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Old 04-24-2016, 04:31 PM
 
Location: Columbia SC
8,993 posts, read 7,762,382 times
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Quote:
Originally Posted by Robyn55 View Post
No it isn't. Your rate of return is 1.42%/year. On a 10 year brokered CD - you could easily get 3% until a few months ago - and you can still get about 2.75% today. And still have all of your money at the end of 10 years. Unless I have misunderstood your investment - it sounds incredibly stupid to me (sorry for sounding harsh - but I just call them as I see them). Robyn
Tough love from Robyn but I agree with her.
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Old 04-24-2016, 04:34 PM
 
30,155 posts, read 47,378,519 times
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Quote:
Originally Posted by Robyn55 View Post
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
I think some of your observations are just not as accurate as you think...
Our FL house is just south of Sarasota FL --not a major metro area...probably 1/3-1/2 the jobs are seasonal or tied to seasonal/vacation traffic and therefore under 40K yr but two big business factions are medical (taking care of seniors) and finance (banks and investment firms--again taking care of seniors) which can be well-paid...along with certain % of wealthy retired people--not all senior citizens......

Our SIL gave up a job in May last year because the company wanted him to relocate couple hours away.
It took him until this week to get a viable job offer in Sarasota area...he could have had plenty of options if he had been willing to consider moving to DFWArea so yes--job viability can drive RE prices but some areas have decent jobs and not such high prices...

Sarasota IS however a very expensive housing area because of the nearness to prime Gulf beaches, desireable weather 8-9 mo a yr, and fairly low crime rate...Sarasota county has some of the better public schools in FL as well although the ratio of seniors to younger families is skewed to seniors...

The overbuild in SFR/foreclosures has been eaten up by investors buying for rental properties, out of country investors looking for more stable place for their money. Some areas --like Venice 10 min south of SRQ--have surplus condos on offer but those are often less desireable because of condo rules, or age, or size...Some areas like South Venice are known for no HOA communities--while some people prefer that because of the no-hassle freedom, we knew after driving to look at two homes in that area we couldn't take trailers and cars parked on front yards (not driveways), lackadaisical yard care, and other signs of neglect...
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Old 04-24-2016, 06:50 PM
 
30,155 posts, read 47,378,519 times
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From Investment News--newletter for financial advisors but free if you register w/email--
Article about income bracket creep for Medicare premiums
Big change coming soon for high income Medicare beneficiaries
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Old 04-24-2016, 08:31 PM
 
1,736 posts, read 620,486 times
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Okay mathjak107, let me do this again:

- $100,000 that I had invested in my mutual funds IRA as of 2006 is equal to $150,000 in that account as of 10 years later (and if I were to start mandatory withdrawals now, the entire amount withdrawn would be taxable). Furthermore, all of that money is always at market risk (eg, the value of this account dropped to 50% during the market crash - fortunately, I did not need to withdraw anything during that time)

- $100,000 that I had placed in a fixed immediate life annuity at age 45 has been already paid back to me - everything paid to me from that annuity for the rest of my life (roughly $450 per month on each initial $100k premium) is a free money - about $200k of free money if I live as long as my grandfather

- $100,000 that I placed in a deferred 15-year annuity will be equal to $180,000 in 10 years, which will be paid out to me over 15 years, with only the interest taxable (a little under 6k per year assuming a $100k initial premium). Based on the experience of the past 10 years, my $100k (as of now) 10 years from now would be expected to be equal to $180k in an annuity account (essentially certain), or $150k in a mutual fund IRA (uncertain), or $110k in a bank account.

- $100,000 that I placed in a deferred life annuity at 53 will be equal to $960,000, 27 years later, paid out over 20 years if I live to be 99 (I do have that kind of longevity in the family)

None of these gains (potentially 200% from an immediate fixed life annuity started at 45, 80% from temporary fixed annuity deferred for 10 years, potentially almost 2,000% from a late-starting life annuity deferred for 27 years), and none of the initial annuity premiums, are at any real market risk (unless companies like New York Life or Pacific Life go completely under - how likely is that? and even in that unlikely case, there are state funds that replace most or all of initial investment in annuities of failed companies). Yes, all of these expected annuity gains are a virtual money until it gets paid to me, but that virtual money is guaranteed by solid financial companies to be a real money if I live long enough to need it. For my retirement, I just need a source of reasonable spending money over about 40 years, I don' t need to die with a massive net worth (I am basically planning to have a sufficient daily amount of money until I die, with minimal net worth since I am not leaving anything to anyone).

