- Jun 9, 2014
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IRR on immediate annuities?
Were you born yesterday? Have you not heard of the term risk transfer? Earth to L-boy. Your phucking pension is an annuity.
Question about IRA/Roth/TSP contributions
- Thread starter BMF
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Were you born yesterday? Have you not heard of the term risk transfer? Earth to L-boy. Your phucking pension is an annuity.
- Oct 5, 2018
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IRR on immediate annuities?
Were you born yesterday? Have you not heard of the term risk transfer? Earth to L-boy. Your phucking pension is an annuity.
I don't have a pension.
The payout rate on SPIAs that are inflation adjusted are only in the 3.0 to 3.5% range last time I checked, although there aren't a lot of cpi adjusted SPIAs. Of course the payout it higher is not inflation adjusted, but what is the point of taking on inflation risk if SPIAs function are to reduce risk.
My point is you pay a lot for that reducing your longevity risk/SWR depletion risk.
A better strategy is to defer SS to 70. And purchase some supplemental SPIAs if you must, preferably future dated.
- Jun 9, 2014
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What do you suppose the cost was for certain retirees who stopped working in 2007 predicated on being able to draw a set percent off a portfolio in the market? There goes the 4% Rule down the drain. It's all about balancing risk.
My point about IRR was it's irrelevant to a life annuity. You're transferring risk to an insurance carrier to provide payments for life whether you live to 65 or 105, with or without inflation protection.
You're not addressing a life annuity, you're addressing a period certain annuity or deferred annuity. You're so bogged down by the details that miss the entire picture.
I'm sure you've heard of the pyramid approach to financial planning. The best retirement planning isn't built around one layer, but rather multiple layers that together form a pyramid.
Knowing how to build those layers is key to success.
- Oct 5, 2018
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I am not a financial planner, and my knowledge of insurance products is not robust. So yes I was confused about what you were talking about.
I'm going to guess a life annuity is essentially a SPIA + life insurance?
As to IRR, many of these insurance policies are essentially a combination of annuity and life insurance. The price is always applicable to any financial product, and even though IRR may not seem like a primary goal, if you are going to sink money into such a product it's price is relevant, and it's applicable IRR is a proxy for price.
For the few times I looked at these things for a friend, they mostly had terrible returns, if you backed out the cost of a comparable term policy. The net result is something that you are locked into with hardly any real return.
An SPIA may make more sense, as their fees are lower, but if you get an inflation adjusted SPIA the payouts are fairly low. You pay a fairly high price for hedging longevity risk.
I'm not specifically familiar with pyramid approach but I can make a guess as to what it addresses.
- Jun 9, 2014
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Politigator, you are unwilling to listen. You're hellbent on a fees narrative while ignoring the most important facet of a life annuity -- a never ending tax advantaged income stream.
You must give your auto and homeowners agent fits.
SPIA choices are income for life, joint income for life, income for life with period certain, period certain. Know the difference. They're financial tools as much as they are investments, ESP in a day and age of no defined benefit plans and increased longevity.
Life insurance is life insurance and guided by a specific set of tax rules, including tax-free treatment of proceeds and FIFO on withdrawals.
Deferred annuities are the opposite. They're for accumulating money tax deferred for retirement while you are in your peak earnings years and therefore highest tax bracket. Withdrawals are subject to LIFO post-TEFRA or Section 72 exclusion ratio rules if the contract is annuitized.
You're welcome.
- Oct 5, 2018
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Politigator, you are unwilling to listen. You're hellbent on a fees narrative while ignoring the most important facet of a life annuity -- a never ending tax advantaged income stream.
You must give your auto and homeowners agent fits.
SPIA choices are income for life, joint income for life, income for life with period certain, period certain. Know the difference. They're financial tools as much as they are investments, ESP in a day and age of no defined benefit plans and increased longevity.
