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Old 04-24-2016, 01:05 PM
 
Location: Prescott AZ
6,119 posts, read 9,068,748 times
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Quote:
Originally Posted by johngolf View Post
So basically you are giving them $100,000 now and over the next 10 years will get back $108,000 at the rate of $10,800 per year. Is this correct?
Yes, that's how it works. It's a better return on my money than a CD or savings account. Of course at the end of the 10 years, I end up with nothing but at that time I will probably decide on another plan of action to replace this annuity.
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Old 04-24-2016, 01:20 PM
 
71,462 posts, read 71,629,249 times
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Quote:
Originally Posted by mathjak107 View Post
those variable annuity's should not really be counted as any stock fund because of how they work . yeah they are linked but odds are because of design the guarantees will be likely the best you will see .

i recently reviewed a variable annuity here which like the stock annuity is linked to something you likely can't high water mark much if at all .

i would count them all like a cash instrument on steroids but a far cry from an equity investment .
the main reason and there are others is the guaranteed minimums include expenses , the variable part does not . you have the annuity fees themselves and the fund fees coming out of any gains and they can run 3% or so in total with the popular options .

if you have an indexed linked annuity or variable annuity you get no dividends which can account for 1/4 to 1/3 of the markets gains , bet they didn't tell you that part .

A sub account doesn’t pay you the dividends from the mutual funds shares it owns. Rather, it uses the dividends to increase the annuity’s reserves. Therefore, the dividends paid by the mutual funds owned by the subaccounts don’t change the value or number of your accumulation units.


The reason for not paying out the mutual fund dividends to subaccount owners relates to taxes. Annuity growth is tax-deferred until you begin taking withdrawals. Annuity providers therefore don’t pay out the mutual fund dividends, since the money would be immediately taxable, even if you reinvested it in additional accumulation units. By adding the dividends to the annuity reserves -- made up of cash and negotiable securities -- the annuity provider offsets some of its costs, which in turn might help it lower the fees it charges you but don't bet on it ..

overall they make slightly better proxy's for a bond investment return wise then any kind of stock investment .

if the guaranteed floors work for you , great , but do not expect much more and DO NOT LOOK AT THEM AS AN EQUITY INVESTMENT . ..
.

Last edited by mathjak107; 04-24-2016 at 01:28 PM..
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Old 04-24-2016, 01:39 PM
Status: "Re-edit status" (set 13 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,133 posts, read 1,883,639 times
Reputation: 3152
Quote:
Originally Posted by mathjak107 View Post
those variable annuity's should not really be counted as any stock fund because of how they work . yeah they are linked but odds are because of design the guarantees will be likely the best you will see .

i recently reviewed a variable annuity here which like the stock annuity is linked to something you likely can't high water mark much if at all .

i would count them all like a cash instrument on steroids but a far cry from an equity investment .
It's Insurance. I am not up on newer VA's or GLWB's other than they are less attractive than those of 4 years ago. Something that I wanted. And Something that people should examine as a possible choice. We'll see what is out in the marketplace when this comes out of guarantee GLWB growth period. We're thinking about moving and will need to show Income on a purchase, so I may exercise the Income call feature on one of more annuities. From now to April 2017, I am going to be very conservative with the discretionary investment account, the 20%, which I may apply towards a down payment. Not sure yet.

YMMV.
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Old 04-24-2016, 01:52 PM
 
1,687 posts, read 607,568 times
Reputation: 1756
In the past 15 years that I have had four types of annuities (deferred life annuities, immediate fixed life annuity, immediate fixed 10-year annuity, and deferred fixed 15-year annuity), my annuities have actually produced slightly better total gains than my SEP-IRA which is entirely in mutual funds. I am a very conservative investor, do not like thinking about money, and really like annuities (about 40% of my total assets are annuities). I obtained most of them through the company ImmediateAnnuities.com, and have been very happy with their services. I am 56 and semi-retired, but I could fully retire based on my financial situation only, I plan to start taking SS at 70, and I credit that to (1) not having raised any kids, (2) not having any heirs, (3) having annuities since age 42, and (4) using public transportation rather than keeping a car, in that order.
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Old 04-24-2016, 01:56 PM
 
71,462 posts, read 71,629,249 times
Reputation: 49027
without seeing those plans there may be a misunderstanding between returns and draw rates . they are worlds a part in what they represent . immediate annuity products have a draw rate not a return like a mutual fund . an annuity includes principal in the payment ,the fund does not . one is all yours at the end , the annuity is not .

