Annuities?

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Re: Annuities?

Post by mathjak107 » Fri May 25, 2018 3:19 am

a good reason to delay ss is also because the tax gods give us a gift if we can make use of it .

every year we can take ira money that was written off at higher tax rates and we can take more than 24k out tax free as a couple or more than 40k out at as little as 4% tax while ss is growing .

just the standard deductions and exemption makes that possible . over 8 years that can reduce rmd's by 320k and you can have that money for almost no tax .

throw in some roth money , some cash set a side and some over funded life insurance money and you can have a nice 100k plus income while delaying ss , pay almost no tax , get an aca subsidy from 62 to medicare age .

you are allowed to over fund a whole life policy up to modified endowment limits where it is no longer considered life insurance and no fees or expenses can be charged on any money over funded .

in a land of less than 1% my policy was paying 4% so any extra money i put in grew by 4% tax free since in retirement you borrow the overage out and never pay it back .

you can see how with knowledge and planning you can get quite a efficient comprehensive plan but it takes planning for early on .

i thought i knew all i needed to know about retirement since my investments were doing well so i never went for help until way later .
by that time it was like telling the guy who build the brooklyn bridge , it is nice but can you move it 2" left .

it was to late for most of the good planning by the time i realized i don't know what i don't know.

knowing what i do now i would have done far more roths because of all the things that hinge on your taxable income in retirement .
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Re: Annuities?

Post by mathjak107 » Sat May 26, 2018 3:00 am

how do you know you can get 1.70% above the rate of inflation until after the game is over ?
so basically delaying is really taking the guaranteed return and taking on more longevity risk or taking it early is betting on markets ,rates and inflation and taking on more market risks .

the choice is yours ......

in the end the roi will be about the same if one lives long enough.

what i am learning though is the taxation of ss is very complex and very low . if you look at the irs worksheet for social security it will make your hair hurt . but the way it is calculated you can have 80k in ss for a couple and about 4k is actually taxed . plus most states don't tax ss .

that is far lss than you would pay on interest ,dividends and appreciation.

the good news is delaying lets you choose when you want to throw in the towel and file. no one says you have to wait 8 years .
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Re: Annuities?

Post by mathjak107 » Sat May 26, 2018 12:16 pm

don't you worry .something as important to american life as social security will be funded fully in the 11th hr like every thing else. they just funded social security disability when it ran out of money.

it isn't that your own investing can't match it , it is your own investing can fail to match it while ss is likely what it is . odds have been good investing works well but there are those failures we have had already where investing failed to keep up with inflation and the retirees were hammered .

ss being cola adjusted was fine .
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 5:40 am

MangoMan wrote:
Sat May 26, 2018 9:26 am
mathjak107 wrote:
Sat May 26, 2018 3:00 am
how do you know you can get 1.70% above the rate of inflation until after the game is over ?
so basically delaying is really taking the guaranteed return and taking on more longevity risk or taking it early is betting on markets ,rates and inflation and taking on more market risks .

the choice is yours ......

in the end the roi will be about the same if one lives long enough.

what i am learning though is the taxation of ss is very complex and very low . if you look at the irs worksheet for social security it will make your hair hurt . but the way it is calculated you can have 80k in ss for a couple and about 4k is actually taxed . plus most states don't tax ss .

that is far lss than you would pay on interest ,dividends and appreciation.

the good news is delaying lets you choose when you want to throw in the towel and file. no one says you have to wait 8 years .
Not saying I don't agree. But
1. guarantees from the government are not worth much, and
2. the PP and some other similar portfolios have been shown [by Tyler] to have very good SWR and PWR
the pp really is not comparable to the standardized stress testing that a safe withdrawal rate is based on . gold not only went through some extrodinary once in a lifetime events but you could not own gold as bullion in this country over the time frames a safe withdrawal rate is tested against .

the dates a safe withdrawal rate is based on are 1907,1929,1937 and 1965/1966 . those dates are what failed and were our worst case scenarios , starting the calculations in the 1970's misses every worst case outcome we had that the term safe withdrawal rate is based on . . we had no worst case outcomes after 1965/1966 .

