PP YTD performance - was it the worst ever?

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vnatale
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Re: PP YTD performance - was it the worst ever?

Post by vnatale » Fri Sep 23, 2022 8:22 pm

Cortopassi wrote:
Fri Sep 23, 2022 7:55 pm

They pay you back a ratio of interest and your principal.

Two main things I like about them:

1) Nearly risk free. Get from an A+ or better insurer (like New York Life, Mutual of Omaha, etc)
2) They pay for life + joint spouse life + cash refund and many other varieties.

Vinny, look at: https://www.immediateannuities.com/ for immediate ballpark quotes.

Just like the PP -- I am not necessarily looking for growth. As I near retirement, I am looking for safety, and money that won't run out, and not subject to the vagaries of the market.

I'd feel much more comfort at, say, 80, with a few checks coming in per month vs. biting my nails because the latest Fed chairperson has just raised interest rates and tanked the market, for example.


Does this apply? https://tonyisola.com/2015/12/annuities ... %20annuity.

I would never consider A+ insurers to be nearly risk free. Far from being as risk free as U.S. Treasuries, which would collapse far later than would issues by A+ insurers.

You ARE investing in a form of bond by those insurers. When you buy a bond from a company you relying solely on their continuing credit-worthiness to get what they promise you. Same as an annuity issued by an insurer. Is there really any differnce?

Also, see this (written my one of my personal financial Mount Rushmore people - William Bernstein):

https://blog.betterfinancialeducation.c ... long-term/

"The first booklet, “The Ages of the Investor,” looks at the sequence of market returns.
– There are two different kinds of risk: 1) Savings Sequence Risk
– The sequence of returns does matter when investing periodically and does NOT matter with lump sums when invested. “That is, with a lump sum, a particularly good or bad sequence of returns will not affect your final result one bit.”
– Younger savers want volatility to get more exposure to buy low opportunities.
– Second kind of savings risk: 2) Very Low Equity Returns
– Mitigated by periodic investing
-Thus … challenge is to recognize (prediction isn’t possible) when situation changes from the first (normal) to the second kind (bad state of the world)
– Fear of the second kind of risk tends to make annuities popular for retirees. However, these come with “four large disadvantages: 1) Do not allow for emergency withdrawals, 2) have to give up ownership, 3) profit needs reduces payouts; profit needs help avoid, don’t prevent 4) insurance companies may not survive the very same systemic crisis that leads to annuity popularity (and state guarantee funds may be inadequate in the same situation as well due to low returns)."
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: PP YTD performance - was it the worst ever?

Post by vnatale » Fri Sep 23, 2022 8:25 pm

Cortopassi wrote:
Fri Sep 23, 2022 7:55 pm

They pay you back a ratio of interest and your principal.

Two main things I like about them:

1) Nearly risk free. Get from an A+ or better insurer (like New York Life, Mutual of Omaha, etc)
2) They pay for life + joint spouse life + cash refund and many other varieties.

Vinny, look at: https://www.immediateannuities.com/ for immediate ballpark quotes.

Just like the PP -- I am not necessarily looking for growth. As I near retirement, I am looking for safety, and money that won't run out, and not subject to the vagaries of the market.

I'd feel much more comfort at, say, 80, with a few checks coming in per month vs. biting my nails because the latest Fed chairperson has just raised interest rates and tanked the market, for example.


Also from Fisher:

https://www.fisherinvestments.com/en-us ... ty-What-Is

About Annuities:
If you’re considering buying an annuity or you already own one it’s likely because you’re looking for an investment that seems financially safe and secure, provides regular ongoing payments and limits potential losses. But there are many different types of annuities with substantial differences between them. Annuities are often complex and can have significant tradeoffs. Investors should do their due diligence so they know what they’re buying—and to make sure they understand all of the annuity contract’s fine print, terms and fees.

Fisher Investments does not sell annuities. We never have, and we never will. Why? We believe anything you can do with an annuity, can be done better with other investment vehicles. We have worked with countless clients who were sold annuities that did not meet their needs. Many annuities are complicated products that promise many things, but their features can actually prevent investors from reaching their long-term investing goals.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Fri Sep 23, 2022 8:44 pm

I am only looking at SPIA, fixed annuities, no ongoing fees (or if there are, they are built in). The payout I see is the payout I will get for the rest of my life.

