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In reply to NewbieHere: if you don't need to leave anything to anyone, longevity insurance would be the no-brainer definite choice (particularly if you have a genetic probability of living long). For a low premium, you have a secure stream of income after 80, and you can spend everything else you have by the age of 79. If you die before 80 and do not have a designated beneficiary for the longevity annuity (the cheapest option), the insurance company keeps your premium, but who cares - you won"t need money if you are dead, and you had bought the total peace of mind, as well as the chance to live well on all of your remaining assets, during the more active part of retirement, ie, before 79. That is the choice I took (my closest potential heirs would be the kids of my cousins, whom I do not like much, and would actually want to actively prevent from getting any of my assets :-).
If you do have heirs, eg, your kids who are the meaning of your life etc, then you need ltci. The purpose of ltci is to preserve your other assets for your heirs. Otherwise, you would have to spend all your assets down to the basics before you become eligible for Medicaid.
they pay that much for so little with longevity insurance because odds are people will collect very little . they can offer all kinds of juicy amounts because statistically few will get much back . so you can't compare your own investing to an insurance product anymore than you can compare a pension to your own investing because once you die game over unless you pay to pass to a spouse . .
that is not to say they are bad products , in fact they can be quite interesting .
they can have you plan with your own money up to age 80-85 or so which gives you a lot more to spend than planning to 90-95 , and if you happen to beat the odds and live longer the longevity annuity kicks in .
as a point of fact though , lazy portfolio's take no time at all . i bet in 30 years i put less time in to portfolio mgmt then it takes to read and understand most annuity product contracts .
There are actuarial probabilities for general population (according to which my life expectancy right now is I think about 82), and then there is a probability of longevity for me personally (considering that both of my parents are past my actuarial life expectancy, without any sign of intending to die soon, and I already mentioned dad's family where nobody in the known history died before 90, except one great-grandfather who was offed in his late 20s by TB). Longevity insurance annuities come with massive intangible value of freedom and peace of mind for my 60s and 70s. Since I do not have heirs or dependents, the only purpose of having $ in my case is to convert financial assets into intangible ones. As far as the latter go, freedom and peace of mind seem like pretty good ones to me.
just saving 50k in the same fidelity insight growth model i have followed for 30 years has grown to 1-1/2 million today even without another penny added . the s&p 500 would be about a million too .
Also want to say that I lost $ (admittedly not much because I got disgusted and pulled out) from a Fidelity stock account at the peak of turbo-bull market in the 90s (which made me forever decide to stay away from stocks :-).
My point is that none of this is relevant to anyone older than 30 or 35...they are "doomed" from being able to save $5-10 million if only because they'll have started too late. So to state the obvious to someone who couldn't take advantage of that at their advanced age is....irritating...to the OP and to at least 75% of people in this forum who are too old for it to fit them...and then also irritating to the remaining 24% who happen to have the common knowledge of how compound interest works. Give some wise words on something few people know.
I can not for the life of me understand how anyone does not know how compound interest works. When you take a loan to buy something it is in the print. If you sign up for a credit card it is in the print. It works the same when you invest money as well. I would say that most people know about compound interest and fail to invest for other reasons. Mostly because when you are 20 a new car sounds so much cooler then an IRA or some other investment instrument.
Extrapolating from my own SEP-IRA (self-employed): if a 20 year old puts $2k into an IRA for 7 years, then stops, he'll have about $150k in that IRA at the age of 65. If he puts 2k into this account every year from the age of 20 to 65, he'll have about $280k at 65. If you want to have a couple of million by 65, I think you generally still have to earn them the old-fashioned way, ie, by working :-).
Lets say that two 19 year old kids decide that they want to become millionaires before they retire. They know that the market has investments that will get them to their goal. They both know that time is their friend and since the market is kinder over the long haul they know that even in down times they can expect to get a good return. So both choose long term investments that will on average bring them in a 12% return on average. Realize that Dave Ramsey is using an example but lets see how that example works out.
The first guy starts out when he is 19 and invests $2,000. He invests the $2,000 until he hits age 26 and stops investing. He lets the investment grow on its own. he invests a total of $16,000 and never puts in another dime.
The second guy does not start investing until he is 27 years old. He invests $2,000 in the market until he is 65 years old. He invests $78,000 over the time frame.
