Annuities?

Other discussions not related to the Permanent Portfolio

Moderator: Global Moderator

Post Reply
User avatar
pugchief
Executive Member
Executive Member
Posts: 3880
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: Annuities?

Post by pugchief » Thu May 24, 2018 7:23 am

mathjak107 wrote:
Thu May 24, 2018 3:06 am
you also get to have ex wives if they qualify collect off your record no matter how many there are , you can't do that with an annuity.
Why would you want to? Is that a privilege for you? Why the heck would anyone want one of their exes to benefit? You clearly have never been through a woman-initiated divorce [which for the uninitiated, is most of them].
User avatar
technovelist
Executive Member
Executive Member
Posts: 7057
Joined: Wed Sep 15, 2010 11:20 pm

Re: Annuities?

Post by technovelist » Thu May 24, 2018 9:39 am

mathjak107 wrote:
Thu May 24, 2018 3:06 am
this is true , under those circumstances . but it is rare there is not a higher and lower benefit in ss . especially in survivor benefits which can contain not only delayed credits but where it is not based on half amounts either. even if both benefits are the same if you were at least 62 in 2015 you can let your benefit grow and collect spousal no matter who's is bigger.

you also get to have ex wives if they qualify collect off your record no matter how many there are , you can't do that with an annuity. the fact still stands , do not buy an annuity without delaying ss first , it makes no sense . there is no better cola adjusted annuity that will pay you as much for the price !
For all those who want ex-wives to collect on their record, this is definitely very important.

I suspect most people with ex-wives aren't in that category.

And I agree that if you believe that SS will remain the same rather than being cut or means-tested, delaying SS is probably a good choice. But it's not the black-and-white situation that you claim.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Annuities?

Post by mathjak107 » Thu May 24, 2018 2:22 pm

well if you don't delay then you can end up more dependent on markets ,rates and inflation outcomes as your check will be 70% less at the age of 70.

so from 70 on delaying makes you more longevity dependent but a lot less market,rate and inflation dependent. so you have your choice .
survivor benefits can be a lot bigger too .

for the record i went in the middle at 65 and my wife 62
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Annuities?

Post by mathjak107 » Fri May 25, 2018 3:08 am

pugchief wrote:
Thu May 24, 2018 7:23 am
mathjak107 wrote:
Thu May 24, 2018 3:06 am
you also get to have ex wives if they qualify collect off your record no matter how many there are , you can't do that with an annuity.
Why would you want to? Is that a privilege for you? Why the heck would anyone want one of their exes to benefit? You clearly have never been through a woman-initiated divorce [which for the uninitiated, is most of them].
i guess it depends on your relationship with the ex . i always make sure my ex knows to file on my record via restricted application while letting her own grow . i want her to get the best deal ss wise that she can even if it is off my record
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

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 .
User avatar
pugchief
Executive Member
Executive Member
Posts: 3880
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: Annuities?

Post by pugchief » Fri May 25, 2018 10:57 pm

Mathjak, I know you are a big Kitces fan. In this blog post he basically says that if you can earn 1.7% above inflation you should take SS early and invest the money rather than delay until 70. Your thoughts?
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

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 .
User avatar
pugchief
Executive Member
Executive Member
Posts: 3880
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: Annuities?

Post by pugchief » 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
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

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 .
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Annuities?

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

pugchief 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 .
Last edited by mathjak107 on Sun May 27, 2018 6:14 am, edited 6 times in total.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

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 .
User avatar
mathjak107
Executive Member
Executive Member
Posts: 2951
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

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
Post Reply