Apples to oranges. A SPIA is not an investment; it’s an insurance product and should be evaluated that that way.
It’s especially useful for people with “not quite enough” to retire with assurance. It serves to give you a bit more monthly income than you could have with a SWR. What you give up for that is money for your heirs. Those who die early fund those who don’t.
Others who can benefit from them are affluent retirees who have enough SS, pensions, and annuities to fund their retirement and can then do as they wish with the surplus. AttorneyMother’s advice about trusts and basis should be considered.
It’s a s@@@@@ insurance product for most people. (I actually typed the @@@ word in). Glad I caught that.
The Schwab product for somebody in my situation… The buyer doesn’t even get his own money back 20 years. After the buyer makes his own money back, The buyer will be dead before the buyer makes more than a 3 percent bond. It is a bad deal… For the buyer. You can call it insurance if you want.
Instead of buying an annuity at age 59. I invest the $100,000. Let’s say, i make $60,000. That is a 3 percent simple return. I take the $60,000 and now I buy the annuity. I am 79. I think I come out way ahead. I am 79 and my wife is 78.
The monthly check should be $400 a month or better. I think its better than $400 but I can’t access Schwab on this. Then I have the annuity and the $100,000 too.
Ok…scratch post 7263… The income is $383. I think the tax situation is better… Because the annuity holders are older. But …it’s too close…plus… If all the income generated by the $100,000 can be saved…then all the annuity payments can be saved and that changes the numbers…
I think I am talking to myself…which is a good thing.
I think that is a great idea, particularly if one is hoping to pass along an investment template or philosophy or to provide guidance for someone who may help manage one’s funds later in life. I’m planning on providing the same, at some point, to my audience of two, with a caveat that it is a guide and not a mandate.
IMO, there are three major parts to such a guide:
(1) understanding the types of accounts (taxable, tax-deferred, tax-free) in which investments are housed and their ongoing tax and legal implications (joint ownership, asset protection, inheritance, etc.)
(2) the investments into which the funds are made
(3) the purpose for such a guide–to help the reader understand my thought process if I were to become unavailable or unable to continue in my role
For me, (2) is fairly simple. And, I’m planning on simplifying (1) as much as possible.
People have different experiences, knowledge, psychology, intelligence, attitudes, goals, etc.
I was talking to somebody who runs a science department at one of the top schools in the country. We were talking about the science of something and I told her what she was saying is very difficult to understand.
Later we started talking about finance and she told me she doesn’t understand finance. She doesn’t get it. She said it is too hard.
And I looked at her. I said, “You understand the scence you just told me. You give speeches all over the country and finance is hard for you?”
She said,“Yeah”.
Foreign languages are very hard for me. i can’t memorize songs. We all have our strengths and weaknesses.
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I have two kids that understand math very well. One is very open to anything I say.
The other kid wants to do things himself.
So I feed off this.
I was telling a friend of mine just this week. There are some things I would rather figure out and do myself even if the outcome isn’t as good.
A friend of mine is kind of a fund to funds guy. He sees investment opportunites and he tells me. He saw this opportunity to invest in the mortgage market after the financial collapse. Some guy was running a fund to buy up mortgages. Mortgages took a hit as we know. You could buy some mortgages for pennies on the dollar. The manager of the fund had a great track record. I told my friend I would rather make less then give some money to this guy.
Some of you can appreciate this - some guys do need to appreciate skills that others possess w/o doing stuff themselves but they have to try it out first. The great example is a very busy and successful orthopedic surgeon; he decided to try his skills at some home masonry project (we have excellent masonry work in our area, and not overpriced). Surgeon decided they have skills that are ‘easy’ to them, and not to have that as a DIY project…I was amused that he even undertook that work (risk of fine motor injury with his hands). My dad owned a construction company and had education in masonry; when his new home had a more complicated chimney system - he actually had to lay it with his brick laying crew in having it done right.
I wonder how many couples are there where both the husband and wife have about the same knowledge about the couple’s finances? My wife has the general knowledge. She participates a little too. Has good ideas. But she isn’t interested in all the details.
I told her if I die, to look through the tax returns. She will be able to figure out where everything is from the tax returns. I think she knows the name of our CPA.