so the only way you can really compare is see if the pp managed to have a 2% real return over the first 15 years of every rolling 30 year period but we still don't really know how 25% of the portfolio in gold would have influenced things and if you would have seen a 2% real return over the first 15 years of those worst case time frames ..

but a safe withdrawal rate also assumes you ended with a buck left at the end of the 30 years . so you really need to look at the balance left to besides that draw rate . that balance is used for all those big expenses not in the yearly budget , healthcare costs down the road that exceed things and money for heirs , a car , home repairs and renovations , etc ..

so as an example a 60/40 mix has had a 96% success rate at 4% inflation adjusted while 90% of every rolling time frame left you with more than you started with . 67% of the time it left you with 2x what you started and 50% of the time 3x what you started with .

that is 117 rolling 30 year cycles stress tested . if we eliminated those worst years for starting retirement a safe withdrawal rate for 60/40 would be about 6.50% with money still left over most time frames for heirs .

so there really is not a good way to see how the pp would have done against conventional investing because gold was such a wild card .

but in practice all that counts is how you do .

we have been retired just about 3 years now and despite delaying social security until 65 and spending down 100k a year from assets since age 62 we are still a few hundred thousand higher than the day we retired 3 years ago and that is all that matters when it comes to safe withdrawal rates .at the end of the day it is only about what has your portfolio done over your time frame .
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 6:02 am

so where does all this fit in with insurance products ?

well technically when we use our own assets we are really self insuring . we are self insuring our income , we are self insuring our long term care and we are self insuring our LONGEVITY .

key word is longevity . if you ask people how long they will live the answers are usually understated and are in the 80's . about 1 in 4 of us will see 90 and if a couple odds are 1 in 2 that one of us will see 90 so longevity is our big risk .

that means we need to self insure and keep quite a lot of dry powder unspent for the what if we live to our 90's or what if we need long term care of a sort ?

so it can be rather inefficient use of our own money trying to keep a buffer for the unknown .

that is where pooled money in insurance products could be a big help because we take the unknown out of the equation on some of the stuff .

by having those who die help pay for those who live , the self insuring aspect of things becomes easier .

what if we took our own assets and only planned to 85 rather than the chance one of us as a couple will see 95 ? we could spend a whole lot more if we just bought a deferred longevity annuity for very little money that kicked in at 85 and supported us through death on the chance we make it that far . .

that may be a far better deal than counting on the whims of the markets to leave you with a balance big enough to spend as much without the annuity for as long .

so the insurance products can trade uncertainty for certainty and reduce the buffer you need for self insuring all these aspects of life . delaying ss does a lot of the same thing .
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 9:48 am

many years ago money magazine featured my wife and i in an article . they wanted to see how my plans met up with their team of pro's ideas . so we did it with them .

we differed in one area . i wanted to self insure long term care . they were against it . they turned out to be right . because like i said above self insuring means the money you self insure with has to be kept safe ,secure and there ready to go . you can't leave it in the investment pool you use for income since a safe withdrawal rate assumes that can be spent down to 1 dollar if needed .

so it really meant taking a large chunk of money , hundreds of thousands of dollars , segregating it in low yielding safe investments . for a mere piece of the long term gains keeping that money invested we can easily pay the premiums on an actual policy without decreasing our income by segragating that money .
our estate attorney said most of his clients are the self insurers who never really did anything to actually self insure other than say the words and keep their fingers crossed . now when the crap hits the fan the stay at home spouse realizes she can be impoverished .

so there are lots of benefits using certain types of insurance products that can insure us far better than we can self insure . having some income insurance , longevity insurance and long term care insurance with no uncertainty can be a pretty good thing to have and the assets they protect can pay for the costs and come out further ahead.

at this stage i only have a small life policy and a ny state partnership plan for ltc . no annuity products yet
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Re: Annuities?

Post by barrett » Sun May 27, 2018 11:14 am

mj,

As enthusiastic as you are about delaying SS as long as possible (which I totally agree with... I think), why did you decide to claim at age 65?

