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Old 01-11-2016, 01:55 PM
 
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Your math is wrong A 1995 dollar would need to be 1.58 today. But your concern is right.
So your income must grow with the years. That's one of the dangers of an annuity that does not increase over time.
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Old 01-11-2016, 01:59 PM
 
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an annuity should not be used alone but with your own investing for inflation protectuion .

but even so an immediate annuity can give you back your own money at the rate of a 6% draw today vs the 4% you can safely draw and cover the worst case scenario's . .

how many inflation adjustments can you take before your draw is 50% higher then where you started ? the answer is a lot so the 50% more cash flow of the annuity day 1 can absorb quite a bit of inflation adjusting if you use only the same 4% of it for spending and hold 2% towards inflation adjusting .
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Old 01-11-2016, 02:08 PM
 
Location: Ponte Vedra Beach FL
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Quote:
Originally Posted by Mircea View Post
...Developing- and emerging-States will put constant pressure on resources...
Perhaps - but not all the time. Witness commodity prices today. Also - a lot of developing and emerging markets/economies rely on commodities *exports*. Some are in (deep) trouble today as a result of declining commodities prices. So their "consumers" aren't in a particularly good position to "consume".

Quote:
...The average COLA increase since 1975 is 3.88%
Even my father - who is 97 - hasn't been collecting Social Security that long .

I am not a particularly short term person when it comes to most things. OTOH - I won't project what might happen in the next 2-3-5 years on the basis of the last 40. The last 5 or 10 years - and the trends I see - are more like it. And I just don't see a heck of a lot of CPI type inflation right now. If/when commodities prices stabilize and turn around - and I start to see some new trends - I'll change my mind.

This is not to say that certain seniors won't see the cost of things they buy more often than other people - like (some) drugs - go up. Or that people who live in certain hot rental markets won't see their rents go up. Those things are entirely possible. But we're not talking about the kind of system-wide inflation we saw in the 70's. The kind that gave rise to the SS COLA in the first place. Robyn
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Old 01-11-2016, 02:13 PM
 
Location: Ponte Vedra Beach FL
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Quote:
Originally Posted by mathjak107 View Post
an annuity should not be used alone but with your own investing for inflation protectuion...
And there's nothing that says one can't and shouldn't save after retirement. And reinvest savings. That's what we've used our IRAs for for decades. And we don't plan to take out one penny until we get hit with some RMDs in a few years (even then - we'll probably save and reinvest most of the RMDs). Robyn
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Old 01-11-2016, 02:22 PM
 
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it all depends on how much you draw out and what markets , rates and inflation do .

historically drawing 4% inflation adjusted with a 60/40 mix has left you with more then you started with 96% of the time and 67% of the time more then 2x what you started with 30 years later . .

so yeah it is possible to save and not deplete but a bunch of parameters ride on that . some of the worst scenario time frames like those who retired in 1929 , 1937 ,1965 , 1966 and possibly 2000 made it through without big spending cuts but with very little left over .

right now the hypothetical y2k retiree has a balance on par with the 1929 retiree

Last edited by mathjak107; 01-11-2016 at 02:46 PM..
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Old 01-11-2016, 02:41 PM
 
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Quote:
Originally Posted by Robyn55 View Post
And there's nothing that says one can't and shouldn't save after retirement. And reinvest savings. That's what we've used our IRAs for for decades. And we don't plan to take out one penny until we get hit with some RMDs in a few years (even then - we'll probably save and reinvest most of the RMDs). Robyn
BADDDDDDDDDDA BinnnnnnnGGGGGGGGG!
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Old 01-11-2016, 02:47 PM
 
Location: Ponte Vedra Beach FL
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Quote:
Originally Posted by TuborgP View Post
Nahhh I am almost 68 and in two years it will be Bada Bing Ca Ching (sp?) and trying to figure out what to do with the money. Also the higher the benefit the greater the actual dollar compounding benefit which is another Bada Bing! The greatest lesson you can teach a person is the power of compounding! Robyn makes some good points but once again having a high earner spouse with their own benefits enables us already there to collect spousal benefits from 66-70 on their accounts thus minimizing the impact of delaying benefits.
I have nothing against compounding . But my main point is that I ran the calculations for me and my husband (we basically get about the same amounts in Social Security) - and found we would wind up with more money overall taking SS at age 62 - saving it - and reinvesting it at a modest rate of return - say 3% on high quality munis (where I'm compounding my money ) - than collecting more at any later age. Assuming we live to our normal life expectancies (which I thought was a reasonable assumption in our case). Even without saving and reinvesting - we only came out a touch ahead deferring until age 66 (our FRA). And we came out behind deferring until age 70 unless we lived beyond our normal life expectancies.

