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Old 01-15-2015, 01:56 AM
 
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the deferred annuity is actually longevity insurance and is another strategy .

however with the deferred annuity your spouse still has to contend with what i call the wife factor which is shouldering all the risk and volatility herself until way down the road when it kicks in .

i prefer an spia in that regard since if i got one to add to our own investing the main reason would be to situate my wife with a pay check.

but the deferred annuity is the better value it just wouldn't serve the same purpose for the reason i would do it.

it isn't so much i fear her running out of money as i want her to be more comfortable in how that money is generated and not be 100% dependent on mr markets whims and where rates are..
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Old 01-15-2015, 03:34 AM
 
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Quote:
Originally Posted by rjm1cc View Post
In a lot of cases you will see that the lifetime payments of an annuity is basically a return of your principal if you die at your life expectancy. If you only plan on living a few years past the AVERAGE life expectancy annuities are not too good.

Yes most annuities let you take out 5 to 10% each year without a penalty. You will have to read the contract to see what yours lets you do. The idea is you will come out with more dollars if you do not annuitize and live to the average life expectancy.
actually which leaves you with more for heirs depends on the annuity type and how aggressive your allocations are . using spia's and stocks and living to average life expectency has left heirs with more money more often than not as well as a higher success rate of not having the income stream need a reduction.

the more conservative the portfolio the more the spia improved things. in all cases the spia left you ahead , the allocations determined by how much.

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Old 01-15-2015, 03:44 AM
 
71,511 posts, read 71,674,131 times
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additional research has found the effects of using spia's and stocks could be duplicated by using a rising glide path through retirement.

that is my chosen method of entering retirement this year.

you reduce equities to 30-40% going in to protect against any off the bat downturns before you have an up cycle and then increase equities by about 2% a year up to your maximum comfort level.

i will take mine up to 50% or so eventually.

that has achieved the success rate of the spia's.

the conventional methods of the past were 1 of 2 methods of getting spending money .

what folks did is as they spent down is they rebalanced back to their origonal allocations pulling equally from all assets to refill cash for spending in the systematic withdrawal method. or they depleted cash and bonds and then sold stocks and refilled in the bucket method..

in the systematic withdrawal method they maintained their allocations from day 1 which worked fine unless a downturn hit before an up cycle built up a cushion.

the bucket system allowed for rising equity allocations as you spent cash and bonds but were set back to the origonal allocation when you refilled.


with this method you can rebalance but let the stock section have an extra 2% allocation to it until you reach your max that you want in equities down the road..


our hypothetical unlucky y2k retiree spending down 4% inflation adjusted would have stood up much better using the rising glide path .

if you have average to above average results for your 30 year time frames than 100% your own investing would work the best.

if you have average to below average results the rising glide path and spia would work better.

i prefer to plan for the worst and then have anything better an upside surprise. i would rather not try to rule out uncertainty but instead plan for it and allow for it .

Last edited by mathjak107; 01-15-2015 at 04:21 AM..
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Old 01-15-2015, 02:43 PM
 
Location: Florida
4,359 posts, read 3,694,371 times
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Quote:
Originally Posted by LookingatFL View Post
You've gotten a really good education on Single Premium Immediate Annuities and also on Deferred Annuities. Here is an article by Wade Pfau Why Retirees Should Choose DIAs over SPIAs. Mr. Pfau is someone that Mathjak swears by. In this article Mr. Pfau discusses why the deferred annuity is better than the immediate annuity. I am giving you this article so that you don't feel badly for choosing the DIA. It is actually a very intelligent choice. It costs less than the SPIA because it has time for the premium to grow. People should not worry so much about the fees charged in any annuity. The sole object of the annuity is to make sure you don't run out of money. It is going to happen through investment of your premium and it will either cost more up front because there was no time to accrue or it will cost more in fees because someone spent the time managing it.
I would Google Pfau and read as much as you can. He will reference other researchers. You will get a good education on retirement planning by doing this. Pay attention to the withdraw rate discussions.
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Old 01-15-2015, 04:10 PM
 
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the think tank leaders are pfau, kitces , guyton and david blanchett .

all brilliant reserchers who are even at odds at times which makes for an even better education.

what i like is how they look under the hood of popular beliefs and disect them .
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Old 01-16-2015, 10:50 AM
 
Location: Florida -
8,760 posts, read 10,834,959 times
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Thanks for your input. At this point, the fact that I have an IRA-based, deferred variable annuity is pretty much 'water under the bridge.' If I now treat it like a SPIA, I can effectively withdraw an "immediate" lifetime $40K per year on my $460K initial investment (8.7% ... ignoring the last 3-4-years of zero appreciation).

An alternative is to roll the annuity into a different type of 'managed investment' (equities, funds or ??). I'm not much of an active investor, but, it looks like a 5-6% average ROI, would still allow me to withdraw $40K per year, (while, like an annuity, eating through my principle in about 20-years). (As previously mentioned, we don't really 'need' the income). Of course, the Annuity would continue on through my lifetime, if I outlive 87/88.

Since I can't change the past, I'm trying to gain some new perspectives that will help me do the best thing moving forward from where I am now.
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Old 01-31-2015, 09:48 AM
 
Location: Florida -
8,760 posts, read 10,834,959 times
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Quote:
Originally Posted by rjm1cc View Post
In a lot of cases you will see that the lifetime payments of an annuity is basically a return of your principal if you die at your life expectancy. If you only plan on living a few years past the AVERAGE life expectancy annuities are not too good.