H is an engineer and doesn’t have the interest nor pays the attention to do our taxes. Also not interested in managing the investments as long as he knows they are being taken care of. He understands things from our financial guy, and I like having our funds spread out more with financial guy and with good returns; I still manage the fund choices with H’s sizable 401k (not sure if we can move that money when H is 59.5 or until he quits/retires; will check into that as that time is approaching). H is frugal but does have a few areas he will spend money on.
Most people that are in long time marriages (we have been married 36 years) know what areas each can ‘carry the burden’, what areas they need to do w/o much discussion, etc.
I just came across a humor book on my bookshelf that really irritated H. I stopped reading it (I thought it was funny; he thought too much male bashing). Not important to me to continue reading. Life is too short to look for problems.
There will be many small and larger things to agree upon as H closes out his career. When we have more time together in retirement - all the more reason to be as agreeable as possible. We agree totally on so many things, that we should be happy retirees. Agree on the kids - that will be finished with college and ‘launched’ by retirement time. The last financial piece is putting some $$ into an account for wedding (or for them to use if not getting married) - have two girls.
If one has enough money in retirement, that is one facet. How many people are unhappy, and money is not the root or the real root of the unhappiness?
To get back to the question - the person who knows less about finances, insurance, etc needs to make sure they have access to the numbers/data and perhaps a support system if the financial guru partner dies or becomes debilitated.
A lot of time and effort needs to be made by us in having things in place for when one or both of us are gone…
A parent of one of the special olympic athletes died recently. She was 78 and her death was unexpected. I knew the parent and the athlete.
The parent lived in the United States. The daughter lives in the United States. The rest of the daughter’s family lives in Asia.
So a sister flew out here. I told her I would help her. (I didn’t really want to be involved).
The sister handed me a list the parent had written up. It was contact information. Names. Phone numbers. Addresses.
The attorney who wrote up the special needs trust and her will was on the list. The CPA. The appropriate government agency. The day program. Doctor. Maybe a few other things.
I looked at this list. I told her. Your mom did a great job. You contact those people and organizations and I think you are going to be ok.
Yes, I agree–it is important to take all these factors into account. What I want on hand (I hope) will not just be a list of accounts and people to contact, but also the reason why the portfolio looks the way it does and a spending plan, so that my work putting both together will be evident. I hope that will be useful when someone has to step in to help me, which may become very important. I plan to have my target readership look over my finished guide so I can get feedback. No sense leaving behind something that is gibberish to them.
Relying on experts is very important–hence the importance of a list of accounts and phone numbers. But it can get very expensive especially if the survivors have little to no understanding of what is there. It can be very confusing, especially if the problem is compounded by grief. And not all experts are going to watch the time spent / bills incurred as closely as you’d like.
@AttorneyMother , based on my lack of success in getting my wife to look at my unambitious document, I can only wish you luck. If you succeed, share the secret.
It is fitting that I came across this thread today since I had my 2014 tax meeting with my CPA this afternoon and we had discussed some of these same issues.
Early on in this thread there was a lot of talk about freezing pensions. That is what happened to us. I will get the same 2-4k per month (depending on when I start taking benefits) whether I retire tomorrow or in another 20 years. DW is eligible to retire now but needs a couple more years to get her last employer to continue to pay their share of her health premiums until Medicare kicks in. After that she will work at her current part-time job that she loves. She would love to retire now and go full time at the part time gig but she realized that the health care bennie is too valuable to pass up.
At the CPA today I asked again if I made the right choice this year by paying cash for our downsized house and not getting a mortgage. He assured me that even with the super low interest rates I was way ahead in terms of savings. I haven’t had a car payment in many years, and 4 or our 5 cars are at least 10 years old with 100-200k miles.
You would think that with our income and zero debt of any kind that we would be saving a ton of money but we (I am being generous when I say “we”) are finding it hard to say no to some things we probably should. We used to spend a lot on traveling. Now we spent even more. We used to eat out a lot. Now we eat out even more. While finishing the remodel of the old house that we bought we are spending extra to get high-end stuff. There is also R&B for 2 college kids to account for. Luckily both tuition bills are covered by either 529s or scholarships.
