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Old 09-08-2017, 12:16 PM
 
Location: North Scottsdale
30 posts, read 18,005 times
Reputation: 104

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Quote:
Originally Posted by ohio_peasant View Post

Have you considered NOT taking the lump-sum option on that $1.7M, and instead going for the annuity? What would that annuity be? Have you done an actuarial calculation, estimating the break-even life expectancy, for lump-sum vs. annuity, for a range of scenarios (inflation, rate of return, etc.)?


Annuity would be at ~$8800/mo single life. I would take spouse survivorship, however so the monthly would be lower. While this sounds - also great, it puts most of my assets in annuities, as my other pension that I plan to take at 65 - will be an annuity. So it sort of leaves me annuity rich, and cash poor(er). And if something were to happen to me and my spouse, a substantial portion of net worth evaporates.


Thank you for your input.
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Old 09-08-2017, 01:02 PM
 
71,527 posts, read 71,712,424 times
Reputation: 49115
Quote:
Originally Posted by galaxyhi View Post
Canoesmith

People like you make me and others just as much as those who sit around doing nothing and having welfare and Medicaid. Even when I WAS on welfare and Medicaid, I volunteered at the hospital and was college student, so I was exempt from the "work" program.

I'm also never amazed at how little those who AREN'T in certain programs misunderstand them.

What are you going to do if they reinstate the "work" requirement for Medicaid? It'll be a menial minimum wage job you'll have to work I can assure you that.
Aca may only be income based, but Medicaid, at least in my state, also requires statements with paper copies to back up your claim that you have a need to have free healthcare.

I had serious severe medical issues and had to go through my retirement and savings before I could get the "SAFETY NET" of welfare and Medicaid. Even when my SSDI was approved, I had $800/month in SSDI and the medicaid ceiling was $675. I had to "spend down" and actually pay the difference back to medicaid, or show I had spent it in health care BEFORE Medicaid would pay a single bill.

You may have $0 income, but Medicaid DOES count ANY and ALL assets in my state EXCEPT your primary home nd one car for single or one car per couple if married. A second car better be a $500 beater, or they will make you sell it. Any additional property? Again sell that before you even qualify. It's a fine AND prison term for qualifying and not declaring assets. You'll never qualify for Medicaid.

Even now, my OH has two part time jobs to assimilate a full time job, I have SSDI, and I'm working part time, our income is just over $42k and I dont get Medicaid as second to my Medicare. Even when I WAS on welfare and Medicaid, we got married and my OH s income counted and I got booted off medicaid and we had only half the income we do now.both incomes had to count.

You'll have interest from $400k in taxable interest, right? THERE'S your INCOME. It WILL count towards your qualifying for Medicaid, and they will want to know how you are earning that interest, and you'll have to PAY THEM to get your medicaid.

If you go ACA, you might get away with income only means testing, but you may be taking away from someone who DOOESNT have over $2M in assets.

That's right, you are the dreaded 1%er, and ripping off the system won't endear you to anyone.

Pay your premium for COBRA like a big boy and take your lumps. Everyone else has to. Or shop around most can get a family plan for about $12k a year. Or stay working until you qualify for Medicare.

Sheesh.



if the state has expanded medicaid and the plan is gotten through the exchange there IS NO SPEND DOWN for medicaid health insurance -it is only income based

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Some states have expanded their Medicaid programs to cover all people with household incomes below a certain level. Others haven’t.
Whether you qualify for Medicaid coverage depends partly on whether your state has expanded its program.
In all states: You can qualify for Medicaid based on income, household size, disability, family status, and other factors. Eligibility rules differ between states.
In states that have expanded Medicaid coverage: You can qualify based on your income alone. If your household income is below 133% of the federal poverty level, you qualify. (Because of the way this is calculated, it turns out to be 138% of the federal poverty level. A few states use a different income limit.)

https://www.healthcare.gov/medicaid-...nsion-and-you/
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Old 09-08-2017, 02:35 PM
 
7,913 posts, read 5,037,155 times
Reputation: 13571
Quote:
Originally Posted by canoesmith View Post
Annuity would be at ~$8800/mo single life. I would take spouse survivorship, however so the monthly would be lower. While this sounds - also great, it puts most of my assets in annuities, as my other pension that I plan to take at 65 - will be an annuity. So it sort of leaves me annuity rich, and cash poor(er). And if something were to happen to me and my spouse, a substantial portion of net worth evaporates.
This largely contingent upon whether one is more concerned about potentially running out of money during one's lifetime, or with leaving a substantial amount after one dies.

