U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Old 04-30-2016, 02:57 AM
71,501 posts, read 71,674,131 times
Reputation: 49074


stop with your nonsense . get educated on this stuff once and for all instead of posting the same worthless dribble where you parrot other mis-informed people every time you see an annuity discussion regardless of even what type is discussed .

stick to your usual buy agg and voo and don't bother adding to these conversations until you understand what is being said and why .

you have demonstrated your lack of understanding in the area of retirement planning over and over as you post charts that do not even apply to what is being discussed nor even understand the basics that those silly charts of average returns you keep posing in every discussion are just about meaningless when spending down . . .

Last edited by mathjak107; 04-30-2016 at 03:08 AM..
Reply With Quote Quick reply to this message

Old 04-30-2016, 06:56 AM
Location: Ponte Vedra Beach FL
14,628 posts, read 17,923,045 times
Reputation: 6716
Originally Posted by elnrgby View Post
more @Robyn55-
- $100k principal placed in a deferred fixed life annuity at age 55 will pay $1,100 per month for life starting on the 70th birthday
- $100k placed in a deferred 15 year fixed annuity at age 55 will pay $1,000 per month for 15 years starting at age 65 (ie, 65-70)
- $100k placed in a debarred fixed life annuity at age 53 will pay about $4,000 per month for life starting on the 80th birthday

I am away from home so do not have the policies on hand to give you the exact numbers, but the figures above are pretty accurate. Re other comment, I also understand a difference between maxing off income vs. maxing off good life in my 50s, and am more interested in maxing off good life. That's just me. Even my genetically healthy parents have slowed down substantially in their 80s, so I know that I have only 25 good years left at the absolute maximum.
I am not sure how an insurance company would calculate the rate of return on these. But - the way I see it - in your first example - your internal rate of return on the annuity is about 2.8% or so. Based on your life expectancy. Calculated as of the date you bought the annuity (I think that is the life expectancy the company would be looking at).

When it comes to the third example - your rate of return is actually negative. Because - at age 53 - your life expectancy is about 83. So if you compound $100k for 27 years - at the 2.8% I mentioned above - you get about $210k. And - 36 monthly payments of $4k starting at age 80 will only give you a return of $144k (less than the amount of your compounded principal). Of course - the numbers will look different depending on how long you actually live. If you die before 80 - you will have lost all your investment. You'll break even at at 84-85. And then you'll have a positive rate of return (how much depends on how long you live).

FWIW - if you make a different interest rate assumption - like say 4% - you will have to live to age 86 to break even on annuity 3.

So I really don't see the point of these deferred annuities as compared to very safe/safer alternatives. If someone is 53 today - he/she could buy a 27 year STRIP (US government zero coupon bond) where the yield to maturity is 2.8%. Then if that person lived to age 80 - he/she could buy an immediate life annuity if he/she wanted to. If the person died before age 80 - he/she would die with the original money (and probably more - depending on market conditions). If the person needed all or part of the money before age 80 - for any reason - he/she could access it (these things trade actively on the secondary market).

Note that long term STRIPS (like the annuities) aren't good protection against inflation. If someone wanted to hedge his/her bets against inflation too - he/she might buy a mix of STRIPS and IBonds or TIPs (the last two would provide inflation protection).

Finally - annuity number 2 makes more sense than 1 or 3. Assuming the payments are guaranteed for 15 years to the annuity holder *or a beneficiary* - and not subject to the holder's life expectancy. If the payments are guaranteed for 15 years - the rate of return on 2 is in the 4-5% range. Note that I'm assuming your "65-70" was a typo - and you meant to say 65-80. Robyn
Reply With Quote Quick reply to this message
Old 04-30-2016, 07:08 AM
71,501 posts, read 71,674,131 times
Reputation: 49074
i agree , the deferred annuity's that are deferred out so long that they really act as longevity insurance are cheap and pay a lot but that is because as kitces says they do not start paying out until so many years later most folks will never collect more then they paid in . that is what is wrong with the qlacs as a way of delaying rmds until age 85
Reply With Quote Quick reply to this message
Old 04-30-2016, 07:32 AM
Location: Ponte Vedra Beach FL
14,628 posts, read 17,923,045 times
Reputation: 6716
Originally Posted by elnrgby View Post
Who called whom stupid? I did not think anyone was stupid, was just genuinely confused by Robyn55 implying that 2M+ is very little to retire on, and I should try to maximize further savings rather than spend 12% of my assets in my 50s (I mean, I know that 2M is not a lot, but combined with soc security, it seems it should sustain a modest lifestyle for 40 years without difficulty. Or no? Is there something I don't know about it?)
Two million isn't a little. But it isn't a whole lot either. Especially if you're younger and have to factor in the effects of (even mild) inflation over the course of 20-30+ years. IMO - most people will need more money down the road - not less - to "stay even" in terms of lifestyle.

Also - if someone happens to live a very long time (like 90+) - it becomes more likely that the person will need more help/care/specialized senior living accommodations. Like senior "independent living" or "assisted living". One can look at one's personal situation - family history - etc. - to get a good idea what the odds are in terms of needing these things. And it's also not a bad idea to get a sense of what these things cost where you live. The base cost for my father's place (senior "independent living") here is about $4000/month now (and he pays another $750-1000/month for additional help at home). His sister - who lives in a similar place run by the same company - pays about 50% more (in the much more expensive New York metro area).

Then there are medical expenses. Whether or not you're on Medicare now - it's hard to know what it and other medical things will look like/cost 5-10-15 years down the road (the only safe bet is it will all cost more).

