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Post by minnesotapaintlady on Nov 6, 2022 22:05:19 GMT -5
I would like to try to make it to 70 before drawing SS yes. I was low income most of my career and had a lot of money going into things like FSA and HSA that are SS exempt, so my payout will not be huge. Right now the estimate is something like $1200 at 62 and $2000 at 70. I'm guessing 250K could last me 10 years I suppose, but I don't plan on getting an annuity until at least 65 either...unless I find out that buying a deferred one now makes more sense.
Are those soci sec numbers assuming you continue in your current job up until taking benefits? Or what you've earned already? If I stop working now, I get 1770 at 62 and 3110 at 70. 1925 if i continue working until 62, and 3822 if i work until 70. $1262 at 62 and $2298 are from the SS statement so assumed I keep working. If I use the SS calculator and set my future earnings to $0 it comes up with. $1128 - Age 62 $1986 - Age 70
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 7, 2022 12:23:15 GMT -5
I'm hoping April soc sec statement will show some improvement to our numbers! Maybe/maybe not - well at least I think the inflation adj for 2022 will be added and will be a nice bump and we are likely already incorporating the inflation in our eyes looking at this, so that should be welcome. And also one more year for the "already earned it" piece. Tesla took another beating today, lol! I may have to work until I can live off that soc. sec. If I work until 70 and pay off my house, I could probably do it - live off of just soc sec.... I don't want to work until 70. I don't even want to work until 60! Sadly - that is less than 2 year away . Will see if the market will make it possible. Def buying a power ball ticket for tonight! I have to say that I am surprised at how low my currently earned soc sec payment is. Next year is 40 years in the work force for me! and less than 1800/month at 62? People all over talk about geting 3k month, or even some 2-person household with 5k month. I got up to 75k/year about 15 years ago - inflation adjusted, that is over 100k today!! (sidebar - wow! 6 figures aint what it used to be!). I did have a lot of low earning years but common!
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azucena
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Post by azucena on Nov 7, 2022 12:26:33 GMT -5
Skimmed and I'll admit that my career has been life insurance and not annuities.
I can confirm that there are different mortality tables used for pricing annuities. Self-selection is part of it.
Within an annuity, you're paying for agent commissions, surrender charges, premium load, investment risk, and insurance company profits. Any COLA or guarantees cost extra and are priced for profits too.
FWIW life actuaries always buy life insurance but almost never buy annuities.
MPL - JMHO, but I'd trust yourself to manage your money better than the insurance company. We've watched you do a tremendous job saving as well as an appropriate amount of splurging. I think the current economy, politics, and your looming home improvements might be making you second guess yourself.
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Post by minnesotapaintlady on Nov 7, 2022 13:07:45 GMT -5
MPL - JMHO, but I'd trust yourself to manage your money better than the insurance company. We've watched you do a tremendous job saving as well as an appropriate amount of splurging. I think the current economy, politics, and your looming home improvements might be making you second guess yourself. Honestly, I'm much more concerned about dying with a pile of money than running out. I will self-deprive to the bitter end. The psychology behind spending a guaranteed income is much different than tapping savings.
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azucena
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Post by azucena on Nov 7, 2022 13:10:50 GMT -5
I have a similar super-saver mindset. I'm planning to think of it as a backwards budget of what I get to spend instead of what I have to spend carefully to have some left to save.
I'm not making light of your decision, just would hate for you to incur extra costs when you've been so careful.
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jerseygirl
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Post by jerseygirl on Nov 7, 2022 13:20:08 GMT -5
MPL I’m the same Will do my utmost to avoid taking out from brokerage account or more than the RMDs from retirement accounts No reason but guess it’s my nature So happy we have SS and annuity that is fine for our lives Although did take some cash from brokerage account for the 12 person sailing trip this summer. That was very unusual as other trips were from our usual monthly income
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Post by minnesotapaintlady on Nov 7, 2022 13:33:01 GMT -5
I was reading a lot on the Boglehead's forums yesterday. There is a lot of positive talk about SPIAs over there for those that don't already have pensions. They consider SPIAs the "term insurance" of annuities as far as bang for the buck.