As for risk, not sure how to answer that. If I cannot trust names like Mutual of Omaha, Prudential, New York Life, etc with at least a portion of my assets in an annuity, not sure what I can do.

So for me, it is safety first, which will then allow me to mentally allow myself to be riskier (meaning market invested) with the remaining assets.

No doubt, esp. when people focus on variable or indexed annuities vs. immediate, there are concerns of high fees and it not performing as expected.

With an immediate, what you see is what you get. If the $ received per month for the lump sum you give works for you, then it works for you.
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Re: PP YTD performance - was it the worst ever?

Post by vnatale » Fri Sep 23, 2022 9:42 pm

Cortopassi wrote:
Fri Sep 23, 2022 8:44 pm

I am only looking at SPIA, fixed annuities, no ongoing fees (or if there are, they are built in). The payout I see is the payout I will get for the rest of my life.

As for risk, not sure how to answer that. If I cannot trust names like Mutual of Omaha, Prudential, New York Life, etc with at least a portion of my assets in an annuity, not sure what I can do.

So for me, it is safety first, which will then allow me to mentally allow myself to be riskier (meaning market invested) with the remaining assets.

No doubt, esp. when people focus on variable or indexed annuities vs. immediate, there are concerns of high fees and it not performing as expected.

With an immediate, what you see is what you get. If the $ received per month for the lump sum you give works for you, then it works for you.


I just did a quote for myself. Turning over $100,000 at my age of 71 I'd get $711 per month or about $8,500 per year. Without even factoring interest / inflation that's an over 10 year break-even on a nominal basis. Much longer if one factors into alternative returns plus inflation.

As Bernstein pointed out those companies you name, in the worst case, may not be able to pay out. If safety is first, U.S. Treasuries cannot be beat. I have a full 50% of my investing in them. Until recently they were returning practically nothing. But on a relative basis nothing was a great return compared to how much I have lost this year on my equity investments.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: PP YTD performance - was it the worst ever?

Post by mathjak107 » Sat Sep 24, 2022 4:13 am

Spias don’t really pay interest until you go on their dime 15 years later . The irs implies an interest rate yearly for tax purposes. But you have zero return until you get that 100k back..you give them 100k and they hand it back to you over 15 years .

Your first real return is 16 years or so down the road .

And never buy an spia without delaying ss first .

For the amount of money in checks you would give up there is no commercial annuity that offers what ss does for the price..
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 7:39 am

I'll definitely look at laddering bonds as well, problem for me is they are not lifetime, so I run the risk of a future ladder paying crap, right?

Totally agree about ss. I did not realize until recently how much that will pay with delaying to 70 plus the spousal benefit.

I am totally open to other ideas, except stock market risk!
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Re: PP YTD performance - was it the worst ever?

Post by mathjak107 » Sat Sep 24, 2022 8:04 am

The spias that pass to heirs are actually selling you one of the most expensive life insurance riders money can buy .

To really benefit you want a single plan .

Joint may be better served with a single annuity and single premium life insurance .

In fact a good way of taking forever taxed ira money and creating never taxed money is to take some of the ira money and buy the policy .

You will pay tax on what you spend for the policy but since life insurance is leveraged you get a far bigger benefit then the policy costs up front
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 8:23 am

mj,

Immediate annuities.com shows nearly identical monthly payouts for single, joint and joint with cash refund, where heirs would get any principal left, but not their own annuity.

Regardless, my original thought was to start by annuitizing my Ira. It is traditional. Can you expand on your comments about taxes?

Also interested in anyone who is doing bond laddering for retirement.

Xan, maybe this and the most recent posts on this should go to a different topic called Annuities or such.

Thanks
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Re: PP YTD performance - was it the worst ever?

Post by mathjak107 » Sat Sep 24, 2022 8:38 am

The pay outs vary by enough to make them very different

Single life spia 7344 a year

Single life with the balance paid out if you didn’t get your money back which means only what is still owed to you from your own money is 6936

So you are paying over 400 a year for the small chance you will die in 15 years time ….that is expensive for what you get .


Joint annuity is 6372 a year so almost 1k less
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 9:14 am

Oops, you're right, I was looking at the wrong entry.

In any event, my family and my wife's are long lived -- her grandmothers made it to 92 and 100, and both sets of our parents are still around, late 80s/early 90s.

I have a mental need to protect against that, and open to almost all options!
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Re: PP YTD performance - was it the worst ever?