A few numbers.... $8800/month is about 6.2% annual "return" on $1.7M. If taking a lump sum, investing that at a guaranteed annual 3.5%, and withdrawing 6.2% of the original amount annually (that is, $8800/month) - NOT adjusted for inflation - the $1.7M becomes depleted after about 24 years. If the $8800/month is escalated by inflation (assume 2.5%/year), the $1.7M goes poof in about 17.5 years. The original $1.7M will last for 30 years if the monthly withdrawal is limited to $5500 (adjusted for inflation). You'd need to boost your annual rate of return to around 7% (so, 4.5% after inflation, with my assumptions) to get the $1.7M to last for 30 years... and that's only possible with a large equity-allocation.

Personally being a miser, and obsessed with net-worth, I'd take the lump-sum. But for a person with large monthly expenses, who's in good health but without emotional attachment to net-worth as a way of defining oneself, the annuity (under the above assumptions) looks like a better deal.
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Old 09-08-2017, 05:16 PM
 
Location: Gilbert, AZ
3,180 posts, read 1,958,918 times
Reputation: 3320
No mention as to whether the pensions are fixed, or include a COLA provision. That's a pretty huge consideration.
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Old 09-08-2017, 05:35 PM
 
Location: North Scottsdale
30 posts, read 18,005 times
Reputation: 104
Quote:
Originally Posted by hikernut View Post
No mention as to whether the pensions are fixed, or include a COLA provision. That's a pretty huge consideration.
The large annuity is fixed, the smaller will have a cola.
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Old 09-08-2017, 06:56 PM
 
1,618 posts, read 3,370,928 times
Reputation: 1752
This is slightly off topic, or maybe not.
Does anyone subscribe to the 'bucket' approach to preserving your retirement monies?


That is, an amount equal to your needs for a year, placed in tiered accounts that are fully safe?
Example:
Year one is say $50k in a savings account.
Year two is a 1 year Certificate of deposit
Year three is a 2 year CD and so on until
Year six is a 5 year CD.


Then as the CD's mature you rotate them to the next position and purchase a new 5 year CD from your more aggressive Stocks and REITs.


The main purpose is to protect yourself in a downturn but still allow your Stock Portfolio some manner of appreciation in good times.




Any comments?
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Old 09-09-2017, 02:34 AM
 
71,527 posts, read 71,712,424 times
Reputation: 49115
most of us use a bucket system in some form . mentally they do a comforting job .

financially they do nothing . in fact studies show the weight of the cash over time has drawing in good and bad times from stocks and bonds actually doing better with no cash buffer . studies show your life time spending is less using cash buckets

we think we are protecting ourselves in down markets using cash but had we not had the cash we would be that much higher . the long term effect from the weight of holding cash can be big .

but buckets make for a more comforting structure mentally they "just fit with the way our brains work ".

think about it , in down markets without cash buffers you WOULD NOT BE SELLING STOCKS . natural rebalancing would have you selling bonds , taking spending money and BUYING STOCK with what is left . so the process of just rebalancing back to your allocation does the work for you naturally .

i would keep no more than 2 years cash tops . 1 year for current spending and 1 year as an emergency fund for convenience . but there is really no extra protection going on .

as micael kitces said :

" I think the strongest thing about bucketing from the practical standpoint, it just fits with the way our brains work. We have this growing volume of research now, what we call the behavioral-finance research, and the particular version of this is called mental accounting, which basically is we tend to form lines and we make buckets around how we allocate and manage information in our heads. And that definitely includes how we treat our investment accounts."


http://www.morningstar.com/cover/vid...aspx?id=601506

https://www.kitces.com/blog/research...-market-timer/

https://www.kitces.com/blog/buying-h...e-lyubomirsky/

Last edited by mathjak107; 09-09-2017 at 03:20 AM..
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Old 09-09-2017, 08:03 AM
 