Wouldn't it make the most sense to have a master annuity/LTC/SS claiming strategy in place before pulling the trigger on any of these?
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 12:53 pm

simple answer... it fit in our plans better . i enjoy working one day a week doing motor control and vfd training for my old company . i would have made over the limit if i filed early . but the special rules for the year you will be fra allow you to make up to 45k so it worked well .

also my wife gets a healthy spousal adder of almost 4500 a year to her early ss benefit when i file . for every year i waited we gave up 4500 more on her end . so 65 was a good balance for reducing market risk and balancing it with longevity risk .

we are all going to have different situations . if our income was lower and i could have spent down our ira's at near no tax and taken advantage of zero percent capital gain brackets i may have delayed longer .

we have an excellent LTC plan in place so we do not need to buffer any money for that .
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Re: Annuities?

Post by barrett » Sun May 27, 2018 1:38 pm

mathjak107 wrote:
Sun May 27, 2018 12:53 pm
simple answer... it fit in our plans better . i enjoy working one day a week doing motor control and vfd training for my old company . i would have made over the limit if i filed early . but the special rules for the year you will be fra allow you to make up to 45k so it worked well .

also my wife gets a healthy spousal adder of almost 4500 a year to her early ss benefit when i file . for every year i waited we gave up 4500 more on her end . so 65 was a good balance for reducing market risk and balancing it with longevity risk .

we are all going to have different situations . if our income was lower and i could have spent down our ira's at near no tax and taken advantage of zero percent capital gain brackets i may have delayed longer .

we have an excellent LTC plan in place so we do not need to buffer any money for that .
Ah, got it. Thanks for that. I don't know anything about the spousal "adder" so will have to look into that. But in our case I don't think it matters. When I turn 70 in 2028, my wife will be 61.6.

I also have not looked into LTC but am thinking that it might be cheaper to purchase now rather than wait until I turn 60 in September (just a guess). I have been going on the assumption that we will "self insure" but I know that's a gamble. I was just talking to a guy at the gym whose dad is paying $13,000 per month for being in a memory care facility.
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Re: Annuities?

Post by mathjak107 » Sun May 27, 2018 6:36 pm

my dad was under care 24/7 for 5 years and it left his spouse impoverished . it just did not make sense to actually self insure . not when the partnership plans here are so great .

i get 3 years of 400 a day increased 5% a year for a nursing home or 6 years of assisted living or in home care .

but that is nothing compared to the perks . the partnership has a special version of medicaid picking up all the bills forever once the insurance runs out . all assets are 100% protected and the stay at home spouse has no income limits on them .

the perks are really why we wanted it .

i waited from 60 to 62 and i turned prediabetic . i got a 1k surcharge every year now forever because i waited and did not take it while i had no issues .
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Re: Annuities?

Post by mathjak107 » Mon May 28, 2018 4:56 am

barrett wrote:
Sun May 27, 2018 1:38 pm
mathjak107 wrote:
Sun May 27, 2018 12:53 pm
Ah, got it. Thanks for that. I don't know anything about the spousal "adder" so will have to look into that. But in our case I don't think it matters. When I turn 70 in 2028, my wife will be 61.6.

if you were not 62 or older in 2015 if you have a work record of your own you can only get your own benefit . you can no longer take a spouses benefit and let yours grow .

if as an example your wife files at fra for her benefit and 1/2 your fra amount is larger than her fra amount , they add the difference to her check . that is a spousal adder .

as long as you file she can get that spousal adder whenever she files . if she is only 62 when she files than the difference is added to her early benefit . it will always be less than 1/2 your full since she is penalized for filing early
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Re: Annuities?