Last edited by mathjak107; 04-24-2016 at 02:47 PM..
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Old 04-24-2016, 02:04 PM
Status: "Re-edit status" (set 13 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,133 posts, read 1,883,639 times
Reputation: 3152
Default Income, for a home loan worth more than the asset supporting the Income.

Talking about a home purchase or other installment type of purchase:

Discovered that Income is required to get a loan. How much your NW or assets have less bearing than Income. We were investigating a pre-qualify loan to purchase a income rental. The Bank said that we didn't have enough Income for a competitive rate loan, even though we would put down 20% + and could show asset statements that would support the loan payments.

We said, We'll pay cash for the Rental and wrote a check from this bank. I don't understand them Banks?
The Bank lost our checking deposit in this purchase and the Bank lost the possibility to make $$ from a home loan? Our gain is that we get full value from the Rent and far better ROI from this than from a the 6mn CD.

Kinda wish that I could've used OPM and leveraged and get a tax deduction.
YMMV
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Old 04-24-2016, 02:16 PM
 
83 posts, read 53,985 times
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Quote:
Originally Posted by hikernut View Post
Here's one piece of advice that I think applies to nearly everyone...

Don't even consider buying an SPIA until you've got a plan to delay taking SS until age 70. Using assets to cover expenses while waiting for SS is better than buying an annuity.
Pretty good advice. I did both.
I converted a cash retirement account (converted from an old DB pension @JPM) to a lifetime annuity, which has a draw rate over 8%! I think they used an unheard of 4.5% interest rate which was the original guaranteed minimum rate established years ago.
I could not in good conscience turn this down as I am single with no children and whatever I leave to my family will likely be way too much anyhow.

Of course I delayed SS to 70 and funded retirement from tax-free munis, 401k withdrawals, REITS, etc., and made annual conversions to a Roth IRA to mitigate the tax bite of RMD's.

The offloading of risk to the SPIA enables me to stay more fully invested than I would have had I no safe stream of income to rely on, as Mathjak has so often remarked.

It's working out as good, if not better, than plan.

YMMV
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Old 04-24-2016, 03:03 PM
 
Location: Hiding from Antifa?
6,393 posts, read 4,170,610 times
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My company has announced they are terminating an old DB Pension plan that they stopped putting into a few years back. In the next month I should find out what my options are.
The amount I have for lump sum is 63.8K. I am not sure if they will still offer the original annuity options which worked out to about $398/month single life or $335 for 100% joint survivor. After looking at one of the links above, this seems like a pretty good option. I am old enough to start it now, but before they opted to terminate the plan I couldn't touch it until I terminate employment first.

If it is still available does anybody with experience in the matter know if we could do better?

For the difference in single life for me versus joint with survivor would it be possible to get a term life insurance on me for the wife's benefit, that could actually pay out about $100K? She could then get another SPIA for a much higher monthly payment I assume.