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Post by Deleted on Nov 7, 2022 14:10:46 GMT -5
I was reading a lot on the Boglehead's forums yesterday. There is a lot of positive talk about SPIAs over there for those that don't already have pensions. They consider SPIAs the "term insurance" of annuities as far as bang for the buck. I'd agree with that. The fewer complications the better. Exceptions might be COLA increases and some guaranteed payout, either amount or time, in case you die prematurely.
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CCL
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Post by CCL on Nov 7, 2022 14:35:29 GMT -5
MPL - JMHO, but I'd trust yourself to manage your money better than the insurance company. We've watched you do a tremendous job saving as well as an appropriate amount of splurging. I think the current economy, politics, and your looming home improvements might be making you second guess yourself. Honestly, I'm much more concerned about dying with a pile of money than running out. I will self-deprive to the bitter end. The psychology behind spending a guaranteed income is much different than tapping savings. I can definitely understand that. I don't like taking money from my brokerage account, but may set up a monthly auto-transfer to my checking just so I spend some of it.
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jerseygirl
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Post by jerseygirl on Nov 7, 2022 15:04:07 GMT -5
Honestly, I'm much more concerned about dying with a pile of money than running out. I will self-deprive to the bitter end. The psychology behind spending a guaranteed income is much different than tapping savings. I can definitely understand that. I don't like taking money from my brokerage account, but may set up a monthly auto-transfer to my checking just so I spend some of it. CCL that’s a good idea for brokerage account. At least it would be capital gains/loss and not like IRAs taxes as income . Yep might as well spend it on us now
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 7, 2022 18:39:59 GMT -5
I was reading a lot on the Boglehead's forums yesterday. There is a lot of positive talk about SPIAs over there for those that don't already have pensions. They consider SPIAs the "term insurance" of annuities as far as bang for the buck. how are they paid for? would you have to cash out of retirement accounts the 250k and pay taxes?
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CCL
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Post by CCL on Nov 7, 2022 18:40:17 GMT -5
Yes. It's all long-term capital gains. 0% rate for us. I've been converting the IRAs to Roths ever since Trump lowered the tax rates. I was thinking I should set up a monthly draw from my IRA, but I'd really rather pay my taxes on conversions now and pay 0% (Roth) later. I just need to make sure I keep our taxable income under $82k or whatever it is currently.
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CCL
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Post by CCL on Nov 7, 2022 18:43:56 GMT -5
MPL, what if you bought the annuity sooner? Could you put less $$$ into it and get same income from it later?
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Post by minnesotapaintlady on Nov 7, 2022 19:42:30 GMT -5
MPL, what if you bought the annuity sooner? Could you put less $$$ into it and get same income from it later? I'm not sure! That's what I'm trying to figure out. But, the more I'm reading the more it's sounding like Immediate is a better idea then Deferred. For starters, I could get a terminal diagnosis in the next few years and the annuity that I didn't schedule to start getting payments on until 65 is irreversible.
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Post by minnesotapaintlady on Nov 7, 2022 19:45:36 GMT -5
I was reading a lot on the Boglehead's forums yesterday. There is a lot of positive talk about SPIAs over there for those that don't already have pensions. They consider SPIAs the "term insurance" of annuities as far as bang for the buck. how are they paid for? would you have to cash out of retirement accounts the 250k and pay taxes? I would fund from a qualified retirement plan. You don't pay taxes, it's treated like a Rollover.
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jerseygirl
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Post by jerseygirl on Nov 7, 2022 19:53:23 GMT -5
how are they paid for? would you have to cash out of retirement accounts the 250k and pay taxes? I would fund from a qualified retirement plan. You don't pay taxes, it's treated like a Rollover. My annuity is from IRA so good part of RMDs taken care of with that Theoretically better to not be in IRA but had individual bonds in an IRA snd basically took these bonds to pay for annuity
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 7, 2022 21:15:53 GMT -5
how are they paid for? would you have to cash out of retirement accounts the 250k and pay taxes? I would fund from a qualified retirement plan. You don't pay taxes, it's treated like a Rollover. oh - and then just income tax on your yearly income from it? That is kind of sweet.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 8, 2022 13:42:40 GMT -5
Another question! So if you buy the annuity with after-tax dollars - would you then be taxed twice on the money? Or how would that work?
