Obviously, you don't understand her emotional attachment to the thing. If she was being honest, I think her ranking would go:
Daughter
Pension
Me
And some days her daughter would have a problem maintaining that position.
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How Much to Retire right now? (1 Viewer)
- Thread starter sublimeone
- Start date
Daughter
Pension
Me
And some days her daughter would have a problem maintaining that position.
proteus126
Footballguy
Anybody discussing retirement planning who isn't adjusting for inflation is doing it wrong. Its just a given, and keeps the math simple. I would assume that we are all talking 2017 dollars here. If not, then I begin to understand the $20M folks a little better.
When I say I will spend $100k per year, or whatever, that means I will spend $100k worth of current purchasing power. 30 years down the road, from your example above, of course that means I'll be spending $200k, or $300k, or whatever inflation cranks it up to. When you estimate investment gains as a percentage, just subtract your estimate of inflation. 7% market return become 4% real return in a 3% inflation environment.
MarvinTScamper
Footballguy
Michael Brown
Footballguy
All true, and I should have included the word "enough" in my OP. They are factoring it in, just not enough. Seems obvious to most of us in here, but it blows my mind to hear some of the stories when people talk about retirement planning.
And yes, there will be some more money if we're able to invest it but my own numbers still stand even with that cause I'm only assuming a 3% rate of return
RUSF18
Footballguy
Why? I have enough in life insurance to take care of my family and get my kids through college should I drop dead tomorrow or at any point of the term coverage. I also have savings accounts, investment accounts, retirement accounts, 529s, etc that would be added to that and as long as I keep on living (but die before the policy runs out) that would allow the insurance payout to last a bit beyond college for my kids and hopefully leave them with a little more to get started on post-college.
In this scenario, all of that goes away AND I need to money to live on for decades.
matttyl
Footballguy
Yes, I said "and it's not because of already accumulated asset"....which you apparently have. You don't need to replace that in a "you die tomorrow" situation.
So what was your number for the OP question?
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AhrnCityPahnder
Yinz-o-riffic
proninja said:
a random internet calc shows that $1M in an index fund from May1975 is worth ~$23M now.
Pipes
Footballguy
I find it sad that so many of you would walk a way from your jobs for a lump sum payment of $2,000,000 or less. Why did you chose your current profession if you feel that way? If you are in your 30's or 40's with a family that money isn't going to last when you factor in your housing, food, clothing, health insurance (12K a year for family coverage), etc...and lol at the guaranteed 5% rate of return. There's a great chance you'd be cutting into that principle immediately thus eventually running out of money. Plus losing your current assets like the op said do you really not have anything saved for retirement because that essentially nets out to the lump sum?
I'd need to run the numbers but would likely be at least $5,000,000 before I'd even consider it. 46 with wife and 2 teenage kids.
I'd need to run the numbers but would likely be at least $5,000,000 before I'd even consider it. 46 with wife and 2 teenage kids.
RUSF18
Footballguy
You're right...others were talking RE which is where my head went when you said accumulated assets.
My number was $10MM, 4x my life insurance amount.
matttyl
Footballguy
For what it's worth, a SPIA (single premium immediate annuity) is a [very flexible] product from insurance companies where you give them a lump sum of money, and they pay you an income stream for either a set of time (10 years, 20 years), your lifetime (be it a year or 80 years), the combined lifetime of you and a spouse (potentially a drop in income after the first death), or really any combination of those (my lifetime with a guarantee of 30 years if I don't live that long).
So, for every $1m you put in today you'd guaranteed (from a triple AAA rated company that's been around 150+ years, so pretty damn safe), you would receive (life only)....
$3,180/m if you were 30, for life
$3,423/m if you were 40, for life
$3,836/m if you were 50, for life
and $4,550/m if you were 60, for life
So for you 40 year old saying $5m would do it - even in today's very low interest rate environment, you could "buy yourself" a $17.1k monthly pension, for life.
So, for every $1m you put in today you'd guaranteed (from a triple AAA rated company that's been around 150+ years, so pretty damn safe), you would receive (life only)....
$3,180/m if you were 30, for life
$3,423/m if you were 40, for life
$3,836/m if you were 50, for life
and $4,550/m if you were 60, for life
So for you 40 year old saying $5m would do it - even in today's very low interest rate environment, you could "buy yourself" a $17.1k monthly pension, for life.