71,527 posts, read 71,712,424 times
Reputation: 49115
i just wanted to reinforce something that is extremely important to remember about just conventional rebalancing as opposed to buckets ..

in down markets without cash buffers you WOULD NOT BE SELLING STOCKS . natural rebalancing would have you selling bonds which likely went up , taking spending money and BUYING STOCK with what is left . so the process of just rebalancing back to your allocation does the work for you naturally .

key words being "buying stock in down markets , not selling "

odds are bonds are up ,stocks are down so it is the bonds that get sold and if the down market is really down like 40% again , you will likely get your spending money and be buying stocks rebalancing them back up again to your chosen allocation ..

that is in contrast to a bucket system ,where you will not be buying stocks but rather liquidating bonds to refill cash and if anything selling stocks to refill bonds and cash

but most of us will still use the more comforting bucked system ..

i reduced cash this week as rates came down on the fidelity conservative bond fund i was using as a holding place for a lot of the cash . but with rates down again i moved 1/2 to my capital preservation and income model . with my first ss check due next month i no longer need so much cash .

Last edited by mathjak107; 09-09-2017 at 08:12 AM..
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Old 09-09-2017, 10:27 AM
 
29,775 posts, read 34,863,854 times
Reputation: 11705
Quote:
Originally Posted by canoesmith View Post
Annuity would be at ~$8800/mo single life. I would take spouse survivorship, however so the monthly would be lower. While this sounds - also great, it puts most of my assets in annuities, as my other pension that I plan to take at 65 - will be an annuity. So it sort of leaves me annuity rich, and cash poor(er). And if something were to happen to me and my spouse, a substantial portion of net worth evaporates.


Thank you for your input.
I understood your original question and am not surprised at all by the direction the ensuing discussion went. That is this forum and the nature of a variety of people with different variables offering their opinions. I have often felt and said there should be a separate forum discussion with pension options and sizable portfolios. It is a matter of weighing the long term benefit of higher fixed benefits at the possible expense of you portfolio balance or the opposite.

I found FireCalc to be very helpful. You have to add in various pension/fixed income amounts etc, etc to create multiple outcome scenarios. What you want to manage is avoiding to high a fixed income or to high a portfolio balance in the out years. You will hopefully find a fixed income that is in excess of your needs and eventually allows you to grow your portfolios with new money.

I would suggest you consider what your age 80 expenses will be and if you see a CCRC in your future or some other model that offers structured aging support.
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Old 09-09-2017, 11:31 AM
 
1,053 posts, read 515,228 times
Reputation: 1809
Quote:
Originally Posted by mathjak107 View Post
i just wanted to reinforce something that is extremely important to remember about just conventional rebalancing as opposed to buckets ..

in down markets without cash buffers you WOULD NOT BE SELLING STOCKS . natural rebalancing would have you selling bonds which likely went up , taking spending money and BUYING STOCK with what is left . so the process of just rebalancing back to your allocation does the work for you naturally .

key words being "buying stock in down markets , not selling "

odds are bonds are up ,stocks are down so it is the bonds that get sold and if the down market is really down like 40% again , you will likely get your spending money and be buying stocks rebalancing them back up again to your chosen allocation ..

that is in contrast to a bucket system ,where you will not be buying stocks but rather liquidating bonds to refill cash and if anything selling stocks to refill bonds and cash

but most of us will still use the more comforting bucked system ..

i reduced cash this week as rates came down on the fidelity conservative bond fund i was using as a holding place for a lot of the cash . but with rates down again i moved 1/2 to my capital preservation and income model . with my first ss check due next month i no longer need so much cash .
Agree with what you said. I used to use the bucket approach but came to the conclusion it really only had a psychological benefit in my situation.

But let's not assume selling stocks in a down market is always a bad thing. Down markets are inevitable, and whenever we have one, I always look for an opportunity to harvest capital losses (to offset capital gains, which reduces my taxable income). If you are using index based etfs, it's easy to avoid the wash rule if you want to jump back in, since there are numerous etfs that track each index.
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