Post by jhogue » Tue May 29, 2018 3:08 pm

mathjak107 wrote:
Sun May 27, 2018 6:36 pm
my dad was under care 24/7 for 5 years and it left his spouse impoverished . it just did not make sense to actually self insure . not when the partnership plans here are so great .

i get 3 years of 400 a day increased 5% a year for a nursing home or 6 years of assisted living or in home care .

but that is nothing compared to the perks . the partnership has a special version of medicaid picking up all the bills forever once the insurance runs out . all assets are 100% protected and the stay at home spouse has no income limits on them .

the perks are really why we wanted it .

i waited from 60 to 62 and i turned prediabetic . i got a 1k surcharge every year now forever because i waited and did not take it while i had no issues .
Long term care insurance (LTC) is not a panacea.

1. The Wall Street Journal had a lengthy article within the last six months that concluded that neither consumers nor insurance companies are happy with where LTC is headed. The insurance companies have discovered that they significantly underestimated longevity and resultant payouts. Consequently, LTC premiums are now skyrocketing for BOTH new and long term policyholders. Many insurance companies have stopped writing policies and quit the business. Many long term policyholders feel that they have been gouged or forced to drop their now unaffordable coverage-- even after paying premiums for years on end.

2. Even if you do buy an LTC policy, you could still outlive your policy coverage. Consider the following example:
Each of my elderly parents had two-and-a-half year’s worth of coverage with their LTC policies. Each of them managed to outlive that coverage in an assisted living facility. At that point, they were faced with spending down their other investments. Ironically—how else can I describe it?—they both died within the last 6 months, just as that drawdown would have commenced. Of course, we would have cared for them no matter what, but the difference between them dying well enough off to leave a substantial inheritance to their children and them dying flat out broke still strikes me as ridiculously arbitrary. In the jargon of personal finance, my father’s observed SWR from his retirement portfolio at age 62 until his death at age 93, averaged 0.0%, with a standard deviation measured in 6 or 7 figures. In retrospect, I would say that LTC did help my parents reach their ultimate finish line, but their experience equally demonstrates the wisdom of also accumulating a portfolio structured to grow in perpetuity.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Annuities?

Post by mathjak107 » Tue May 29, 2018 3:13 pm

i did not buy my partnership policy for the 3 years insurance . that is peanuts . i bought it for the great perks we get after that insurance runs out .

all assets and income has 100% protection and we do not have to worry about ever having to spend down assets . that is a big concern for the stay at home spouse who can be easily impoverished .

our private homes will take medicaid assignment if you paid for at least 2 years . we simply give the bills to medicaid once the insurance stops . that is the deal our state makes with you if you take a partnership plan . not only that but the stay at hme spouse can have unlimited income while medicaid pays those bills unlike the restrictions on medicaid typically that are so low you can't live .
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Re: Annuities?

Post by jhogue » Tue May 29, 2018 3:18 pm

If you never spend down your assets, they you actually must be self-insuring.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Annuities?

Post by mathjak107 » Tue May 29, 2018 3:22 pm

no we are not self insuring at all . a ny state partnership plan offers us 100% asset protection and unlimited income protection once the insurnace runs out . the state has all our bills paid for by medicaid . so if i am in a home for 3 years then our insurance pays , if i am still there after 3 years then the bills are paid by a special form of medicaid set up just to go with these state plans .

ny and one other state offer 100% asset protection or a cheaper plan called dollar for a dollar . that means if medicaid spends 200k for medicaid care than only 200k in assets is protected . that is how most state partnership plans work , not ours we have 100% asset protection .

the premiums are priced so by the time we will be in the sweet spot for care we will pay about 1 years worth of care in premiums in future dollars .

that is a fair price for what we get in perks ,. homes here are 140k a year .
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Re: Annuities?

Post by mathjak107 » Wed May 30, 2018 4:01 am

the more i learn the more i am beginning to think that it may be a much better deal to use deferred longevity annuities instead of immediate .

basically you plan until 85 or so which increases your safe draw drastically . then for relatively little money buy a longevity annuity for a lot less money then an immediate annuity to kick in and take over from your 80's .

it is a pretty cheap way to get guaranteed income if needed and make what you already have work a lot more efficiently since you no longer save big buffers of money in case you are the one who goes beyond average life expectancy .

i saw an interesting show on this on consuelo mack the other night with jamie hopkins .

