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Old 01-28-2016, 10:57 AM
 
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the payout increases by age as well as interest rates if they go up ,.

i would take the money i want to allocate and divided it up over as many as 5 years and just buy each year . i would do this for myself if i did it starting at 70 .
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Old 01-30-2016, 05:15 AM
 
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Sorry,
Would you provide a simple numerical example, please. I understand from what I have read on annuities the rate depends on [U]the amount of money you put every year[/u] in during these 5 years. This feature makes the case more complicated.
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Old 01-30-2016, 05:22 AM
 
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Sorry, would you decipher "ALC", please.
My search provided "African Lake Corporation" and so on.
This forum is very important to me, although it has many unusual abbreviations.
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Old 01-30-2016, 04:34 PM
 
Location: Columbia SC
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While there is much good and some bad information here, one must change with the times. A a recent widower my thinking/plans are "rapidly" undergoing change. Some could be more helpful by not being so adamant about their decisions/plans as things could rapidly change.

As an example one chat question was is $1million enough for retirement? For two people with debt and facing retirement, it might well not be enough. For a 70 year old, single retiree with no debt it probably is more than sufficient.

One car chat I visit says please list make, model, year, mileage, etc. of your vehicle before you ask a question as the answer can be widely different.
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Old 01-31-2016, 02:40 AM
 
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Quote:
Originally Posted by Maple47 View Post
Sorry,
Would you provide a simple numerical example, please. I understand from what I have read on annuities the rate depends on [U]the amount of money you put every year[/u] in during these 5 years. This feature makes the case more complicated.
an immediate annuity is like buying a cd . you buy a guaranteed payout . there are no other epenses , fees or anything else you need to know .

the older you are and the higher the rates the more you get .

you can check where pay out rates are at vanguard who sells the cheapest or immeadiateannuity.com .

you buy in with a lump sum and it pays out immediately . if you want to ladder them over time you can take that lump sum and break it up putting in some each year by buying another annuity contract .

you are not really adding money to anything existing . in fact it may not be a bad idea to use 2 different company's .
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Old 01-31-2016, 02:44 AM
 
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Quote:
Originally Posted by johngolf View Post
While there is much good and some bad information here, one must change with the times. A a recent widower my thinking/plans are "rapidly" undergoing change. Some could be more helpful by not being so adamant about their decisions/plans as things could rapidly change.

As an example one chat question was is $1million enough for retirement? For two people with debt and facing retirement, it might well not be enough. For a 70 year old, single retiree with no debt it probably is more than sufficient.

One car chat I visit says please list make, model, year, mileage, etc. of your vehicle before you ask a question as the answer can be widely different.
location , location , location . even 1 million bucks , which today may not sustain even a 40k pretax income , would not be enough to live a comfortable life here in the boroughs of nyc forget about manhattan ..

there is no such thing as how much is enough in retirement anymore then there is an answer to how much is enough when working .

69k here qualify's a family of 4 for a low income nyc housing project so just like when working everyone's idea of lifestyle is different .

Last edited by mathjak107; 01-31-2016 at 02:54 AM..
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Old 01-31-2016, 02:48 AM
 
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mathjak,

I think maple47 is asking what "ladder" means in this context. So an answer would be,

put $1,000,000 into a SPIA in 2016
then $100,000 in 2021
then $110,000 in 2026
then $121,000 in 2031 etc

this gives you a roughly 2% per year income increase (collected every 5 years).

I would also diversify among SPIA issuers, say by picking three issuers initially and buying the add-ons from yet others.
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Old 01-31-2016, 02:53 AM
 
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thanks
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Old 01-31-2016, 04:32 AM
 
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michael kitces did an interesting look at why spia's are not used more and it is scary how the human brain works .


number 1 fear most retirees list over everything else is :

running out of money before they run out of time .

number 2 fear is being eaten by inflation .

so here you have a product that addresses both issues , an inflation adjusted spia - the greatest fears retirees have and now the mind starts it's little game of throwing in more parameters .

things like , once we lock in to the annuity , we can never do better .

well that was a point never raised as a "greatest fear " from the start but now there it is cropping up .

another issue coming up is legacy money . all of a sudden our two greatest fears are dealt with but now legacy money is now on the list when it never was before as a top fear . .


the brain never stops throwing things in to the mix including the fact we hate parting with large sums of money all at once . our brain just shudders at the thought .
--------------------------------------------------------------------------------------------------------------------
but as michael kitces said :

Maybe our problem with immediate annuities lies in our irrationalities. For instance, imagine a proposed retirement income solution for a client as follows: every paycheck for your working years, we’re going to take a portion of your income, and allocate it directly to a future retirement annuity. You can’t touch the money when it’s paid, or at any point thereafter, even if you desperately need it for a dire emergency. Your retirement contribution to the future annuity is mandatory, and it will be a non-trivial portion of your paycheck (e.g., 6%). You can only start the annuity payments when the annuity company says you have reached a reasonable retirement age. If you’re married, the annuity payments will be made on a survivorship basis, but if you pass away without a spouse – or are the 2nd to die of the couple – no future payments are made. All of your remaining savings in the retirement annuity are gone. If you’re single, you can save (and will, since it’s mandatory!) in the retirement annuity for 40 years but if you pass away right before retirement, all of the money is gone and you can’t bequeath any of it; the annuity company keeps it.

I suspect if we proposed the above as a solution to retirement, the overwhelming majority of clients would be in an uproar. We’re taking away people’s opportunity to invest. We’re preventing them from leaving legacies for their children. We’re not allowing them to have access to their own money. We’re forcing them to save in an illiquid investment vehicle they can’t use for their needs and have no choice in the matter. Yet when we call it what it is – Social Security retirement benefits – we view the system as a fundamental pillar of retirement income. Odd how quickly our views can change depending on how the information is presented to us, isn’t it?

And of course, this isn’t our only irrationality in this regard. We have a strong desire to maintain liquidity – a common criticism of the immediate annuity – yet the reality is that most of our liquid funds sit idle for years and decades on end. We insist that choice is good and that we want to be the masters of our own destiny, yet the so-called “Paradox of Choice” reveals that we more often we are actually irrationally paralyzed by having lots of choices, rather than empowered. Similarly, when I suggested a mandatory retirement annuity savings system, many of you probably recoiled; yet when I pointed out that I was simply talking about Social Security retirement benefits, suddenly the idea didn’t seem quite as bad. How are we supposed to deal with all this irrationality, where the manner in which the question is framed and the choice is presented has such an overwhelming impact on our views about it?
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Old 01-31-2016, 08:47 AM
 
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Larry Siegel,

Thank you for explanation. Now I see the idea.
Sorry, I have more questions.
1. All these annuities are not "lifetime", but "term certain", which is 5 years, right?
2. Why is the first annuity payment $1000000, but not 100000 approximately, as the others are? It is ten times larger.
3. I understand your note on 2%, however, due to the laddering I shall get better rate already! Why do I add more rate on the top of this better rate?
I understand the diversifying issue.
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