Post by mathjak107 » Sat Sep 24, 2022 9:17 am

Just being a couple says odds of one of us in the couple seeing 90 is almost 50%

Math for couples is very different since either can out live the other .

Remember 80% of all married men die married .

80% of all married women die alone
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Re: PP YTD performance - was it the worst ever?

Post by ozzy » Sat Sep 24, 2022 10:56 am

Here's a good visual illustration of the 60/40 stock/bond portfolio historical returns going back to 1928. It's down -19.3% YTD. Its turning out to be the worst year since 1937. There's really no portfolio to hide in this year. If you keep your money in cash you're still losing to inflation. 2022 has been a rough year without a doubt. Ugh.

https://twitter.com/charliebilello/stat ... 78/photo/1
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Re: PP YTD performance - was it the worst ever?

Post by barrett » Sat Sep 24, 2022 11:22 am

ozzy wrote:
Sat Sep 24, 2022 10:56 am
It's down -19.3% YTD. Its turning out to be the worst year since 1937. There's really no portfolio to hide in this year.
https://twitter.com/charliebilello/stat ... 78/photo/1
Well, damn, no wonder it feels so lousy. I hadn't realized it was historically that bad. And already within spitting distance (or maybe just one more down day) of those 1937 losses. I'm glad we have a biggish batch of I-Bonds but even the year's total return on those can be offset by one bad day for the S&P. Ah well. Many investors have longed for the day when they could get some kind of nominal return on their cash and at least rising rates gives us that.

Coincidentally it's really just this year that my wife has started following the markets at all. Damn! At least she doesn't get down when we keep taking hits.

So who's getting richer this year? Or are we all keeping the same slice of a smaller pie?
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Re: PP YTD performance - was it the worst ever?

Post by mathjak107 » Sat Sep 24, 2022 12:59 pm

From January 2008 to dec 2008 the popular vti/bnd in 60/40 was down 19.44% according to portfolio visualizer
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 3:41 pm

MJ,

Any comments on MYGAs?
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Re: PP YTD performance - was it the worst ever?

Post by mathjak107 » Sat Sep 24, 2022 3:43 pm

I don’t use them …meh ,not a product I have interest in .
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Re: PP YTD performance - was it the worst ever?

Post by mathjak107 » Sat Sep 24, 2022 4:00 pm

So I haven’t looked in a while but I see pp down 16.50% , wellesly down 13% and fidelity insight income model down 12.67
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 4:01 pm

Curious what you do with any cash you have specifically in cash, but not necessarily immediately needed?

I've got a bunch in a savings account paying 2.75% currently. Other options are shorter term CDs, ETF like SHV, and these MYGAs. I suppose I could do treasury bills/notes/bonds, but those pay generally 0.5 to 2+% less than the MYGAs for the same term.

I can get a 3 year MYGA for ~4.05% interest right now. Similar 3 year Treasury notes are around 3.56%

Thanks
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Re: PP YTD performance - was it the worst ever?

Post by barrett » Sat Sep 24, 2022 5:35 pm

Cortopassi wrote:
Sat Sep 24, 2022 4:01 pm
I can get a 3 year MYGA for ~4.05% interest right now. Similar 3 year Treasury notes are around 3.56%
I am guessing you haven't check Treasury rates in a bit. The 3-year is at 4.26% on the Fidelity website. See here:

https://fixedincome.fidelity.com/ftgw/fi/FILanding

Even a 3-month issue is yielding 3.4% at the moment. I also see that CD rates are now about level with T-Bills/Notes for most maturities.
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 6:39 pm

barrett wrote:
Sat Sep 24, 2022 5:35 pm
Cortopassi wrote:
Sat Sep 24, 2022 4:01 pm
I can get a 3 year MYGA for ~4.05% interest right now. Similar 3 year Treasury notes are around 3.56%
I am guessing you haven't check Treasury rates in a bit. The 3-year is at 4.26% on the Fidelity website. See here:

https://fixedincome.fidelity.com/ftgw/fi/FILanding

Even a 3-month issue is yielding 3.4% at the moment. I also see that CD rates are now about level with T-Bills/Notes for most maturities.
Barrett,

I need to be schooled in how to buy bonds! I went to Treasury direct and that's the number I saw for the latest auction. Which I guess was before the latest rate increase.

Anyway, how to best buy? TD? Something else?

