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They aren't disguised as anything at all. You may not understand annuities but many of us do. Just because you don't understand doesn't make them disguised. There is no disguise and no confusion. Just intelligent choices. The products that are for the ill informed and unsophisticated (like you) include putting all of your investments at risk. That works sometimes, but often is a very poor and ill informed strategy.
Yup.I'm unsophisticated. Think I touched a nerve. You probably own a whole life policy as well.
I went from a net worth of $0 to over $4.5 million in 32 years all thru my own investing .....most in the market. But hey you keep handing your hard earned dollars over to an insurance salesman. The commissions you pay are funding his retirement. Annuities are for people that too stupid or too afraid to invest on their own.
They need someone else to do it for them. This is why the Edward Jones and the Raymond James are raking in billions. One of the first things these sharks will try to sell you is an annuity....immediate, variable, indexed. You name it , they got it. They have convinced all the sheep that they aren't smart enough to do it on their own.
you and i are investors from another time frame . i started 28 years ago . from 1987 to 2003 we had the greatest bull market in history . almost 14% average returns for 17 years .
well , those days are gone , the last 16 years barely moved on an inflation adjusted basis .
if you looked at your balance in 2000 and fell asleep until today you would be like wtf . your balance from that point on grew less less than a 1.80% real return average . sure , new money did fine but existing money died on the vine . as a retiree i can tell you going forward there is not likely to be a whole lot of new money and in the near term below average returns are likely . not a problem waiting it out if you are in your accumulation stage .
spending down principal while waiting as a retiree can be deadly when it is early on ..
going forward is going to be uncharted times with low rates and high stock valuations as bed fellows .
odds are thinking like it was yesterday is going to set a retiree up for failure . unconventional times are now likely going to call for unconventional investing and income generation methods .
Last edited by mathjak107; 12-30-2015 at 03:55 PM..
DH and I are early 40s and nowhere near retirement age, I'm posting to get some good ideas/tips from actual retirees.
I think we've taken all the usual advice regarding retirement planning from the usual magazines/web sites. we've contributed to 401K plans since age 22 and max out on those plus IRAs every yr. Now also maxed out the 529 college savings plans for both kids which is about $150k total and they're both under 5 so no college costs yet for a long while. We own primary residence valued about 1 mil which is about 50% paid off. We are not business owners, just salaried workers.
Our questions is what else do we do now in terms of planning for our retirement?
1) Rental properties? several friends are very into owning rental properties as an investment and additional income stream, but I am wary of being a small time landlord.
2) pay off house with plan to do some type of reverse mortgage in retirement? not sure it's a good idea to tie up $1mil in a house given current low interest rates.
3) Annuities? Our financial adviser has suggested annuities but we haven't taken the plunge. How has that worked for anyone here and do you recommend any particular web site for researching annuities?
4) LTC? I am curious if we should be looking into Long Term Care insurance or if that that is too early?
My father - still alive - bought some immediate fixed annuities. When he was about 80. He wasn't a very talented investor - and got pretty good return rates - at least for annuities - the rates are in general pretty lousy. He's 97 now and interest rates were higher back then. An immediate fixed annuity isn't anything anyone should consider at all until about age 70. And - even then - you have to be careful/use due diligence. Overall - the immediate fixed annuity is a speculation that you will outlive your normal life expectancy. My father has. But - overall - his rate of return is about 5-6% now at age 97. It is also a way to guarantee a relatively modest rate of return if you're not a talented investor (which - like I said - my father wasn't).
Of all the annuity flavors out there - I think the immediate fixed annuity is the most straightforward - and perhaps the most useful for most people. But I'm talking about seniors - not people your age. There is also a subset of immediate fixed annuities - those issued by charities as opposed to insurance companies. Where - in addition to the income stream - you can get some charitable deductions. I might consider a charitable immediate fixed annuity as I approach 80 (I'm 68 and my husband is 70) - and perhaps start to question my ability to invest correctly (our main estate beneficiary is a charity).
When it comes to rental properties - I know they work for some people. But my husband and I aren't the type to fix our own leaking toilets - much less those in a rental property. And who wants to deal with phone calls about leaking toilets in the middle of the night? YM may indeed vary. And the mileage of other people does as well. You will have to answer that one yourself. I'm not sure how hard or easy it is to invest in that area - because my husband and I don't care to invest in it at all.
When it comes to paying off a mortgage - it depends on the terms of your mortgage versus what you can earn with the money elsewhere. Sometimes paying off a mortgage is a "comfort thing" - but not when you're talking about a $500k balance. It's simply a dollars and cents proposition then.
When it comes to long term care insurance - I pretty much know only what I read "in the papers". My husband and I are sufficiently high net worth that we don't have to worry about it. Robyn
but i will say do not wait to long if you want LTC insurance . you save nothing by waiting . it is priced so by a certain age you pay in about a years worth of premiums .
it just makes it more expensive and likely it will be out of reach price wise , you have no present coverage and the biggest issue is you may have an event that makes you not acceptable or gets you surcharged .
i delayed acting 2 years past when i decided to do it and my blood work was perfect up to that point , but by the time i acted i tested positive for diabetes and even though on no meds and back to just high normal through diet and exercise i got hit with a surcharge now for life .
