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Old 04-11-2014, 04:27 PM
 
29,782 posts, read 34,876,173 times
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Quote:
Originally Posted by hikernut View Post
I see Bill Bernstein being mentioned in this thread. He's a pretty sharp guy, and here is what he has to say about the subject...

If you have a reasonable life expectancy, delay taking Social Security until you are 70; it is the cheapest, safest “annuity” you can “buy.”

If you do a web search on Bernstein AND annuity AND "social security" you'll find a number of articles where he discusses this, and even gives numbers for some scenarios.

hikernut
Yes and not 100 percent all the time. Bernstein talks about two portfolios one constructed at low risk to meet your long term income needs. Another portfolio with greater risk opportunity etc that allows for long term wealth creation. For SOME with pensions SS is not a basic part of that basic living income portfolio in short game over you have more than you need and a strategy like 62/70 becomes attractive to facilitate early retirement. For some SS becomes part of their continuing to invest while retirement early.
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Old 04-11-2014, 04:42 PM
 
Location: Gilbert, AZ
3,182 posts, read 1,962,242 times
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Quote:
Originally Posted by TuborgP View Post
Yes and not 100 percent all the time. Bernstein talks about two portfolios one constructed at low risk to meet your long term income needs. Another portfolio with greater risk opportunity etc that allows for long term wealth creation. For SOME with pensions SS is not a basic part of that basic living income portfolio in short game over you have more than you need and a strategy like 62/70 becomes attractive to facilitate early retirement. For some SS becomes part of their continuing to invest while retirement early.
Sure, someone who doesn't need SS to pay their expenses can do whatever they like... take it early, take it late, or anywhere in between. It's "play money" to them.

But the person who is scratching for every last dollar of income... that's the one that Bernstein is addressing with the quote I mentioned. For someone who is really concerned that they're not going to have enough money to make it through retirement, it's usually better to use some savings to pay for expenses while deferring SS checks, as compared to using the same savings to buy an immediate annuity.

In fact, Bernstein doesn't even use the word "usually". He categorically states that deferring SS is the best annuity that one can "buy".

hikernut
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Old 04-11-2014, 04:45 PM
 
Location: Haiku
4,112 posts, read 2,580,412 times
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There is nothing magical about an annuity - the insurance company is simply taking your money and investing it and then making payments to you. But they are in the business of making money, so they certainly are making more money off the money you handed over to them, and subsequently invested, then they are paying back to you. Otherwise they wouldn't be doing it.

So, if they can make money that more than covers their pay-outs, so can you. So why would you pay a hefty up-front purchase fee, on-going management fees, and surrender inflation protection for something you can do yourself without those down-sides?

As near as I can see, an annuity is probably helpful if you don't want to manage your own retirement portfolio, or are really risk adverse and don't want to worry about it. But you are paying a high price for those benefits. If you are comfortable with managing your own money, I would try to do that. Ultimately you will have more income since you will be paying less fees. When your annual withdrawal rate is on the order of 4-5%, a fee difference of 1% can make a huge difference -that is about 25% of your yearly income.

At any rate, talking to a financial planner is absolutely the best thing to do. Talk to more than one. And read retirement investment guides. But be leery of fad investments.
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Old 04-11-2014, 04:49 PM
 
71,651 posts, read 71,777,271 times
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annuity companies have something we can never duplicate on our own . they diversify in to dead bodies.

while we as mere mortals are stuck with depending on the whims of markets and interest rates they get to diversify into a given, the dead.

that is what makes annuities so powerful in a plan , the dead are consistant. they can pretty much tell you how many folks in the plan will die each year. they can't tell you who but the numbers do not change all that much. Much of your payment from an annuity is because those that die pay for those that live.

annuities are best when used in conjunction with your own investing ,not instead of.

the other nice thing is it is nice to have a third party to shoulder some of that risk for your income.

we have now had almost 14 years of way under par market performance and the lowest interest rates in decades.. we had some wild roller coaster rides but we are far behind where we should have been 14 years later. not only that but we have never ever had a combination of high stock prices and low rates together.

it is uncharted territory and returns could potentially be weak for quite a few years with a mix of equities and bonds .

it used to be if markets fell 15% you were whole again in 2-3 years, today its decades.

throw in increased volatility since 2000 far beyond the swings one would expect from a given mix and i can think of lots of reasons to increase the base income one is getting.

