seriously wrong and no one knows what will happen next. There's nothing to stop it from dropping arbitrarily low.
Plus the stock market rarely drops 50% in one day, it’s over months or weeks, I believe Oct 2007 to March 2009 is when we did drop 40%.
Fear is worst emotion. I thought somebody here sold at the low and went into cash, that person did the opposite of what one should do. I bought more when it drop but I didn’t go whole hog either, so I understand.
I think that's a good reason, for me at least, to think about what I might do in such a situation so I had a plan to fall back on instead of reacting out of emotion. Easier said than done I'm sure.
Plus the stock market rarely drops 50% in one day, it’s over months or weeks, I believe Oct 2007 to March 2009 is when we did drop 40%.
That's another thing with the below examples. A person isn't going to be withdrawing the same 5% no matter what without the opportunity to adjust spending. If I was one of the lucky 2/3rds I would adjust up and if unlucky I would have to tighten up to make it last longer. Even the unlucky one gets to take 5% and that money lasts 17 years. The average length of retirement is 18 years.
Quote:
Originally Posted by mathjak107
stocks win over very long periods of time like 25-30 years .. shorter term is sporadic .
sequence risk when spending down is the biggest factor ....
the 17-year period (1987-2003), the S&P 500's average return was 13.47%. It doesn't make any difference if we look at the returns from 1987 to 2003 or from 2003 to 1987.
But when taking withdrawals, the sequence of returns makes all the difference. The same initial capital, the same withdrawal amount, the same returns - but a different sequence produces dramatically different results.
if we leave the rate of inflation growth with the principal and spend everything else .
For a $100,000 portfolio adjusted for inflation over those 17 years, the difference is a remaining balance of $76,629 to a deficit of $187,606. depending on the order those gains and losses came in .
never ever use a calculator that simply asks you to fill in a projected average return .
as far as rebalancing , there are many ways . some do it once a year ,, others by bands when allocations get to far out of whack , others by valuations
That's another thing with the below examples. A person isn't going to be withdrawing the same 5% no matter what without the opportunity to adjust spending. If I was one of the lucky 2/3rds I would adjust up and if unlucky I would have to tighten up to make it last longer. Even the unlucky one gets to take 5% and that money lasts 17 years. The average length of retirement is 18 years.
The idea of a safe withdrawal rate is it requires nooooooo adjustments whether good or bad times .. whether you want to cut back anything in the lifestyle you planned around should be a choice not a necessity.. 5% is not a safe withdrawal rate planning for a standard 30 year retirement .
There is no average length of retirement and it certainly is not 18 years . ..... there are only different percentages of men ,women and couples that live to different ages . One in a couple can make it to age 90 which could be 28 years in retirement and that is a tad under 50% where half die and half go on , that is 28 years that has to be supported . .
there is a whopping 73% chance one in a couple will see 85.
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Last edited by mathjak107; 02-01-2019 at 03:04 PM..
The idea of a safe withdrawal rate is it requires nooooooo adjustments whether good or bad times .. whether you want to cut back anything in the lifestyle you planned around should be a choice not a necessity..
There is no average length of retirement and it certainly is not 18 years . ..... there are only percentages of men ,women and singles that live to different ages . One in a couple can make it to age 90 which could be 28 years in retirement and that is only about the 50% point where half die and half go on , 47% to be exact .
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It seems to me adjusting withdrawal rates would be good to do either way. 4% might be good for planning but shouldn't execution be dynamic?
I was trying to come up with a worst case scenario and see how it would be. Hopefully a person had enough money that the only cut backs needed would come out of luxuries. Even the worst case isn't really all that bad.
So far I haven't seen a good reason why a person shouldn't put that bond money to work if equities fell 50%. Yeah, it can fall more but the risk is a lot lower in reality than it was before the drop.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,060 posts, read 7,493,946 times
Reputation: 9787
Quote:
Originally Posted by mathjak107
this is why i say without seeing this deal it is not worth even discussing .. these glwb with market investments show great numbers in the virtual account not your actual account .. you can only utilize the growth generally if you annuitize and they make sure you can't get to more then they want you too , ever
i was pitched one that promised me a minimum of 10% for 10 years or what my market investments did , which ever is higher ..needless to say when you looked under the hood -MEH
if i want an annuity i would get an spia ,, if i wanted an investment i would buy equities ...
It seems to me adjusting withdrawal rates would be good to do either way. 4% might be good for planning but shouldn't execution be dynamic?
I was trying to come up with a worst case scenario and see how it would be. Hopefully a person had enough money that the only cut backs needed would come out of luxuries. Even the worst case isn't really all that bad.
So far I haven't seen a good reason why a person shouldn't put that bond money to work if equities fell 50%. Yeah, it can fall more but the risk is a lot lower in reality than it was before the drop.
Depends on the withdrawal method used . There are a few ..
Typically what is called the constant dollar method which is the 4% inflation adjusted method , should only be dynamic one way , going up ... it is already based on the worst of the worst to date so a pay cut should be rare ...far more common are raises plus the inflation adjusting as anything better than the worst of the worst would give you much more money ..
the bond money always gets used when rebalancing and stocks are down ... there are just different criteria that people use for triggering the rebalance . i rebalanced at years end .
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