Annuities?

[mathjak107]

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

[jhogue]

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.

[mathjak107]

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 .

[jhogue]

If you never spend down your assets, they you actually must be self-insuring.

[mathjak107]

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 .

[mathjak107]

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/

[Libertarian666]

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.

[mathjak107]

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 .

[Libertarian666]

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.

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.

[mathjak107]

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

[Libertarian666]

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.

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.

[Libertarian666]

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.

[mathjak107]

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

[Xan]

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.

[mathjak107]

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 .

[Xan]

You can (and do) make all those arguments, but you don't get to say that people who disagree are blindly thinking that "this time will be different". It's just a matter of timescale.

[Libertarian666]

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 .

If it had turned out badly, you wouldn't think the same way about it.

In other words, just because something turns out well, that doesn't necessarily mean it was a good decision at the time.
Of course the reverse is also true: just because something doesn't turn out well, that doesn't mean it was a bad decision at the time.

[jhogue]

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 .

mathjak,

Why do you keep saying you are 50/50?

We all know you have cash.

[mathjak107]

i mean if you want to get technical it is 50/47.5/2.5.% cash at the moment . but i don't count the cash as part of the models i use since the cash is outside and separate from my investing models. .the cash held for spending is treated like my art work and and real estate . it is all part of our net worth but they are not part of our investing models.

i don't break out my 50/50 in to including art work and real estate as part of the 50/50 . .

the only time i would count the cash is if it was part of the models themselves as an integral part of the portfolio because we held a cash position temporarily for redeployment . like in the pp , that would count as cash in the portfolio , it is an integral part of the pp and will always be part of the pp. spending the cash to live on daily would unbalance the entire portfolio and require things to be rebalanced all the time .

so even if i used the pp i would maintain that 25% cash position and have the daily spending money outside the confines of what i would call my portfolio .

back in 2008 i think the insight income model held 25% cash . so yes that would get counted because it is an actual portfolio position and it will be eventually be put back in to action .

there is a difference when a small percentage of cash is cash for daily spending and cash is an actual portfolio position and must remain as cash in my models . .

so in short if the cash is part of a portfolio position and strategy it gets counted . if it is daily spending money to live on and is declining daily , i do not include it since the percentages in each fund that we hold are based only on that portfolio value not my total net worth .

[mathjak107]

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 .

If it had turned out badly, you wouldn't think the same way about it.

In other words, just because something turns out well, that doesn't necessarily mean it was a good decision at the time.
Of course the reverse is also true: just because something doesn't turn out well, that doesn't mean it was a bad decision at the time.

if , if and if . if you want to keep doing the if's in your head don't walk out the door . what if you get run over . in fact don''t invest at all , what if you get sick and die by next year ? you will hurt yourself financially with the what if's ,


why not just spend all your money on insurances of all types since we have a whole load of what if's that can or could have happened .

there are risks and ramifications to everything in life . we weigh the pro's and cons and we make our choices .

but many times those visions of what if's will end up hurting you as you stare at the risks in things and end up quite poorer like those gold bugs who used to send me newsletters more than 30 years ago about how markets are collapsing along with the US dollar .

THEY BELIEVED THEIR OWN BULL-SHIT AND ARE A WHOLE LOT POORER FOR IT .

a flexible diversified portfolio does what it needs to as the big picture shifts . as an example while i can't disclose the model's holdings from the newsletter at one time we held lots of interest rate sensitive stuff on the bond side .

for quite a while now the bond side ranges from ultra short to bond funds that are go anywhere and can actually go in to areas of bonds that are helped by higher rates . if the economy slows down better choices will be utilized . been this way for more than 30 years with excellent results .

i don't use a static portfolio that is buy and die and just sits and sits . my main investing portfolio's have always been dynamic and shift a bit over time like nudging a big ship to keep it on course as the dynamics change . if you are wrong it never hurts you , you just don't make as much as if you were right in that instance . but all you need to be is right by more than you are wrong .

[Xan]

Mathjak, you aren't accounting for your survivorship bias. Sure, it's easy to be more right than wrong, just do what I did! Doesn't work that way. There are many who were aiming for what you did and were more wrong than right.

[mathjak107]

so what is your point , we should never invest because we fear being wrong ? or should we spend lots of money in in our investing hedging things that have little chance of happening and even those hedges may not be worth a darn when you expect them to .

investing is always going to be calculating risk vs the rewards and doing what your instincts tell you .

[Xan]

I'm saying that it's not wrong to invest in a way that does not rely on predicting the future.

[mathjak107]

well that is something balanced portfolio's have been doing since 1871 through wars , depressions , crashes , and an almost total financial collapse . so not sure of your point . a 50/50 mix or 60/40 works great in retirement or filling short term money needs .

in fact long term equities have been just fine over decades and need no mitigating for temporary short term dips . so no something like the pp is not needed if that is your point and would only have permanently hurt long term returns for a long term investor ..

the argument you are trying to make really is weak in practice . betting on the long shot is never good idea

[Xan]

Sorry, 1871 isn't far enough back for me to go all in on that strategy. For one thing, note that we so happened to win (or at least not lose?) all those wars. That kind of streak just doesn't go on forever.