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Niles Standish
Footballguy
If you're living on 500K you're paying what $150K off the top to taxes? Then you're looking at 350K/year. 350K a year for 50 years is 17.5 million. Most of us won't be working for 50 years at least not making a half million the whole time. Even if you're working 60 years making that much each year you're going to gross 21 million. Raises and investment income are both too much speculation to figure out. The point being if you're making 500K a year then 20M is more than you'll probably ever make especially since that 20M will probably be 100M when you retire.
matttyl
Footballguy
And assume those non-shtick people had to work their butts off for 30+ years to do that, spending nights/weekends/possibly entire weeks away from family doing something that maybe they didn't like doing - only because it got them a paycheck. I find "value" in my job, and think I do good for others with it - but I don't love it.
You show me a guy with $10m who's worked 60 hours a week his whole life while being mostly miserable - and I'll show you a "richer" man worth only $5m who's enjoyed himself thoroughly spending as much time as he could (or as he could stand) with his family and friends, and doing all the things that he wants to do.
What is "life" for a 49 yo? I ain't givin' no one $1MM to get $3,836/mo for "life" when my "life" could be ended in a car wreck driving home after i sign the policy. Is there a return of unused premium up to a certain point? A payment to a beneficiary for a set time?
matttyl
Footballguy
Yeah, either - like I said they are very flexible. At 49 it's about what the 50 year old would get - $3,836, and as you point out that's just for "life". So what you'd like want to do is say "life with 20 year certain." I closed my quoting stuff, but it would likely lower your payout to about $3,600 or so - which you or your family would get guaranteed for 20 years, and then for however long *you* live beyond that.
If you crunch the numbers the return isn't great, but it is buying you an income stream you can't outlive. Just do that with half of the lump sum and do whatever else with the rest.
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-OZ-
Footballguy
It's an expensive safety net. Your plan of buying the annuity with half makes a lot of sense.
the moops
Footballguy
RUSF18
Footballguy
sublimeone
Footballguy
Redwes25
Footballguy
MarvinTScamper
Footballguy
Your math is bad here. 500k pays a minimum of 200-250 in various taxes. And no one makes that for 50 years. I already said all that tho. What are you saying?
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NutterButter
Footballguy
If this arraignment doesn't put me in the top .01% of the world's population, I'd rather just keep doing what I'm doing now.
Binky The Doormat
Footballguy
Good info. It's something to consider as a part of an overall strategy but I wouldn't consider it until I was pretty old and looking for a larger portion of my money as a certainty - payout for x years with same survivor benefits.
matttyl
Footballguy
Yeah, but don't get one now. Rates are historically low now because of the very low interest rates. I helped my gramother with one about 15 years ago and the actual rate of return on it was ridiculous considering the guarantee she had.
NutterButter
Footballguy
MarvinTScamper
Footballguy
sublimeone
Footballguy
That's what I'm wondering... do these annuitys get adjusted for inflation or is it just a flat dollar amount for the term?
Binky The Doormat
Footballguy
Not typically. You have to buy an inflation-adjusted specific one. And they jab you pretty well for it as you can imagine. You start out with lower payouts and cross over into the positive (compared to a fixed) after about 15 years (based on 3% inflation).
An inflation-indexed immediate annuity is a form of a fixed annuity. You receive a guaranteed stream of income from the insurance company, and that income will rise each year based a pre-determined formula; usually, the increase is tied to changes in the CPI (Consumer Price Index).
An inflation-indexed annuity will provide a lower initial amount of monthly income than a non-inflation indexed immediate annuity, but over time, as inflation continues, the monthly income will gradually increase, surpassing the amount you would be receiving from an equivalent non-indexed annuity. It can take anywhere from 12 - 20 years for the monthly amount to grow the point it would have been at if you had taken a fixed payout non-inflation payout from the start.