GETTING LTC REQUIRES A CAREFUL SCREENING PROCESS THAT FOR US INCLUDED BOTH EXTENSIVE BLOOD TESTING , AIDS TEST AND DRUG TESTING AS WELL AS A BUNCH OF MEMORY TESTS .
so it can eventually be quite tough to get down the road .
you never know when you may need it too, my 55 year old co-worker fell off a ladder painting . he broke his wrist and hip .
he had a paralyzing stroke during just a simple hip surgery .
his wife is financially devastated now . so even younger it may not be a bad thing to have . but i think the 50's would be more appropriate .
But no one should ever forget that LTC insurance isn't any different than auto or homeowners' insurance. Your rates with a company can go up dramatically over a period of a few years. Your insurer can go out of business. Yada yada yada. Also - LTC insurance usually pays a specific dollar amount of benefits which is usually less than those who spend the most on LTC will spend (and more than those who spend the least pay). Since the OP is in his/her 40's - I suggest as an alternative simply putting X into an account labeled LTC insurance account. A specific amount every year. Invest it in something like bond/stock index funds. By age 80 (when most people wind up needing LTC care if they ever need it) - it should be a tidy amount of money. And more reliable than any insurance policy. LTC insurance is very actuarial (X dollars for Y years mostly likely to be paid out Z years in the future) - and it is pretty easy to get the same benefits from a personal investment account as opposed to buying the insurance if one starts fairly early. Robyn
But no one should ever forget that LTC insurance isn't any different than auto or homeowners' insurance. Your rates with a company can go up dramatically over a period of a few years. Your insurer can go out of business. Yada yada yada.
DH & I comparison shop every year for the best auto/homeowners' insurance and switch to take advantage of lower rates. In 2015 for instance, our premiums would have gone up about $900 if we had stayed with the same insurer. We switched and ended up paying $1300 less for the same coverage. That's not feasible with LTCi. We have no intention of "marrying" an insurance company and that's exactly what you do with LTCi - for better or for worse.
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Since the OP is in his/her 40's - I suggest as an alternative simply putting X into an account labeled LTC insurance account. A specific amount every year. Invest it in something like bond/stock index funds. By age 80 (when most people wind up needing LTC care if they ever need it) - it should be a tidy amount of money. And more reliable than any insurance policy. LTC insurance is very actuarial (X dollars for Y years mostly likely to be paid out Z years in the future) - and it is pretty easy to get the same benefits from a personal investment account as opposed to buying the insurance if one starts fairly early. Robyn
...Plus if one starts a policy now, in your 50's, what is to prevent a company from increasing premiums, deductibles, elimination periods to a level that makes these payments unsustainable?
Nothing.
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Also, when you look at statistics, the average time spent in a nursing home for a man is 14 months. For a woman ....less than 3 years.
Those stats are pretty much on target. The CEO of my late FIL's SNF thought - based on those statistics - that it would be relatively inexpensive if everyone paid into a national pool to take care of those average costs. Of course - that isn't going to happen. And someone like me won't pay into a national pool where I'm paying 10/100x what hundreds of other people are paying. I'd rather take care of my personal stuff myself (because any such plan would doubtless be income based). Robyn
We are in our early 40s,too,have been planing our retirement forever. We bought an income property back in 2010 when the housing market crashed. It is a 6 plex, a lot of fixing, at one point we were so stress over the work the house required. We took out a 15 years small business loan the rent cover the bank note, we even make some small profit the last couple of year!
In my opinion it is like i bought this property at 40% of what it cost tenants pay the rest. We planed to use that income to fund our care if need when we are old.
Another suppliment to our income is the whole life insurance policy that my husband bought since We are a single income family.
LONG TERM CARE vis a vis the USA: You're in your early forties? That's exactly the time to setup long term care policies. Our parents in Calif. were always told they were "overinsured". It's sure paying off now, but the type of policy they got isn't sold any more. Too many people, mom included, are living longer than the insurance companies planned. How dare they???
But no one should ever forget that LTC insurance isn't any different than auto or homeowners' insurance. Your rates with a company can go up dramatically over a period of a few years. Your insurer can go out of business. Yada yada yada. Also - LTC insurance usually pays a specific dollar amount of benefits which is usually less than those who spend the most on LTC will spend (and more than those who spend the least pay). Since the OP is in his/her 40's - I suggest as an alternative simply putting X into an account labeled LTC insurance account. A specific amount every year. Invest it in something like bond/stock index funds. By age 80 (when most people wind up needing LTC care if they ever need it) - it should be a tidy amount of money. And more reliable than any insurance policy. LTC insurance is very actuarial (X dollars for Y years mostly likely to be paid out Z years in the future) - and it is pretty easy to get the same benefits from a personal investment account as opposed to buying the insurance if one starts fairly early. Robyn
most folks will never ever segregate a sum of money from their main portfolio for ltc usage .
plus i firmly believe that ltc money like any insurance money should not be put at risk the same as your other investments .
you can't risk an extended down turn or 16 years of little growth if it is 2000 all over again .
so that means ideally low return investments that likely will fail keeping up with inflation and healthcare costs .
for just a small percentage of the potential gains of leaving that money invested in your regular investments you can pay for the policy and have more left over .
for most folks self insuring ends up being a disaster .
most of the cases our estate attorney sees are those who were so called self inuring . only now the community spouse goes in to survival mode and wants to cut corners every where they can as well as first develop a plan after the fact in case the money runs out and assets are at risk .
insurance is not the only way to prepare but the fact is few of those folks who say the are self insuring have any plan in place including letting their spouse know what assets are to even be sold .
self insuring for most of those who do so is not a comprehensive plan and hope is really their strategy that it isn't them .
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