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Old 09-22-2017, 09:03 AM
 
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it is a word that really needs to be a word . because that is exactly what we do today with the demise of most actual pensions .

i have a whole list of ungood words that should be good words .
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Old 09-22-2017, 09:32 AM
 
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Why develop a new word, especially when the word would be misleading? Besides, if you really want to mimic a pension, just buy a annuity. That puts longevity in someone else's portfolio.
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Old 09-22-2017, 09:36 AM
 
Location: Central Massachusetts
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Originally Posted by bigbear99 View Post
Why develop a new word, especially when the word would be misleading? Besides, if you really want to mimic a pension, just buy a annuity. That puts longevity in someone else's portfolio.
having the word is one thing and buying an annuity is another. I would not suggest anyone buy an annuity with the exception on rare circumstances a QLAC. That is really under very specific circumstances. Creating an income stream similar to a pension can be done using current technology and accounts. Hence creating a new word 'pensionize".
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Old 09-22-2017, 10:22 AM
 
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Under the terms you mention, the word makes no sense, but do as you please.

Developing a portfolio that will provide a specific income stream "99%" of the time, based on back testing, is no pension.

Frankly, developing models that back test well is riskier than most folks think, since the past does not reflect (or predict) the future. The best you could say is that a model (or approach, call it what you want) would have worked 99% of the time in the past. It is not 99% of the time in the future. We can't know that.

There are a number of spectacular flame-outs in the past, most notably Long Term Capital Management in 1997, who had approaches that back tested well. Yes, they were higher risk portfolios than an individual is likely to have, but they also had the brain-power of two econ Nobelists.

Keep in mind that the world is now connected in ways unimaginable in the past. This means the markets could move in ways we've never seen before, good or bad, but certainly not related to the past.
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Old 09-22-2017, 01:28 PM
 
Location: Central Massachusetts
4,800 posts, read 4,843,254 times
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Quote:
Originally Posted by bigbear99 View Post
Under the terms you mention, the word makes no sense, but do as you please.

Developing a portfolio that will provide a specific income stream "99%" of the time, based on back testing, is no pension.

Frankly, developing models that back test well is riskier than most folks think, since the past does not reflect (or predict) the future. The best you could say is that a model (or approach, call it what you want) would have worked 99% of the time in the past. It is not 99% of the time in the future. We can't know that.

There are a number of spectacular flame-outs in the past, most notably Long Term Capital Management in 1997, who had approaches that back tested well. Yes, they were higher risk portfolios than an individual is likely to have, but they also had the brain-power of two econ Nobelists.

Keep in mind that the world is now connected in ways unimaginable in the past. This means the markets could move in ways we've never seen before, good or bad, but certainly not related to the past.
bigbear you are mixing me up with the OP who was looking for the Monte Carlo simulation and to adjust based on past or future possible outcomes. I suggest in my post to adjust draws based upon current balance and conditions as well as (true) needs. I am of the opinion that a person can adjust draws upon current day to day needs and the person's balance. This is also assuming that they are not solely depending upon the current draw which I contend a person should not put themselves in that position. If you are depending on an unsustainable draw you retired too soon.

It was the OP that was looking for a Monte Carlo simulation calculator because they didn't feel the historical models didn't provide enough data to sift through. MJ was contending that the Monte Carlo simulation was possibly overly pessimistic with predictions. Then MJ and I were in discussion about whether or not it was wise to give yourself a pay cut based upon the fact that they were already running pay check to pay check. It was at this point that you jumped in to argue a made up word that really does need to exist in our lexicon. Pensionize(d) just means that a person has set up a steady stream of income from an unconventional source.

For your suggestion though setting up an income stream from an annuity is only really good for a couple of reasons. One that the person doesn't trust themselves to make it on the current balance. The second is to delay RMD to 85 on some or all of one's portfolio. The QLAC is set up just for that imbedded in the IRA. At 70.5 the person needs only draw RMD based on the balance outside the QLAC. At 85 the QLAC then begins.
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Old 09-22-2017, 01:48 PM
 
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No mixup, but neither was my post directed specifically to you. Your approach and comments make sense!

Monte Carlo simulations are curious because their results depend greatly on the initial conditions. They are most useful IMHO for finding and analyzing interaction effects. I've used them in corporate finance situations for valuing income producing assets, with no big surprises.
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Old 09-22-2017, 01:50 PM
 
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but as we mentioned in another thread a qlac at 85 is a horrible age to first start taking back the money you gave them . unlike longevity annuities which are cheap because you may not live to collect , you pay full fare for a qlac and it is you who decided to wait until 85 .

plus qlacs have an accelerated rmd schedule in an ira really making rmd's high
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Old 09-22-2017, 02:21 PM
 
Location: Central Massachusetts
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yup very true. 85 is the age where one is standing one foot on a banana peel and the other on a skateboard facing downhill towards I95 on the CT shore.
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