he really made me think how we basically self insure our income in retirement . only unlike insurers who can insure very efficiently because those who die pay for those who live , we can't do that with our own investing .

so to self insure we need to keep so much powder dry and plan to 90-95 even though most of us will never live that long .

well if we knew the day we would die , planning would be so easy and we can spend so much more if we were crapping out in our 80's .

well we can actually plan like that . we plan to our 80's and spend a whole lot more and because odds are low most of us will live in to our 90's , unlike an immediate annuity which is almost certain to pay out , these longevity annuities are very cheap for what they pay out if you need the dough .

excellent show and the good news is the show is already up on wealthtrack for viewing on line .

https://wealthtrack.com/jamie-hopkins-e ... etirement/
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Re: Annuities?

Post by Libertarian666 » Wed May 30, 2018 9:45 am

mathjak107 wrote:
Wed May 30, 2018 4:01 am
the more i learn the more i am beginning to think that it may be a much better deal to use deferred longevity annuities instead of immediate .

basically you plan until 85 or so which increases your safe draw drastically . then for relatively little money buy a longevity annuity for a lot less money then an immediate annuity to kick in and take over from your 80's .

it is a pretty cheap way to get guaranteed income if needed and make what you already have work a lot more efficiently since you no longer save big buffers of money in case you are the one who goes beyond average life expectancy .

i saw an interesting show on this on consuelo mack the other night with jamie hopkins .

he really made me think how we basically self insure our income in retirement . only unlike insurers who can insure very efficiently because those who die pay for those who live , we can't do that with our own investing .

so to self insure we need to keep so much powder dry and plan to 90-95 even though most of us will never live that long .

well if we knew the day we would die , planning would be so easy and we can spend so much more if we were crapping out in our 80's .

well we can actually plan like that . we plan to our 80's and spend a whole lot more and because odds are low most of us will live in to our 90's , unlike an immediate annuity which is almost certain to pay out , these longevity annuities are very cheap for what they pay out if you need the dough .

excellent show and the good news is the show is already up on wealthtrack for viewing on line .

https://wealthtrack.com/jamie-hopkins-e ... etirement/
I agree that longevity annuities have advantages in planning. They have a couple of drawbacks though:

1. You are leaving your money with a company for a long time. What if they get into financial difficulty? That is unlikely but not impossible.
2. Inflation-adjustment, even if they offer it, doesn't start until the payouts start. So high inflation before payments start will make the payouts considerably less valuable.

But if you are willing to take those risks, then they are worth considering.
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Re: Annuities?

Post by mathjak107 » Wed May 30, 2018 9:59 am

any annuity should NEVER be counted on for inflation adjusting whether immediate or longevity .

most annuities are protected to some extent by the states . even an almost total financial collapse in 2008 saw insurers stay well . at no point was even aig's insurance wing in trouble . they remained healthy through the whole thing . so i would say that was a pretty good litmus test . we personally are at far more risk than insurers .
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Re: Annuities?

Post by Libertarian666 » Thu May 31, 2018 7:27 am

mathjak107 wrote:
Wed May 30, 2018 9:59 am
any annuity should NEVER be counted on for inflation adjusting whether immediate or longevity .
Yes, but the longer that they have your money before they start paying you, the greater the risk of unexpectedly high inflation causing you problems. Thus, deferred annuities are riskier in this respect than immediate annuities.
mathjak107 wrote:
Wed May 30, 2018 9:59 am
most annuities are protected to some extent by the states . even an almost total financial collapse in 2008 saw insurers stay well . at no point was even aig's insurance wing in trouble . they remained healthy through the whole thing . so i would say that was a pretty good litmus test . we personally are at far more risk than insurers .
I don't think we should count on the next crisis being resolved in the same way as the last one.
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Re: Annuities?

Post by mathjak107 » Thu May 31, 2018 8:17 am

i don't think we will see anything as bad as 2008 for a long long time . that really was the perfect storm . it was a whole load of different issues all coming together in a perfect storm way . we will have downturns for sure but i doubt near total collapses .

i would never count on dealing with inflation ever through any annuity product . over time that is what our own investing deals with .

the only real risk with a longevity annuity is longevity . but no worse than us insuring our house our car or even term life insurance and not having a claim or living long after the policy is gone . it is INSURANCE
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Re: Annuities?