Lastly, based upon financial experience of the first nation that underwent massive aging of its population (Japan), severe inflation is highly unlikely to happen in my remaining lifetime, which makes annuities even better (although I did account for inflation by layering various annuities over time).
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Old 04-24-2016, 09:38 PM
 
Location: Prescott AZ
6,130 posts, read 9,093,524 times
Reputation: 11545
Quote:
Originally Posted by Robyn55 View Post
No it isn't. Your rate of return is 1.42%/year. On a 10 year brokered CD - you could easily get 3% until a few months ago - and you can still get about 2.75% today. And still have all of your money at the end of 10 years. Unless I have misunderstood your investment - it sounds incredibly stupid to me (sorry for sounding harsh - but I just call them as I see them). Robyn
Thanks for calling me stupid. How could I get $900 a month for 10 years with a CD????
Tell me oh wise one.
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Old 04-25-2016, 02:35 AM
 
1,736 posts, read 620,486 times
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Sorry, correction of a bit of math from my previous post: I actually received back, so far, only a little over one-half of my initial fixed life annuity premium that I paid 11 years ago (at age 45), but if I live to 99, I am still going to get almost $200k of free money out of $100k ppremium,
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Old 04-25-2016, 04:15 AM
 
71,763 posts, read 71,853,273 times
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even at 3% money doubles every 24 years . so getting double or a bit more back is nothing great.

again , without reading your policy i have no idea what the deal is with yours .

one thing i point out all the time is most variable annuity's maintain sub accounts and these sub accounts show huge gains over time . especially when you have deals like bonus bucks and guaranteed minimum returns like we were pitched where we were guaranteed 10% a year min for 10 years .

it had our balance doubling in only 10 years regardless of what our underlying accounts did .

but that balance was never yours to take . it served only as a base for annuitizing and drawing money out each year .


for each year you delayed they actually gave you that 10% but your amount you could withdraw only grew by 1/10% a year for each year you delayed .

so if i gave them 100k my balance was 200k in just 10 years . but my draw rate had i not delayed was 4% , by delaying 10 years to goes to 5% so the best you will ever see is 1/10% of 1 % per year . in ten years you can draw 5% instead of 4% from that 200k balance . that is all thar 200k can be used for . whatever the markets do to your original 100k is your real story and that balance good or bad is all you get to take out lump sum or if there is a death benefit your heirs get .

in the mean time fees are based not on 100k but 200k . so in those 10 years fees are now 2x what they were based on money you can't have .

so yep , there was a nice big fat juicy balance showing but there was no way to really gain access to it in its entirety .

that sub account with that balance is never yours to take . only your actual account balance without the guarantees and bonus dollars ever goes to you or the heirs .

quite a difference between what one thinks they are getting and what you may be getting .

this is why anything but plain spia's can be so complex you have no clue what the real deal is , you think you got some fabulous guarantees and can only benefit from markets going up with no downside . WRONG !

Last edited by mathjak107; 04-25-2016 at 05:13 AM..
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Old 04-25-2016, 06:39 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,945,286 times
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Quote:
Originally Posted by PhxBarb View Post
Thanks for calling me stupid. How could I get $900 a month for 10 years with a CD????
Tell me oh wise one.
You don't need a CD. Open a 1% high yield savings account - and you can draw $876/month from it. You'll be left with $0 at the end of 10 years. If you absolutely insist on the $900 - you could probably tinker with a 10 year CD ladder. CDs that yield 1.4% or more (easy at the long end - but you can find some at the shorter end of the range with some digging) will get you to the magic $900 number.

Like I said - with the annuity you're talking about - most of what you're getting over the course of 10 years is YOUR OWN MONEY. $833/month. It's like giving your money to a third party - and then having the third party dole it out to you monthly like an allowance. Which is why it doesn't make any sense to me.

OTOH - a SPIA *life* annuity makes more sense. For at least some people. As a form of "longevity insurance". Robyn
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Old 04-25-2016, 06:54 AM
 
71,763 posts, read 71,853,273 times
Reputation: 49311
the annuity only makes sense when they dole your money out to you at a greater rate then you can safely dole it out from yourself including principal .

that really leaves just lifetime annuity's since those who die pay for those who live so the spread between what you can safely draw and what they can give you is wide enough to bother .

The primary reason for this is that while a bond and cash portfolio can provide principal and interest payments over time, an annuity provides principal, interest, and mortality credits attributable to all those who didn’t survive as long. In other words, not only does the annuity eliminate the time horizon problem for those who live a very long time, but it gives “outsized” payments to those who are the survivors .

even longevity annuity's which lick in very late in life are questionable as while they are cheap and pay a lot out , statistically you don't start getting payments until well in to the danger zone so they can be questionable as to their value that late in life .

https://www.kitces.com/blog/why-the-...nt-income-yet/

Last edited by mathjak107; 04-25-2016 at 07:32 AM..
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Old 04-25-2016, 07:01 AM
 
Location: NC Piedmont
3,911 posts, read 2,882,516 times
Reputation: 6291
Quote:
Originally Posted by Robyn55 View Post
You don't need a CD. Open a 1% high yield savings account - and you can draw $876/month from it. You'll be left with $0 at the end of 10 years. If you absolutely insist on the $900 - you could probably tinker with a 10 year CD ladder. CDs that yield 1.4% or more (easy at the long end - but you can find some at the shorter end of the range with some digging) will get you to the magic $900 number.

Like I said - with the annuity you're talking about - most of what you're getting over the course of 10 years is YOUR OWN MONEY. $833/month. It's like giving your money to a third party - and then having the third party dole it out to you monthly like an allowance. Which is why it doesn't make any sense to me.

OTOH - a SPIA *life* annuity makes more sense. For at least some people. As a form of "longevity insurance". Robyn
Agree with a caveat; I may do a 5 year to bridge to a higher SS payout knowing that it is likely I could do better with an actively managed account I am drawing from but with the declining balance over a short period I might take the security of the set payment amount over having to fiddle with another account and take a very slight risk for what would likely be a smallish gain.
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