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Location: Was Midvalley Oregon; Now Eastside Seattle area
13,111 posts, read 7,580,788 times
Reputation: 9845
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Quote:
Originally Posted by BeerGeek40
Annuities are for the uninformed, and/or lazy.
GLWB's are the ultimate in option plays. Cost of GLWB option annual 2.0% IIRC of remaining Account (Liquidation-Cash) Balance, mostly immaterial if the goal is Income.
2012 FIA Guarantees to the Income (Annuity) Account.
^5% annual step ups, for up to 10 years. Compounding, No Withdrawals (NW). 1st withdrawal terminates this guarantee but can be reset.
^6.5% Lifetime Withdrawal on Income Account Value (Income Account Value at 1st withdrawal sets the "annuity" maximum payout amount) @ age 70 and 5 years holding, NW; 7.0% @75yo, 10yr, NW; 7.5%@ 80, 15yrs, NW.
^2x Withdrawal rate for qualified LTC, 6 month deductible.
YAMV
Last edited by leastprime; 09-11-2023 at 12:03 PM..
Pfau could have considered a CD ladder except there is no way to quantify what the offered rate might be in 3-4-5 yrs when the ladder rungs may need to be renewed/reinvested for income
You could use a ladder of Treasury zeros if this is what you want to do. I'm not suggesting it's necessarily a good idea or a bad idea, but the alternative exists.
GLWB's are the ultimate in option plays. Cost of GLWB option annual 2.0% IIRC of remaining Account (Liquidation-Cash) Balance, mostly immaterial if the goal is Income.
2012 FIA Guarantees to the Income (Annuity) Account.
^5% annual step ups, for up to 10 years. Compounding, No Withdrawals (NW). 1st withdrawal terminates this guarantee but can be reset.
^6.5% Lifetime Withdrawal on Income Account Value (Income Account Value at 1st withdrawal sets the "annuity" maximum payout amount) @ age 70 and 5 years holding, NW; 7.0% @75yo, 10yr, NW; 7.5%@ 80, 15yrs, NW.
^2x Withdrawal rate for qualified LTC, 6 month deductible.
YAMV
does anyone actually understand anything being said about this product ?
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,111 posts, read 7,580,788 times
Reputation: 9845
Quote:
Originally Posted by mathjak107
does anyone actually understand anything being said about this product ?
GLWB's are essentially a long option. Zero-sum. One party will win more. Sometimes win big and the other party will lose big, depending on the financial time.
Doesn't really matter.
People who don't understand this product shouldn't make unfounded statements.
Those who don't want to investigate, won't.
Product is hard to find today anyways. And I saw 4 years ago as new, was not attractive enough for us to add new purchases vs the equity market.
Today's CD's offer a much better shortterm risk:reward. What's not to like for a 5.35% apr, 13mo CD; or 5% passbook; or 5% 3-yr MYGA. All are simpler to understand than GWLB's,
IOW, in 2012, a 65 yo, buying a $100,000 GLWA FIA (all GLWB are deferred annuities) gave the annuitant, a guaranteed, deferred, future payment of ~$8300/yr for life beginning at age 70. Plus a death benefit to heirs on any remainder. Payback 12-13years, assuming ~0% returns. Long lived family.
Different strokes for Different folks.
YMMV
Last edited by leastprime; 09-11-2023 at 04:01 PM..
treasuries are the only one though that can be counted on to perform reliably in a recession or depression when the fed has to reduce rates and the economy is headed for the toilet .
so if diversification is why one wants bonds then little in your list qualifies since they all are pretty much joined at the hip to equites …
what is good for those assets you listed is good or better for stocks …..
they willl perform horribly in a recession or depression .
so no , they don’t replace treasury bonds in many ways and are not an alternative to bonds since most of your list is stock related
dividend stocks , preferred stocks and reits are stocks first and foremost along with real estate crowd funding which will take a hit in a recession or depression .
fixed annuities can not be rebalanced in most cases to buy more equities when rebalancing is called for , so no they don’t replace bonds there either
corporate bonds are more stock like then bond like.
there is very little there that can replace bonds as far as keeping the allocation you want and the volatility range you want.
as well as providing proper diversification in recession or depression.
so one has to ask themselves what roll are these bonds supposed to perform for me before deciding on what to own or what will replace them.
your list spins off income , that doesn’t mean they are a replacement for bonds and the roll bonds can play in a portfolio.
even a 100% equities can spin off income if that’s what one wants
I was just watching a financial program today that referred to Jim Grant and his prediction of a 40 year bear market in bonds
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,111 posts, read 7,580,788 times
Reputation: 9845
Quote:
Originally Posted by loves2read
Wade Pfau is a very recognized authority in investing circles—usually given credit for accurate insight
This article is an analysis of a recent paper Pfau has presented that advocates using fixed income annuities vs bonds in investment accounts
The author of the linked article takes issue with Pfau’s analysis
overall, I came to the same conclusion as Alan Roth, commentary to W Pfau's Paper on GLWB FIA's.
I agree with Roth's assessment that inflation will eventually destroy any GLWB Income stream. Which means you have to have enough GLWB & other income streams early on and to live below your means, to absorb inflation affects. Ladderings and tracking income to inflation (rentals) will help.
I would agree to Mathjak's comments on annuity concepts: More of an Income stream than Investment Portfolio component. Our Investment portfolio was then 100% devoted towards Retirement Income Security. As we exit the "red zone", we have new freedom in segregating what is Income vs what is Investing. We used GLWB annuities as purchased deferred pension.
The maximum returns that we receive on the Account Value was 1% and that was on the Fixed option. The Index option we never saw anything above 0.5% (1 year, 9 years of 0%). The annual fees made GLWB as a loser for investing. SPIA in 2012 at age 65 were unattractive, maybe 2% IIRC. Long bonds also about 2%.
Purchased annuities represent ~20% of our Income. I really don't know their value in our Retirement Portfolio (does not include home).
StealthRabbit's cite gives some bench marks.
YMMV
Last edited by leastprime; 09-11-2023 at 11:28 PM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,111 posts, read 7,580,788 times
Reputation: 9845
Our Investment portfolio is our Retirement Portfolio.
Our GLWB FIA (2012)had floor rate and very high top rate for the time (a small pile of pseudo money at a high set rate=high income).
Our GLWB Variable (2008, 2012, 2017) had a floor rate and an uncapped Income Value (a big pile of pseudo money at a reasonable rate=high income).
Oh, Never did own Bonds directly, except for EE (1984-1987 era) because they had a 4% floor rate and uncapped top rate. The EE saved DS education during the collapse of tech and 9/11 aftermath of the early 2000s.
Since 2008, I avoid bonds as much as possible either directly or indirectly.
Stock market risk is enough risk. Our trading portfolio is discretionary, relatively small.
our mix of equities , bonds and gold has supported us for 8 years in retirement with a 6 figure draw and it’s still higher in value then the day we retired.
we have no use for any kind of annuity product at this stage
not that we have ever had a use for one
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