Once again, Wade Pfau's research on the use of inflation-adjusted annuities is outstanding. In Efficient Frontiers: Inflation Assumptions, Fixed SPIAs, & Inflation-Adjusted SPIAs he states that, "Today, one of the results that really caught me off guard was that fixed SPIAs performed so much better than inflation-adjusted SPIAs." Because the payout for an inflation-adjusted product start so much lower, it can take a long time to catch up.
pantherclub
Footballguy
if the market keeps chugging along like it has the past few years and my real estate ventures stay strong then I should hit the 10 mil mark in about 15 years if my projections are right.
Ditkaless Wonders
Footballguy
matttyl
Footballguy
Typically no. But you can do that, and it would obviously lower the initial payment amount. Amazingly (not really) the break even point would be your life expectancy [something like either $3,600/m for life with no inflation or $2,800/m with a 3% annual kicker] for a 60 year old.
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MarvinTScamper
Footballguy
things to keep in mind when considering annuities.
1. they are betting they can make more investing the money than you can, pocketing the difference between what they make, and what they pay you.
2. it's essentially a reverse life insurance policy - they only lose if you outlive your actuarial projection
3. typically these are purchased by people who either a) can't manage money (minors, elderly, impaired) b) are diversifying a much larger asset base or 3) just received a huge lump sum
Again, this isn't investment advice at all...just keep reading about and seeing people think these companies are doing you some sort of favor.
1. they are betting they can make more investing the money than you can, pocketing the difference between what they make, and what they pay you.
2. it's essentially a reverse life insurance policy - they only lose if you outlive your actuarial projection
3. typically these are purchased by people who either a) can't manage money (minors, elderly, impaired) b) are diversifying a much larger asset base or 3) just received a huge lump sum
Again, this isn't investment advice at all...just keep reading about and seeing people think these companies are doing you some sort of favor.
Redwes25
Footballguy
matttyl
Footballguy
You can set them up either way. Obviously if you put an inflationary kicker on there it will lower your initial income amount. Like I said above, these things are extremely customizable, but the current rates are very, very low (thanks to low interest rates).
For instance you can say "I'm 45 and my wife is 42 - we want an income stream guaranteed for our lifetimes, to drop by 25% after the first death, with a minimum 23 year guarantee [should you both pass away in that 23 years payments would continue to that 23rd year], with a 2.7386% inflationary kicker computed semi annually." All the insurance company does is enter it into their actuarial tables and it spites out an answer/amount.
matttyl
Footballguy
All true. In addition to #3, though, is someone who just wants a guarantee and to take [nearly] all risk away. Not that they can't manage money - they choose not to. They don't want to deal with it anymore - they just want a check to show up on the 15th of every month for a certain amount, guaranteed, for the rest of their life. I thought that would fit in perfectly with the discussion we were having here.
MarvinTScamper
Footballguy
Agreed. There certainly are exceptions. I tend to see that people who have enough money to buy these, who actually EARNED the money they have already know how to manage money. Not a catch-all, but that's my experience.
matttyl
Footballguy
Recently the ones I've sold have all been to businesses (small to medium size) who are buying these to fund a retiring employees pension they've been promised. Instead of the company writing a check out each month for $1,500 (or however much), they "hired" an insurance company to do it for them, and to take on the risk of longevity from them (which can be huge in today's day and age).
MarvinTScamper
Footballguy
matttyl
Footballguy
No (well, not quite - if I'm understanding your question). The liability is always there (from the company to pay ex employee $1,500 a month or whatever amount). Just because the company bought an annuity (the SPIA) which has the payee as that employee for that 1,500 a month - doesn't mean that the promise isn't still there for the company to pay the ex employee. If the insurance company goes under (extremely low risk depending on the carrier) and stops making those 1,500/m payments - the company will have to pick them back up some other way.
So when this most recent employee retired, they were I think 68 and they were "promised" $2,000 or so a month from their soon to be ex employer. The employer is saying to themselves, "man, $2k a month and this person might live another 30+ years - and we have to sit down and write that check every month to fulfill our promise." So instead they have the insurance company a few hundred thousand and said "you do it." If the insurance company comes back in a few years and says we're no longer going to do it for whatever reason (going under), that employee has still been promised $2k a month for live from the employer.
Personally, I think it's better for the employee. The odds of the insurance company going under (and no longer making payments) are far less than the ex employer going under (and no longer making payments). It's also good for the employer (one less thing to have to do every month, and if the employee lives beyond life expectancy - they ended up paying less).