Just watched a video on buying using TD. Buying me some bills and bonds!
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 8:29 pm

barrett wrote:
Sat Sep 24, 2022 5:35 pm
Cortopassi wrote:
Sat Sep 24, 2022 4:01 pm
I can get a 3 year MYGA for ~4.05% interest right now. Similar 3 year Treasury notes are around 3.56%
I am guessing you haven't check Treasury rates in a bit. The 3-year is at 4.26% on the Fidelity website. See here:

https://fixedincome.fidelity.com/ftgw/fi/FILanding

Even a 3-month issue is yielding 3.4% at the moment. I also see that CD rates are now about level with T-Bills/Notes for most maturities.
I wonder how Fidelity gets that 3.4%. Directly at the Treasury (https://home.treasury.gov/resource-cent ... nth=202209) that same 13 week bill is 3.12%??
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sat Sep 24, 2022 8:51 pm

I think I need to get a fidelity account. Need to check my Ally account on Monday, because they don't show quotes outside of trading hours for fixed income. I made a guest acct at Fidelity. Seems nice.
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Re: PP YTD performance - was it the worst ever?

Post by barrett » Sun Sep 25, 2022 6:34 am

Cortopassi,

I am not your guy for explaining all this stuff. I mean, there are a few things I understand, like if a bond with a 3.00% coupon is selling at 97 cents, then your actual yield to maturity (YTM) is going to be higher than 3%. In practice, when I buy Treasuries at Fidelity, I always get a slightly lower rate than the one posted on that home page. My understanding is that the rates you see on that page are based on buying the "minimum" which is often 500 bills or $500,000. When I put in an order for, say, 20 bills, before I actually hit the "buy" button I get a message telling me what my actual YTM will be.

There's probably way too much info to take in immediately on this Bogleheads thread:

https://www.bogleheads.org/forum/viewto ... st=6886648

But, as dualstow once wrote, "Those Bogleheads really know their stuff!"

One thing that people struggle with when buying even one-year T-Bills is then seeing those positions in red when they log into their accounts. That can happen when the current rates on those issues are higher than what they were when you bought. But, if you hold to maturity, you are made whole and get all of the advertised interest.

It takes a lot of work to really understand bonds. I've recently become aware that I need to really understand how TIPS work. About the only rules of thumb that I have absorbed so far is that you want to buy them in tax advantaged accounts and hold to maturity. Anyway, that is my next project.

Have you maxed out I-Bonds yet for you and your wife for 2022? If so, you can pick up another $20,000 worth in 14 weeks (after January 1st). And that's without even employing the I-Bond gift box strategy that jhogue taught me. We'll be able to make a pretty good prediction what the next I-Bond inflation rate is when the September CPI numbers come out around the middle of October... likely lower than right now but probably still the best fixed income deal for a while longer.

Anyway, I blather. Good luck with all this!
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Re: PP YTD performance - was it the worst ever?

Post by Cortopassi » Sun Sep 25, 2022 10:11 am

Thanks, barrett!

I did max out i-bonds in January, and will again this coming Jan.

I am making it a priority to understand bonds more in the coming weeks. While I am very happy with 2.75% in savings, if I can get more in bills and notes, and have them exempt from state tax, no reason not to!
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Re: PP YTD performance - was it the worst ever?

Post by seajay » Mon Sep 26, 2022 3:55 am

barrett wrote:
Sat Sep 24, 2022 11:22 am
ozzy wrote:
Sat Sep 24, 2022 10:56 am
It's down -19.3% YTD. Its turning out to be the worst year since 1937. There's really no portfolio to hide in this year.
https://twitter.com/charliebilello/stat ... 78/photo/1
Well, damn, no wonder it feels so lousy. I hadn't realized it was historically that bad. And already within spitting distance (or maybe just one more down day) of those 1937 losses. I'm glad we have a biggish batch of I-Bonds but even the year's total return on those can be offset by one bad day for the S&P. Ah well. Many investors have longed for the day when they could get some kind of nominal return on their cash and at least rising rates gives us that.

Coincidentally it's really just this year that my wife has started following the markets at all. Damn! At least she doesn't get down when we keep taking hits.

So who's getting richer this year? Or are we all keeping the same slice of a smaller pie?
There's no reward without taking on risk. When risk is shorter term volatility you can ride that, providing you don't need to lump all in or all out at single points in time. The PP is intended to lower shorter term volatility (yearly), but as this year so far shows even that isn't assured.
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