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there is no advantage to creating an income if they have an income already from the pension. it is when you need more income from savings to go with that pension or have no pension that all this comes in to play .
the money over funded is money that you would have either allocated to cash anyway or to your emergency money since you are really just switching pockets.
the money ear marked for an annuity could be money allocated to the cash and bond portion of your portfolio. that money will be spent down regardless to zero to live on over the next 15 years or so .
then you typically have to liquidate some equities and refill the bonds and cash for the next 15 years .
the annuity pays you 40% more cash flow than your own cash and bonds can support and 15 years down the road you still have income coming in requiring a lot less equities to be sold to pay future bills.
what folks fail to realize is any case their cash and bonds will be spent and gone regardless. the continuing annuity payment goes on forever long after you spent your bonds and cash.
that cuts the needs on your portfolio and lets it grow for heirs.
Last edited by mathjak107; 01-31-2015 at 08:27 AM..
there is no advantage to creating an income if they have an income already from the pension. it is when you need more income from savings to go with that pension or have no pension that all this comes in to play .
. the money over funded is money that you would have either allocated to cash anyway or tyour emergency money since you are really just switching pockets.
the money ear marked for an annuity could be money allocated to the cash and bond portion of your portfolio. that money will be spent down regardless to zero to live on over the next 15 years or so .
then you typically have to liquidate some equities and refill the bonds and cash for the next 15 years .
the annuity pays you 40% more cash flow than your own cash and bonds can support and 15 years down the road you still have income coming in requiring a lot less equities to be sold to pay future bills.
what folks fail to realize is any case their cash and bonds will be spent and gone regardless. the continuing annuity payment goes on forever long after you spent your bonds and cash.
I guess I am confused since the original question was how to get 401K money which is presumably invested at least 50/50 in equities if not more out without paying tax on it.
So, these strategies don't really address that or am I missing something?
And, you have never mentioned that you are using inflation protected annuities which cost more, maybe you are. But, if not, how do you overcome the fact that the amount you are getting each year is declining in value based on inflation?
Sorry to be a pest, but I don't get how the annuity is paying you 40% more. Every SPIA calculator I have looked at is basically just doling your money back out to you.
we are talking reducing taxable income for ss purposes.
all of these ploys and methods can do that .
you do not want inflation protected annuities , don't need them and to costly ,you are using your own equities for inflation proofing and growing money for heirs
Last edited by mathjak107; 01-31-2015 at 08:28 AM..
I guess I am confused since the original question was how to get 401K money which is presumably invested at least 50/50 in equities if not more out without paying tax on it.
So, these strategies don't really address that or am I missing something?
And, you have never mentioned that you are using inflation protected annuities which cost more, maybe you are. But, if not, how do you overcome the fact that the amount you are getting each year is declining in value based on inflation?
Sorry to be a pest, but I don't get how the annuity is paying you 40% more. Every SPIA calculator I have looked at is basically just doling your money back out to you.
go to immediate annuity .com and see. a 65 year old male shows almost a 5.75 % draw rate (.*not interest )
you can draw 4% inflation adjusted from your bonds and cash and they will deplete in about 15 years .
in 16 years you got all your money back from the annuity as cash flow and living expenses and now still have that income forever. you do not need to sell as much in equities to get more spending money to live on once you spent down the bonds ,cash and interest since the annuity income goes as long as you or your spouse does.
the magic with the spia happens down the road because more of your equities can sit and grow instead of all dollars for bills coming from your equity pile after cash and bonds have to be refilled..
we are talking reducing taxable income for ss purposes.
all of these ploys and methods can do that .
you do not want inflation protected annuities , don't need them and to costly you are usi8ng your own equities for inflation proofing and growing money to heirs
go to immediate annuity .com and see. a 65 year old male shows almost a 5.75 % draw rate (.*not interest )
you can draw 4% inflation adjusted from your bonds and cash and they will deplete in about 15 years .
in 16 years you got all your money back from the annuity as cash flow and living expenses and now still have that income forever. you do not need to sell as much in equities to get more spending money to live on once you spent down the bonds ,cash and interest since the annuity income goes as long as you or your spouse does.
the magic with the spia happens down the road because more of your equities can sit and grow instead of all dollars for bills coming from your equity pile after cash and bonds have to be refilled..
OK......thanks for the additional explanation.
One more thing to add to the ever growing list of complexities as I help my sister wade through her finances and get her to a point where she can sit down with a pro.
What is the purpose of laddering the immediate annuities? If we think that rates are going to rise, would it make more sense to wait to purchase a larger immediate annuity rather than ladder smaller annuities?
Would it then make sense to wait until I am older to purchase a larger SPIA rather than ladder smaller SPIA?
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