Life insurance is life insurance and guided by a specific set of tax rules, including tax-free treatment of proceeds and FIFO on withdrawals.
Deferred annuities are the opposite. They're for accumulating money tax deferred for retirement while you are in your peak earnings years and therefore highest tax bracket. Withdrawals are subject to LIFO post-TEFRA or Section 72 exclusion ratio rules if the contract is annuitized.
You're welcome.
You are correct. I am hell bent on fees, and unapologetically so. As to tax deferral, given the way the tax code is structured as ordinary income streams the tax deferral characteristic is much oversold and overrated.
Perhaps some people are willing to pay a massive price for a guaranteed low return tax deferred income stream. I'm not.
- Jun 9, 2014
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Got a few favors to ask.
Bold #1. Show me how it is overrated beyond your own narrow-based opinion.
Bold #2. Define "massive price for a guaranteed low return."
- Aug 25, 2014
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- Oct 5, 2018
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Do those creatures still exist? I thought the internet did to them the same thing the giant asteroid did to dinosaurs.
Yeah I was confused by that too.
- Oct 5, 2018
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With lower ordinary income tax rates the earnings tax deferral aspect isn't as relatively valuable. You are comparatively better using capital gains earning vehicles.
As to commissions:
Life Insurance Agents and Commissions: What to Know
- Jul 15, 2014
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I think these discussions are great. I also think they have good advice for people here that are 50 and older... maybe as young as 45, but that's the edge for sure.
All of this retirement advice for those 50 and over will probably get you through your lifetime barring something catastrophic in the nation or your life and the risk of massive adverse tax code change that would affect all the vehicles talked about here is low(ish) for those 50 and over.
However, given our national debt and deficits with no end in sight, if this is the retirement planning advice anyone is giving to their children, regardless of age, you're doing them a massive disservice.
All of this retirement advice for those 50 and over will probably get you through your lifetime barring something catastrophic in the nation or your life and the risk of massive adverse tax code change that would affect all the vehicles talked about here is low(ish) for those 50 and over.
However, given our national debt and deficits with no end in sight, if this is the retirement planning advice anyone is giving to their children, regardless of age, you're doing them a massive disservice.
- Oct 5, 2018
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OK I'll bite. Where should i be telling me kids to save?
- Jul 15, 2014
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That’s the wrong question, which demonstrates the point.
- Oct 5, 2018
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- Jul 15, 2014
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I’ll get around to it this weekend, but it is a conversation we had about three years ago where I talked about how the rules/paradigm that we grew up with (work hard in school, get a good job, save) had changed, that we were in the middle of it, and beware. You disagreed.
- Oct 5, 2018
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My recollection was don't be an employee, work for yourself, and fire your CPA if he recommends a tax advantaged retirement plan vs investing in yourself.
Whatever one feels about career paths, I can't imagine why somebody wouldn't save. Double digit returns annual returns likely won't be there like in the past, but you still should put something away. And I'm not sure why one would bypass a legit tax shelter based upon hypotheticals about the rules changing. Chances are even if the rules change there are ways to minimize the damage.
- Jun 9, 2014
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- Oct 5, 2018
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Annuity Commissions and Fees — ImmediateAnnuities.com
Variable annuities typically charge annual management fees and mortality fees, which can range from 0.50% to 4.00% a year. On top of that, in the first year the broker or agent may earn up to 8% commission which reduces the amount left over for investment, plus an annual trail commission.
- Jun 9, 2014
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You're in Sacramento and Albany and everywhere in between other than the CORRECT place.
Come back to me when you have your facts straight.
- Oct 5, 2018
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We are talking about guaranteed income streams including variable annuities. The fees and commissions are high on all of those. Are you disputing that?
SPIAs are more reasonable fee wise, but they aren't as popular, because they aren't as lucrative for "financial advisors". SPIAS can make sense, but the payouts are comparatively modest if you add an inflation protection component.
What if anything with the above do you disagree with?