Last edited by mathjak107; 04-11-2014 at 05:13 PM..
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Old 04-11-2014, 05:10 PM
 
Location: Maryland
1,534 posts, read 3,782,708 times
Reputation: 2307
mathjak107: Please disclose whether you plan on being an annuity salesperson once you actually retire. You've stated previously in numerous threads that you're going part time in your regular job in the near/intermediate future.

(Not withstanding your rather curious posting volume during what one would consider normal working hours.) I guess the private sector is quite more tolerate of people spending T&A on non-work related activities than the federal government is. By the way - is your employer aware of your posting activity during conventional working hours ?

IMO, Its a good thing you work for a private sector company - do so working for Uncle Sam and your posting history --- I assure you - you would have been fired a long time ago. So - please do a bit of disclosure here, it would be highly enlightening for many people.

Last edited by Pilgrim21784; 04-11-2014 at 05:25 PM..
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Old 04-11-2014, 05:23 PM
 
Location: Nebraska
1,886 posts, read 2,301,174 times
Reputation: 5327
My Fidelity rep tried to sale my a managed investment package which was a 50% invested in equities and 50% in a annuity that paid 2% a year for 5 years. Here's the questions that I asked and the answers that I received.

1. Which insurance company is going to back the annuity? He informed me that the company was in Massachusetts.

2. Does this insurance company have insurance encase of their financial failure? He said that they have no failure insurance.

3. So can I lose all my money if the insurance company fails? His answer was yes, but he said this would never happen.

4. Does the managed money have any guarantees of earnings. His answer was no.

5. Does the manager take his money out of my investments. Yes .5% yearly.

6. Does the manager have the authority to convert my funds to cash encase of a market collapse? No, he is ordered by Fidelity to keep my money invested.

7. So I could lose a large portion of my money and I could not do any thing about it? Yes. but he went on to say that if you stay invested you will always get the money back in the next 10 years or so. This maybe OK for someone in their 40's but not for me in my 60's and retired.

I made the decision not to let Fidelity manage my money. That was 9 months ago and I have not changed my mind on.
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Old 04-11-2014, 05:27 PM
 
71,651 posts, read 71,777,271 times
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I always wanted to work in the financial world but never did. If i did i would love to help structure potential retirees. But the fact that i only like immediate annuities wouldn't help me earn a living they generate near nothing.
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Old 04-11-2014, 05:28 PM
 
Location: in the miseries
3,302 posts, read 3,581,162 times
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Quote:
Originally Posted by stevemorse View Post
correct. Listen to Sundays radio show at 10 am Ric Edelman. He is on WOR 77.0 am. You can listen on the internet. Maybe even call his firm. The guy is great! Marilyn My opinion is from what I have learned on his shows and advise and he is great is annunities are not the way to go.
I listen to him too. He's actually gives you advice, not just rhetoric.
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Old 04-11-2014, 05:43 PM
 
29,782 posts, read 34,876,173 times
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Quote:
Originally Posted by hikernut View Post
Sure, someone who doesn't need SS to pay their expenses can do whatever they like... take it early, take it late, or anywhere in between. It's "play money" to them.

But the person who is scratching for every last dollar of income... that's the one that Bernstein is addressing with the quote I mentioned. For someone who is really concerned that they're not going to have enough money to make it through retirement, it's usually better to use some savings to pay for expenses while deferring SS checks, as compared to using the same savings to buy an immediate annuity.

In fact, Bernstein doesn't even use the word "usually". He categorically states that deferring SS is the best annuity that one can "buy".

hikernut
I think we read him differently as our situations are probably different so we applied his teachings appropriate for us. You are only putting in your basic portfolio what you need for life time income plus inflation etc. When SS income on top of pension takes you over the top you use part of it differently and look at survivor benefits, longevity and lifestyle needs etc. Bernsteins much and that includes portfolio construction and allocation. When SS is not needed for a living income stream?
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Old 04-11-2014, 05:45 PM
 
Location: North Idaho
2,172 posts, read 2,085,035 times
Reputation: 2599
Quote:
Originally Posted by mathjak107 View Post
any financial planner who makes a broad comment like annuities are bad or not the way to go is not someone i would consider at the top of their game and in tune with what new data and current research is teaching .
The irony is you are making the broad statement that the OP should take out an annuity when you know next to nothing about their financial situation or their retirement objectives.
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