Our plan is to have DW retire from her government job in 2 years and work at her “fun job” for at least 5 years. I hope to cut back to part-time (I’m hoping a 20% pay cut will convince them to let me work about 5 hours per day) in about 3 years and then work PT for another 3 years or so until I am in my early 60s. At that point I hope to retire and do a tiny bit of consulting. I would like to hold off taking my pension or SS until I am in my mid 60s.
We also talked today about needing an updated estate plan.
@AttorneyMother, I don’t want to be too controlling but after reading your post I guess I will add a few instructions. My wife, oldest daughter or my son can manage the account and the bill paying. I don’t want any professionals managing this account. As@IxnayBob knows, if I am dead, my wife can buy a stock index fund or two.
@TV4caster, today was the last day my wife works 32 hours a week. She is done actually. No more working 32 hours a week with half those hours spent doing work she hated. 15 hours a week now. Her choice when to to work most of the time. Doing only what she loves going forward.
@IxnayBob , H and I will have more time to discuss after D is out of the house this fall. He also has finite (very finite) attention he pays to such things, but I reminded him about the perils (for some) of not knowing. I picked a story that I suspected might get his attention. It involved the friend of a good friend of mine. In that situation, H is a partner in a law firm, caught cheating. W is a interior designer who handled all finances during their married life together. She found out he was stepping out on her when she picked up an Rx at CVS for herself and noticed an Rx in his name for Cialis (cringe) She hired a PI, arranged for everything so that it was essentially a slam-dunk divorce before she had him served with papers. He did not know what hit him! =D>
In seriousness, though, H is still very busy with his work, so when he comes up for air, he is more interested in R and R. Your W is probably very busy also. In the meantime, I’m working on things, and I give him a sampling occasionally of my thoughts, nutshell style. We’re on the same page.
@dstark , it’s not being controlling if you are protecting your loved ones from extra work or having to incur unnecessary expenses during that transition time. Afterwards, they can silently thank you while they take a nice trip or go shopping!
@SOSConcern , I worry about the judgment of any orthopedic surgeon who jeopardizes his hands doing DIY masonry work, but that’s for another thread. Thanks for sharing your stories.
To answer you @attorneymother it has to do with ego and his extreme desire to learn useful things. If I was his wife and knew he was going to try masonry, I would have talked him out of it. Part of it also may have been that he liked being a bit of a “good ol’ boy” - he probably relates pretty well with a very broad range of patients.
No assets to sell. I have a bank account with my brother’s name on it so he can access the money needed to take care of my youngest daughter for a year.
My aunt and uncle died last year. Their estate hasn’t been settled. Two homes had to be sold. One had to be fixed up and couldn’t be fixed up until the first home sold.
Every item they owned was labeled, photographed, and cataloged,. A value given for each item and approved by an attorney so the estate could be divided fairly between 14 people.
I think that was a little overkill. The cost of labeling everything, etc probably cost more than than the objects that were owned.
My wife and I are not doing that.
I forgot to get the mail. Maybe there is a check in the mailbox.
“You would think that with our income and zero debt of any kind that we would be saving a ton of money but we (I am being generous when I say “we”) are finding it hard to say no to some things we probably should. We used to spend a lot on traveling. Now we spent even more. We used to eat out a lot. Now we eat out even more. While finishing the remodel of the old house that we bought we are spending extra to get high-end stuff. There is also R&B for 2 college kids to account for. Luckily both tuition bills are covered by either 529s or scholarships.”
That is a bummer about the pension freeze, @TV4caster. I think that is something that everyone who still has a pension fears, but has absolutely no control over.
It’s a hard thing to figure out, how much to spend, and how much to save. Should you keep living a lifestyle that is below what you can afford, as you get older? At what point is it okay to start enjoying some of your earnings? I guess if you had your retirement plan budgeted out as far as how much you’ve decided you need to save, and then you can spend the extra. Sometimes I feel like we’re just bleeding money, though I don’t feel like we’re actually throwing it away or doing anything frivolous. At least things that you’re doing, like a remodel and college bills eventually come to an end.