Yes most annuities let you take out 5 to 10% each year without a penalty. You will have to read the contract to see what yours lets you do. The idea is you will come out with more dollars if you do not annuitize and live to the average life expectancy.
Apparently mine allows me to withdraw 10% of the income value per year, ... but, whatever I withdraw correspondingly reduces the remaining income value and leaves me with an ever-declining withdrawal amount. In about 3-years, it appears that the 10-percent withdrawal will leave me below the 'lifetime income value' I would receive by simply turning-on the annuity (thoughts ??).
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Old 01-31-2015, 11:14 AM
 
Location: Florida -
8,760 posts, read 10,834,959 times
Reputation: 16632
Quote:
Originally Posted by LookingatFL View Post
You've gotten a really good education on Single Premium Immediate Annuities and also on Deferred Annuities. Here is an article by Wade Pfau Why Retirees Should Choose DIAs over SPIAs. Mr. Pfau is someone that Mathjak swears by. In this article Mr. Pfau discusses why the deferred annuity is better than the immediate annuity. I am giving you this article so that you don't feel badly for choosing the DIA. It is actually a very intelligent choice. It costs less than the SPIA because it has time for the premium to grow. People should not worry so much about the fees charged in any annuity. The sole object of the annuity is to make sure you don't run out of money. It is going to happen through investment of your premium and it will either cost more up front because there was no time to accrue or it will cost more in fees because someone spent the time managing it.
Thanks - I read several of Mr. Pfau's articles and am quite impressed with his rationale. Mine is a DIA with GLWB --if that's the proper way of saying it.)

My thought is that I will start the income stream this year at $40K. But, since I do not really 'need' the spendable income, I will re-invest it (less required RMD's and taxes) in an ongoing IRA account that is producing about 10-percent annually. Comparatively, unless I am missing something, this will provide a significantly greater estate/legacy (and concurrent spendable income), than surrendering the annuity and re-investing in an equity/bond strategy.
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Old 01-31-2015, 11:43 AM
 
Location: Florida -
8,760 posts, read 10,834,959 times
Reputation: 16632
Quote:
Originally Posted by mathjak107 View Post
additional research has found the effects of using spia's and stocks could be duplicated by using a rising glide path through retirement. that is my chosen method of entering retirement this year.

you reduce equities to 30-40% going in to protect against any off the bat downturns before you have an up cycle and then increase equities by about 2% a year up to your maximum comfort level.

i will take mine up to 50% or so eventually. that has achieved the success rate of the spia's.

the conventional methods of the past were 1 of 2 methods of getting spending money .

what folks did is as they spent down is they rebalanced back to their origonal allocations pulling equally from all assets to refill cash for spending in the systematic withdrawal method. or they depleted cash and bonds and then sold stocks and refilled in the bucket method..

in the systematic withdrawal method they maintained their allocations from day 1 which worked fine unless a downturn hit before an up cycle built up a cushion.

the bucket system allowed for rising equity allocations as you spent cash and bonds but were set back to the original allocation when you refilled.

with this method you can rebalance but let the stock section have an extra 2% allocation to it until you reach your max that you want in equities down the road..

our hypothetical unlucky y2k retiree spending down 4% inflation adjusted would have stood up much better using the rising glide path .

if you have average to above average results for your 30 year time frames than 100% your own investing would work the best.

if you have average to below average results the rising glide path and spia would work better.

i prefer to plan for the worst and then have anything better an upside surprise. i would rather not try to rule out uncertainty but instead plan for it and allow for it .
Thanks! - The depth of your grasp of these matters far exceeds mine, although I'm learning from you and others. My 'comfort level' gravitates toward a simpler 'managed account approach,' versus a more intensive, hands-on management -- I've examined the 'glide path' strategy and, while it makes sense, my emotional psyche is better served by arms-length investments.

I'm not immediately concerned with 'more' ongoing income, but, it looks like further delaying the annuity income stream works against my probably longevity. Concerns for my wife's financial security (as you mentioned in another post) are diminished by the fact she has her own lifetime pension and SS, plus we have other equity and property investments. I have backed up her pension and SS with a Term Life policy, in the event she goes first; and we both have LTC policies.

At this point, the issue is primarily how to maximize the long-term ROI from annuity income re-investments --- to provide inflation/tax protection and a greater estate/legacy.
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Old 01-31-2015, 02:48 PM
 
29,774 posts, read 34,856,103 times
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Quote:
Originally Posted by jghorton View Post
Among other investments, I put about $460K into a Variable Annuity 3-4-years ago.
Not thrilled with the investment, but, it is what it is.

Right now, I’m looking at options. ONE is to start a lifetime income stream: $37K/2015(68), $40K/2016(69), $49K/2018(70).

ANOTHER is to Surrender and cash-out the Annuity for $460K/2015 and do an IRA rollover to re-invest it elsewhere.

We’ve got ‘enough’ income without the Annuity and will likely Save, Re-invest or “gift” it. IRA RMD’s of about $45K per year will start in 2018 whether I turn-on the annuity or do something else.

My question is WHEN is the best time to start the Income Stream (and Why?) OR Should I take my loses and invest elsewhere (and Where?)
Think about all of this in the context of your other thread on RMD's and tax brackets. You still have a chunk of change worth of income to kick in. Congrats!
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