To me - it's purely a matter of dollars and cents. Which is pretty much the way I look at money (at least money from stable/safe sources of income). Other (often emotional) variables may enter into the thinking of other people.

Of course - there are people who almost certainly shouldn't take SS early. Like many who are still working with earned income. I'm just talking about plain vanilla retired people like us.

Note that it's pretty easy to do these computations (computations about pensions and annuities too) with a simple financial calculator. The only variables are one's expected rate of return (I would be conservative here) and one's life expectancy (I would always assume "normal" unless I had a really compelling reason to assume longer or shorter). Robyn
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Old 01-11-2016, 02:50 PM
 
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Quote:
Originally Posted by Robyn55 View Post
I have nothing against compounding . But my main point is that I ran the calculations for me and my husband (we basically get about the same amounts in Social Security) - and found we would wind up with more money overall taking SS at age 62 - saving it - and reinvesting it at a modest rate of return - say 3% on high quality munis (where I'm compounding my money ) - than collecting more at any later age. Assuming we live to our normal life expectancies (which I thought was a reasonable assumption in our case). Even without saving and reinvesting - we only came out a touch ahead deferring until age 66 (our FRA). And we came out behind deferring until age 70 unless we lived beyond our normal life expectancies.

To me - it's purely a matter of dollars and cents. Which is pretty much the way I look at money (at least money from stable/safe sources of income). Other (often emotional) variables may enter into the thinking of other people.

Of course - there are people who almost certainly shouldn't take SS early. Like many who are still working with earned income. I'm just talking about plain vanilla retired people like us.

Note that it's pretty easy to do these computations (computations about pensions and annuities too) with a simple financial calculator. The only variables are one's expected rate of return (I would be conservative here) and one's life expectancy (I would always assume "normal" unless I had a really compelling reason to assume longer or shorter). Robyn
I agree with much of what you say but for us it was part of our later life strategies and being able to lock things down with fixed income streams and LTC etc independent of investments other than to cover elimination periods if even needed for that. For us 62/70 gave early years flexibility and when I take my full at 70 we can pretty much calculate things with a lock down in mind barring a Black Swan SS or pension event especially if accompanied by a Black Swan market event.
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Old 01-11-2016, 03:26 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,923,045 times
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Quote:
Originally Posted by mathjak107 View Post
...right now the hypothetical y2k retiree has a balance on par with the 1929 retiree...
I don't know hypothetical people. I know real people . It was actually surprising to me how many people in my father's retirement place - people in their 80's or early 90's for the most part - had to move out post-2008 to a cheaper place - or back in with their kids. As a result of 1) huge stock market losses; and 2) unexpected and protracted declines in expected rates of return from fixed income investments. Note that a lot of these people had kids and grandkids they had to bail out - and that didn't help them one bit either. In many cases - their young and not very financially savvy kids were at the time managing their money for them - or they were relying on a bunch of youngsters at various brokerage firms to take care of their financial affairs. Few of these stories had happy endings.

You know my thinking on this - but I still restate it. You are 8 years younger than my husband (who is 70). 6+ years younger than I am. We are not in a big hurry to draw down on anything. I don't care how many historical studies you cite. It's like the old saying about the statistician who died in a lake with an average depth of 2 inches :

Statistical Humor

You don't have a clue where you'll be 10 years from now - in your early 70's - much less 20 years from now in your early 80's. Or especially 30 years from now if you make it to 90+. In terms of money - health - financial acumen - or anything else. You also don't have a clue what will happen with any markets so far down the road. Neither do I.

I would bet a lot of money though that returns in the years to come will be about as anemic as those post-2000 as opposed to those in the 1980's and 1990's - when getting great returns was like shooting fish in a barrel. There will be more volatility too. I've adjusted my portfolio to deal with that distinct possibility - and think other people should as well. Robyn
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Old 01-11-2016, 03:42 PM
 
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I plan around 3-4% for a balanced portfolio for at least the next 5 to 7 years.anything better will be a pleasent upside surprise.

There are to many variables to ever try to plan around any individual people and their spending patterns.

You can only plan around hypothetical basics and mold and season to fit your taste . All this historical hypothetical data gives us real time numbers to monitor our own success

Last edited by mathjak107; 01-11-2016 at 03:53 PM..
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