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Old 04-23-2016, 06:03 PM
 
Location: Florida
4,373 posts, read 3,710,800 times
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Quote:
Originally Posted by DaveinMtAiry View Post
I get it, thanks.


Back to the annuities let's review my initial plan in round figure and compare it with the suggestion.


Initial Plan A


Retire at 65, file for SS then and sell the home. Purchase a $100,000 annuity. This will realize approximately $2,500/month ($2,000 SS, $500 annuity) starting at 65.


Plan B as many of you have suggested:


Retire at 65, sell the home, spend the additional $100,000 as a replacement for SS. If I withdrew the same $2,500/month that is $30,000 a year so my money will run out in only 3.3 years. Then I have to draw down from other savings until I finally reach 70. Then I get an $800 bump but I have a lot of catching up to do to replace that draw down of other investments as this is only a $300 increase over the lifetime annuity payout of roughly $500. In addition we do not have a ton of cash reserved, most is tied into the home and my 401.


What am I missing?
Remember you can start out with plan 2 and if it does not work stop the deferral of SS any time you like.

Be sure to consider inflation. SS does go up for inflation. Your 800 will be a little higher due to inflation.

I think you understand the options but as you approach 80 I think inflation will have a big impact on your budget. Remember if one of you die the lower SS payment will be lost. At that point the steeped up SS maybe be a life saver.

Good luch
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Old 04-23-2016, 06:20 PM
 
71,737 posts, read 71,853,273 times
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Quote:
Originally Posted by leastprime View Post
Remember, only Half of those at 65yo will live to their mid 80's. Them are poor odds for the future dying. For pretty good chance that I'd be dead sooner than later, why would I buy an SPIA?
GL

a 65 year old couple today has a 73% chance of seeing 85 and one of them has a 47% chance of seeing 90 so that is pretty much a coin toss one of us will be here , that is still pretty high.

we have also been adding one more year of life every 4 years since 2000 .

thems pretty high odds
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Old 04-23-2016, 06:31 PM
 
30,146 posts, read 47,378,519 times
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Higher odds especially if you are in decent health at 65 IMO--the better your health, the higher % chance for longevity up to and past 90...barring something like Alzheimer's.
No stats to back it up--just what I observe from people my age or older whom I know...
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Old 04-23-2016, 06:32 PM
 
71,737 posts, read 71,853,273 times
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yep . the statistic would actually be higher but it is already allowing for those in poor health who don't live
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Old 04-23-2016, 06:40 PM
Status: "Re-edit status" (set 22 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,198 posts, read 1,910,089 times
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^ Patty Duke, RIP @69. One of my loves.
Prince @ 57. One of my favorites.

But to "chance" the odds in 20+ years is pretty risky if one is 66/68. (our parents, d@ 90, 97, and 95, Father now has congested heart failure at 96)

Them pretty high odds. ITA, we try to keep all avenues open. Also have a reknown relative who designs heart devices. Dad has had 2 stints plus couple 3 reams, and a quad by-pass. Mom (d) with pacemaker.

Me, a prostatectomy @62, and now elevated PSA at age 66. The odds are changing.
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Old 04-23-2016, 06:43 PM
 
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that still does not change the overall statistic because you can pick out people who died .

it would be a whole lot harde and longer trying to list the ones who didn't
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Old 04-23-2016, 08:01 PM
Status: "Re-edit status" (set 22 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,198 posts, read 1,910,089 times
Reputation: 3216
the ODDs get Real personal when it is Me.
YOddsMMV
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Old 04-23-2016, 09:03 PM
 
Location: Los Angeles
2,919 posts, read 1,963,769 times
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Quote:
Originally Posted by Robyn55 View Post
only for certain people. Like older people (minimum age 70 and preferably older). Who expect to live a long time. Who don't care about leaving money to heirs. And who perhaps think they will lose their ability to manage their money (if they ever had the ability in the first place).
And what will happen when they live a long time? They'll be living off of 2%.
Even during the worst of times (for bond/stock returns + rising inflation) with a SPIA if you lived to be age 90 then you were trying to live on just 1.56% by age 90 and 1.34% by age 95. All of a sudden 3.4% doesn't seem like such a bad deal! In fact it was a GREAT deal back in 1966 even if you did not need to leave money for heirs. Again, there are no "good deals" with annuities.

Betterment can automatically rebalance a portfolio for zombie seniors. Problem solved.
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Old 04-24-2016, 03:38 AM
 
71,737 posts, read 71,853,273 times
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except combine that spia with your own investing using some of the bond and cash budget and there is a different picture . our resident annuity hater really needs to become more educated on subjects if they want to have valid opinions .

6.50% was deliberately used so failures would be guaranteed so it can be seen if the spia's contributed to better success rates . the answer was yes , in almost every instance .

research from John Ameriks, Mark Warshawsky and Bob Veres, concluded that adding an SPIA improved the sustainability of retirement portfolios. the authors concluded that “a significant portion of the benefits provided by a stocks/SPIA strategy can be explained by the implied rising equity glidepath of the strategy.” That is, investing in annuities actually created a rising stock allocation in the retiree’s investment portfolio, and this element made retirement income more sustainable under a greater range of market conditions.


Last edited by mathjak107; 04-24-2016 at 03:56 AM..
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Old 04-24-2016, 04:13 AM
 
71,737 posts, read 71,853,273 times
Reputation: 49289
Quote:
Originally Posted by Big-Bucks View Post
And what will happen when they live a long time? They'll be living off of 2%.
Even during the worst of times (for bond/stock returns + rising inflation) with a SPIA if you lived to be age 90 then you were trying to live on just 1.56% by age 90 and 1.34% by age 95. All of a sudden 3.4% doesn't seem like such a bad deal! In fact it was a GREAT deal back in 1966 even if you did not need to leave money for heirs. Again, there are no "good deals" with annuities.

Betterment can automatically rebalance a portfolio for zombie seniors. Problem solved.
a single life annuity with money back guarantee has very little in mortality credits and is not representative of a simple spia which has a single rate today of around 6.29% at 65

inflation adjusting a 4% draw rate at 3% inflation would take 17 years before your intitail 4% withdrawal rate is inflation adjusted enough so it would reach the 6.20% pay out of the spia today day 1 as well as eventually deplete the bonds and cash portion of the portfolio to zero trying to provide that 4% inflation adjusted and need refilling from equity's to sustain more spending.

utilizing equity's and the spia will allow for longer growth of equity's and lower needs from equity's to sustain spending forever .

you still have not produced one accredited study showing oher wise , and that is because there are none ,as the facts are the facts .

there was a study by pfau and kitces that thought that a rising glide path would have beaten the spia/ equity's /bonds combo . it was one of the rare moments both researchers did a joint study together .

but after guyton got involved the rising glide path was not the better choice with interest rates this low , as once he concentrated on crunching the numbers on the bond side of things they realized that rates are just to low today to cause the traditional portfolio to do better gradually increasing equity's from a low level to a higher level through retirement protecting the early years like the spia combo does .

Last edited by mathjak107; 04-24-2016 at 04:42 AM..
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