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 8, 2022 13:43:53 GMT -5
minnesotapaintlady , you are saying that you have found an annuity that pays you 9% a year guaranteed? That's what 18k on 200k would be. I was confusing things by sometimes saying 200K. My quote was on 250K. And it's 8.38% Without the annual COL increase or guaranteed payout for X years (but with a return of remaining premium to beneficiaries if you die before payback of the principle) 10.26% eta: I thought the 8.38% included a 20 year guaranteed payout, but it's only 10. The 10.26% is return of unpaid out premium only and no annual COL.
And just so I'm clear - the guaranteed payout is just if you die after buying it? If you live to 100, they keep on paying you a monthly check? What happens if the company goes bankrupt?
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Post by minnesotapaintlady on Nov 8, 2022 14:11:37 GMT -5
I was confusing things by sometimes saying 200K. My quote was on 250K. And it's 8.38% Without the annual COL increase or guaranteed payout for X years (but with a return of remaining premium to beneficiaries if you die before payback of the principle) 10.26% eta: I thought the 8.38% included a 20 year guaranteed payout, but it's only 10. The 10.26% is return of unpaid out premium only and no annual COL.
And just so I'm clear - the guaranteed payout is just if you die after buying it? If you live to 100, they keep on paying you a monthly check? What happens if the company goes bankrupt? They'll pay until you're 120 if you live that long! As far as bankruptcy, I wouldn't pick anything but highly rated companies, but my state does insure pensions and annuities up to 250K. As far guaranteed payout, it was different with all the options. Some if you died after you bought it your heirs were SOL. Here are the explanations of each of the options I had quoted.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 8, 2022 16:21:46 GMT -5
Thanks MPL!
I'm like on a teeter totter looking at this! I guess just something to keep in mind when the times comes. Could be a great substitute for the bond portion for a more conservative AA. Also, could tie up less capital with the non COLA version, assuming that over the first 10 years your stocks would double and make the fixed income less critical.
Currently - it would kind of suck to take out of stocks when they are 25% down to buy this - but once recovered would be more attractive.
the 10 years guarnteed on >10% is pretty attactive!
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Post by minnesotapaintlady on Nov 8, 2022 18:32:43 GMT -5
Oh, I really have no intention of buying now unless someone convinces me that buying early makes sense, but nothing I haven't delved into deferred annuities much at all.
It was mostly me just throwing a topic up for discussion. Like I said in my original post I used to be dead set against them (mostly because of the "insurance investments BAD" mindset and fearing handing over control of my assets), but I'm starting to see why they might be attractive to some people for part of their portfolio.
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finnime
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Post by finnime on Nov 9, 2022 8:34:36 GMT -5
This discussion has given me a lot to think about. I never considered an annuity seriously either, but an SPIA could make sense when the time comes.
My DH is an irrevocable testamentary trust beneficiary; his son is the remainderman. DH has no control at all over the trust but does get monthly income to the tune of about $1300-$1500 / month. It is nice, sort of an additional pension. An SPIA would be a good replacement for that income if (as is almost certain) DH predeceases me. Have to think on it.
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Post by Deleted on Nov 9, 2022 9:24:38 GMT -5
What happens if the company goes bankrupt? A legitimate concern but it's pretty rare. I know of only one high-profile BK and it was Mutual Benefit Life in 1991. The link below is from the NJ Department of Banking and Insurance- in short, most annuities were transferred to other insurance companies and some policyholders were given the cash value of their annuities. www.nj.gov/dobi/finreceivership/mblife.htmSo, not a total loss but it would be nerve-wracking. Insurance companies are heavily regulated to prevent this type of occurrence. Every year an actuary must sign off on the adequacy of reserves set aside to pay future claims, including annuity payments. From what I used to read on an actuarial discussion board, though, pension/annuity actuaries were being pressured to use the highest possible rate of return in their calculations (which reduces the required reserve amount). They were typically allowed to use a long-term rate to smooth out year-to-year fluctuations such as this year's awful market, but sometimes companies are over-optimistic about their long-term rate on their investments. And that's probably more than you wanted to know.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 9, 2022 10:42:00 GMT -5
thanks @athena53!
I know you know this stuff!
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