IOW - getting very old can get to be pretty expensive. OTOH - when one gets that old - other expenses will often go down. Like - for example - things people might be paying for cars - travel - restaurants. So it's hard to make generalizations that apply to everyone. Robyn
Reply With Quote Quick reply to this message
Old 04-30-2016, 08:37 AM
1,696 posts, read 609,966 times
Reputation: 1761
@loves2read- Thanks much for complimenting my English, but I still do say weird things, and you should just hear the accent :-). Anyway, Swiss annuities. Actually, I wasn't really accurate when I mentioned. the rate; I think it has been 4.5% all along, but it compounds from year to year, so it ends up being progressively a little more money every year.

If you want a very precise math behind it, I am sure the company would give you all the details, but I am not so analytic about it, and just want to know what I will get after X years from X principal. So, eg, with my first annuity, I started with $100k principal (the minimum that the company allowed) in 2002. It was allowable to increase it by 50% after one year, so I added $50k in 2003. At that time, they told me that my $150k principal would grow to a guaranteed minimum of $220k (but probably more) in 2023, when I can either take it out as a lump sum or annuity (with a provision that I can take some or all money from the annuity account any time before maturity, with no penalties or surrender fees). At the end of 2015, the value of that annuity account was about $210k. It increased in value about $6,600 in 2015, and from the previous years' pattern, I expect it to increase by about $6,750 in 2016 (and that will be taxed in the US as an ordinary dividend). I plan to keep this annuity account going til maturity in 2023, then take out everything as a lump sum.

To tell you the truth, I do not know what they exactly do mathematically to arrive at these figures. There are annuity fees, but I don't know what they are. You only pay the initial premium/principal, nothing else. Any fees are subtracted from the statement that I receive once a year, in Jan following the statement year, and this statement shows only the value of the account on Dec 31 of the statement year. If you want more information, you should e-mail a Swiss annuity company; they will love to practice their English with you, without obligation to get an annuity :-).
Reply With Quote Quick reply to this message
Old 04-30-2016, 09:25 AM
1,696 posts, read 609,966 times
Reputation: 1761
My parents are in their 80s. Dad walks about 5 miles daily, the same thing his father did until 6 weeks prior to death at 99. Mom abandoned intense sports after she broke an arm on a really difficult ski slope, and then her hip while rollerblading, in her mid-70s (but that is all fixed; she walks a lot too). I climbed half way to Everest at 52, and have no health problems at 56. I think it kind of made sense to get a longevity insurance... $140k paid to New York Life at age 53 to get $6,000 per month for life at 80 (plus $2,000 per month from previously ongoing life annuities, plus soc security), and then $2,000 more at 85... $8k/mo after 80 or $10k/mo after 85 plus social security should keep me afloat, I think. Everybody in the family lived without assistance until the end; I'll try the same. If I get blind, I'll learn Braille and read with my fingers. The only glitch could be a really bad stroke, but they already have robotic devices for mobilizing paralyzed people, So, I could climb Everest now, and count on New York Life keeping me afloat after 80, or I could obsess about investments now and what... fly 1st class and have a concierge medical care after 80? I have flown 1st class and did not find it very special (while I did find Everest quite special btw), and know enough about doctoring to realistically project what I myself might want medically (not a concierge care, for sure). So, the point is that we are all different. It may not suit everyone to kill 1M in their 60s, then another 1M plus soc security in their 70s, then live on longevity insurance + ss after 80, but it totally suits me.

Re safety of annuities from New York Life... NYL has been around since well before the Civil War, has never been in real trouble, has refused federal assistance in 2008, has issued its 2008 and 2009 annual financial report booklets with a cheerful title "NYL - built for times like these!", so it is not readily apparent why their annuity would be unsafe.
Reply With Quote Quick reply to this message
Old 04-30-2016, 12:51 PM
71,501 posts, read 71,674,131 times
Reputation: 49074
what you have to remember about annuity products is roi even at zero is irrelevant .

as an example an spia today at a 6% draw rate will provide 50% more income day 1 then you can safely draw yourself .

i know if i got a 50% raise at work that is a substantial difference in income .

without knowing how long you will live and what kind of market outcomes and sequences you will have the fact you could have drawn more from your own portfolio by the games end is irrelevant because you can't while you are alive because so much powder has to be kept dry for poor sequence risk . .

you can step things up slightly if your portfolio is way ahead but still nothing close to the draw of the spia for many many years .

so an spia is NOT about roi . it is all about cash flow while living .

the problem is most variable annuity's don't pay as much out as spia's do and that can alter the value of having one a bit if it is not high enough
Reply With Quote Quick reply to this message
Old 04-30-2016, 02:08 PM
Location: Mount Airy, Maryland
10,459 posts, read 5,922,719 times
Reputation: 16151
Wow I can't believe this thread is still going on.

As for me even though my dad is climbing mountains in his 80's I would have zero interest in a product that doesn't start paying until 80. Besides I will need the money long before that.
Reply With Quote Quick reply to this message
Old 04-30-2016, 02:54 PM
30,065 posts, read 47,312,423 times
Reputation: 16009
You have the option of an immediate annuity, Dave---either for fixed term or for life--
just depends on what you can put into it and what you can live with for the return rate...

So did you decide after all this helpful information if you want to take one out???
Reply With Quote Quick reply to this message
Old 04-30-2016, 03:11 PM
2,517 posts, read 3,505,404 times
Reputation: 5070
I to am curious if the OP decided for or against. I took a long time deciding to take mine out but the peace of mind is wonderful. I plan to start taking payments on mine at 65. I really like elnrgby's attitude to live and not worry about money. I would love to work on my own mindset to be more like his/hers.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.

Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top