Post by Libertarian666 » Thu May 31, 2018 9:14 am

mathjak107 wrote:
Thu May 31, 2018 8:17 am
i don't think we will see anything as bad as 2008 for a long long time . that really was the perfect storm . it was a whole load of different issues all coming together in a perfect storm way . we will have downturns for sure but i doubt near total collapses .
I disagree completely. I believe the next crisis, probably sometime in the next ten years, is likely to be far worse than 2008. The destruction of the dollar is the most likely outcome.
mathjak107 wrote:
Thu May 31, 2018 8:17 am
i would never count on dealing with inflation ever through any annuity product . over time that is what our own investing deals with .

the only real risk with a longevity is longevity . but no worse than us insuring our house our car or even term life insurance and not having a claim or living long after the policy is gone . it is INSURANCE
Again, I'm not suggesting dealing with inflation via an annuity product. I'm saying that an annuity that has a long delay has more inflation risk than one that starts paying out immediately.

For example, for $100k, I can buy a joint & 100% to survivor annuity that pays $2100/month starting about 15 years from now. Is that a good deal? It depends on what $2100/month is worth 15 years from now. If there is 5% inflation for the next 15 years, the first payment of $2100 will be worth about 1/2 of what it is now. But if there is 10% inflation, that first payment will be worth about 1/4 of what it is now.

Of course inflation affects the value of payments even if they start now, but in that case we have a pretty good idea of the purchasing power of at least the first few years' worth of payments. That is not true for long-deferred annuities.
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Re: Annuities?

Post by Libertarian666 » Thu May 31, 2018 12:03 pm

MangoMan wrote:
Thu May 31, 2018 11:29 am
Libertarian666 wrote:
Thu May 31, 2018 9:14 am
mathjak107 wrote:
Thu May 31, 2018 8:17 am
i don't think we will see anything as bad as 2008 for a long long time . that really was the perfect storm . it was a whole load of different issues all coming together in a perfect storm way . we will have downturns for sure but i doubt near total collapses .
I disagree completely. I believe the next crisis, probably sometime in the next ten years, is likely to be far worse than 2008. The destruction of the dollar is the most likely outcome.
And the government is basically announcing their intention to prod that outcome by announcing today that they are repealing the Volcker Rule from Dodd-Frank. Do they never learn?
A. No, they never learn.
B. With or without the Volcker rule, fiat currencies always end badly.
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Re: Annuities?

Post by mathjak107 » Thu May 31, 2018 12:32 pm

you worry to much ....... the most costliest words in the english language have always been this time is different !
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Re: Annuities?

Post by Xan » Thu May 31, 2018 2:28 pm

Mathjak, if this time is NOT different, then stocks will plummet as the US goes from its height to a declining empire. You have a myopic view of how far back to go: because stocks have always gone up since 1880 or whatever, then that's all they'll ever do.
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mathjak107
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Re: Annuities?

Post by mathjak107 » Thu May 31, 2018 4:54 pm

i am a big believer in plan around what was , what is and what stands a reasonable chance of continuing then leave slack in the plan .

we can paralyze ourselves with our own visions of every negative thing that can happen and hurt ourselves for really no reason . the biggest obstacle to our own financial success is believing our own bull-shit that we envision in our heads.

my brain pounded me nightly about every negative that could happen when it came to buying in to the real estate partnership i did . i almost did not go through with committing almost 500k to the deal . I fought my brains visions and 15 years letter it was an incredible investment .

but i learned a long time ago our brains hate losing money more than it likes making money so it will pound you with every negative it can think of .

because stocks went up for 150 years do i think they will go up forever ? well thinking the end was coming certainly would have left you alot poorer to date . certainly i see them going up in my lifetime

at this stage i am fine with 50/50 in retirement and there is plenty of slack in our plan but i certainly won't hide under a rock because of things i can imagine happening .
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