The guy that invests the $16,000 ends up with $2,288,000
The other guy that waited ends up with $1,532,000.
The difference is compound interest over time.
Lets say that the best they can do is 8% over the time period and I am thinking that 8% is a more realistic goal than 12%. You can still see that the first guy has a much smaller investment then the other guy and with an 8% goal I am betting he could still easily hit the 1 million mark over the period.
Lets say that two 19 year old kids decide that they want to become millionaires before they retire. They know that the market has investments that will get them to their goal. They both know that time is their friend and since the market is kinder over the long haul they know that even in down times they can expect to get a good return. So both choose long term investments that will on average bring them in a 12% return on average. Realize that Dave Ramsey is using an example but lets see how that example works out.
The first guy starts out when he is 19 and invests $2,000. He invests the $2,000 until he hits age 26 and stops investing. He lets the investment grow on its own. he invests a total of $16,000 and never puts in another dime.
The second guy does not start investing until he is 27 years old. He invests $2,000 in the market until he is 65 years old. He invests $78,000 over the time frame.
The guy that invests the $16,000 ends up with $2,288,000
The other guy that waited ends up with $1,532,000.
The difference is compound interest over time.
Lets say that the best they can do is 8% over the time period and I am thinking that 8% is a more realistic goal than 12%. You can still see that the first guy has a much smaller investment then the other guy and with an 8% goal I am betting he could still easily hit the 1 million mark over the period.
Not sure I would call it compound interest when investing in the stock market. I would call it growth and gains. Also can be losses.
I think compound interest was a term used more when saving accounts and CD's paid something.
Lets say that two 19 year old kids decide that they want to become millionaires before they retire. They know that the market has investments that will get them to their goal. They both know that time is their friend and since the market is kinder over the long haul they know that even in down times they can expect to get a good return. So both choose long term investments that will on average bring them in a 12% return on average. Realize that Dave Ramsey is using an example but lets see how that example works out.
The first guy starts out when he is 19 and invests $2,000. He invests the $2,000 until he hits age 26 and stops investing. He lets the investment grow on its own. he invests a total of $16,000 and never puts in another dime.
The second guy does not start investing until he is 27 years old. He invests $2,000 in the market until he is 65 years old. He invests $78,000 over the time frame.
The guy that invests the $16,000 ends up with $2,288,000
The other guy that waited ends up with $1,532,000.
The difference is compound interest over time.
Lets say that the best they can do is 8% over the time period and I am thinking that 8% is a more realistic goal than 12%. You can still see that the first guy has a much smaller investment then the other guy and with an 8% goal I am betting he could still easily hit the 1 million mark over the period.
Lets say that two 19 year old kids decide that they want to become millionaires before they retire. They know that the market has investments that will get them to their goal. They both know that time is their friend and since the market is kinder over the long haul they know that even in down times they can expect to get a good return. So both choose long term investments that will on average bring them in a 12% return on average. Realize that Dave Ramsey is using an example but lets see how that example works out.
The first guy starts out when he is 19 and invests $2,000. He invests the $2,000 until he hits age 26 and stops investing. He lets the investment grow on its own. he invests a total of $16,000 and never puts in another dime.
The second guy does not start investing until he is 27 years old. He invests $2,000 in the market until he is 65 years old. He invests $78,000 over the time frame.
The guy that invests the $16,000 ends up with $2,288,000
The other guy that waited ends up with $1,532,000.
The difference is compound interest over time.
Lets say that the best they can do is 8% over the time period and I am thinking that 8% is a more realistic goal than 12%. You can still see that the first guy has a much smaller investment then the other guy and with an 8% goal I am betting he could still easily hit the 1 million mark over the period.
Yes, but reality works in such ways that an IRA generally earns about 4%-5% per year (maybe 8% in a fantastic year like this one, but it is not the average), when it doesn't lose 40% as in 2008-9. Neither kId will get that kind of return from an IRA, plus there are taxes to pay which diminish the final net gains further. In general, if you want that kind of returns, you have to be a professional investor with your attention glued to the market at all times, without any other occupation or interest in life (I do know some people of that kind, and they are not much different from heroin addicts). If investing were so easy and gains so predictable, everyone would have the assets of Warren Buffett.
My kid's Roth IRA was invested at the peak, 2008 peak, but today it's average return is either 10 or 15%, I can't remember which. Look it up, it's VHCOX.
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