I am not sure how to calculate the "roi" on the 63.8K to compare to other investment strategies. 5%, 6%? No idea!
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Old 04-24-2016, 03:09 PM
 
1,687 posts, read 607,568 times
Reputation: 1756
@mathjak107- my IRA (which is in mutual funds, and to which I stopped contributing about 10 years ago) has gained about 50% in value in 10 years (with an interesting 2008/9 episode when it lost about 50%, something that does not happen to annuities from reputable companies), while a deferred fixed annuity I obtained last year will start paying in 10 years, and will pay out (over the subsequent 15 years) the total of 80% in interest plus the principal. If I live to be 99 like one of my grandfathers, the deferred fixed annuity that I got when I was 52/3 will start paying out when I am 80, and will pay out 1,900% (that is one thousand and nine hundred percent) in interest plus the principal by the time I am 99. The immediate fixed 10-year annuity I have going now pays additional 1% of the remaining principal in interest every year (ie, 1% in the first year which is comparable to a bank CD, but 2% in the 2nd year, 5% in the 5th year, and 10% in the 10th year - it does not look as though CD rates will be increasing quite so fast). So, I have an annuity for every purpose - better than a bank account for ongoing spending, about as good as mutual funds (but without market fluctuations) for later spending, and far better than anything for a possible very old age.
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Old 04-24-2016, 03:13 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,917,951 times
Reputation: 6716
Quote:
Originally Posted by loves2read View Post
Re the sticker shock of housing in "south" for retirees relocating...

We own three homes...one my husband's sister lives in basically rent free, one is in FL nxt to our daughter and family and one in the DFW TX area...

DFW has seen stable market for most part even during the RE downturn and in past 2-3 yrs has seen tremendous growth because large companies are relocating and bringing either new jobs or jobs and employees...building boom has added homes but there is still market scarcity and residential valuations have gone up significantly for 2016...everyone is complaining and planning to appeal...

People who come here from out of state usually expect to get a "better deal" -- basically that means make out like a bandit...and they are usually given a rude awakening because our taxes can be higher and prices/lot sizes don't fit their expectations...no state income tax but there are other ways the state gets its money...

In FL we bought house next to our daughter because of that lucky location primarily but it was also well-maintained, single -level, good price point (before that market recovered from doldrums), and our daughter/SIL have no real desire to move...so looking forward to our really senior years it seemed like very workable aging in place solution...
We can certainly sell at a profit the way the market is now...and the only reason we bought in FL was because they obviously were not moving to TX--her home state--and longer visits with a dog and cat now that we are both retired just would not work in rental,properties... We did consider that initially...

Relocating in retirement is an issue that is so complex and tied to individual situations that multiple books, articles, and threads here still can't offer any finite list that fits everyone...
But the idea that you can Google RE sites and chose a relocation destination w/o some serious time in that area seems the worst way to make decision...

We have friend who was living in Houston after years in CO, LA, AK, and son in San Diego...
They chose to buy home in Washington state for various reasons but w/o spending any real time there...think after about 2 yrs they have spent 15 mo in an RV traveling....which they could have done from Houston just as well...
So some people decisions are mysteries to me...
There was an article in the WSJ a couple of days ago that focused primarily on the super hot housing market in the metro Dallas/Ft. Worth area:

Home-Price Surge Stymies First-Time Buyers - WSJ

And I don't think that area is unique today. I am honestly bewildered by the prices young people from up north are willing to pay for new ticky-tack houses which aren't close to anything in former pine tree farms here.

OTOH - Dallas/Ft. Worth is a major metro area in the US. Some areas that have been mentioned here - like Johnson City Tennessee - aren't. And where I live is kind of in the middle between really big and really small. Also - a lot of housing prices depend on the local labor market. If there isn't any - or if all/most people who work locally make peanuts - houses won't be very expensive (nor will they be very nice IMO either). The higher the wages in any area - the more expensive the housing will be (in general).

I certainly agree with you about spending time in a place before relocating there. Even though we had lived in south Florida for 20+ years - we rented for 6-12 months in north Florida before deciding to stay/build. It is sometimes hard to appreciate what things like weather are like without experiencing them first hand. For example - I have always been somewhat intrigued by the Pacific NW. But we've only been there on vacation during the dry sunny season. Which - as I understand it - is a pretty short season in most parts there. I'd never move there permanently without spending a whole year there renting and seeing what it's really like year round. Robyn
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