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Re: Are SPIA's fairly priced? - A quick and dirty analysis

According to Moshe Milevsky in a 2013 CFA pamphlet authored by him (http://www.cfapubs.org/doi/pdf/10.2470/rf.v2013.n1.1) he notes that as a rule of thumb an SPIA's payout yield is priced against the 10 year treasury at a 3.5% premium (p. 16). While Milevsky says that it's "not a bad rule of t...
by Frugal Al
Mon Sep 22, 2014 11:54 am
 
Forum: Investing - Theory, News & General
Topic: Are SPIA's fairly priced? - A quick and dirty analysis
Replies: 68
Views: 2970

Re: So what the benckmark SWR for a 25 year retirement?

A lot of fresh air is wasted with arm-waving on SWR thinking. Trying to get down to fractional percent analysis is really not productive. (How much safer is a 3.8% WR vs a 4.2% WR, for instance...) One's AA in retirement, combined with Sequence of Returns uncertainty combined with Lifespan uncertai...
by Frugal Al
Sat Sep 20, 2014 11:36 am
 
Forum: Investing - Help with Personal Investments
Topic: So what the benckmark SWR for a 25 year retirement?
Replies: 14
Views: 922

Re: So what the benckmark SWR for a 25 year retirement?

The 4% SWR (inflation indexed) results in an imputed average compounded 1.25% real rate of return for it to be successful. Applying that rate of return to a lump sum over a 25 year time period would result in an SWR of about 4.67%. While the 1.25% real average return would seem relatively achievable...
by Frugal Al
Sat Sep 20, 2014 9:45 am
 
Forum: Investing - Help with Personal Investments
Topic: So what the benckmark SWR for a 25 year retirement?
Replies: 14
Views: 922

Re: Immediate payable annuity is a bad investment?

Whether anyone is interested in purchasing any type of annuity, deferred or immediate, their benefits will lag the financial markets . If and when long bonds give higher yields, We could expect many years before insurance companies become comfortable in offering competitive products. :annoyed :? Th...
by Frugal Al
Sat Sep 20, 2014 5:21 am
 
Forum: Investing - Theory, News & General
Topic: Immediate payable annuity is a bad investment?
Replies: 45
Views: 2414

Re: Are SPIA's fairly priced? - A quick and dirty analysis

While the fair pricing concept of an SPIA is interesting, for me it's a moot point: long bonds are fairly priced and I'm not buying those today either.
by Frugal Al
Fri Sep 19, 2014 4:51 pm
 
Forum: Investing - Theory, News & General
Topic: Are SPIA's fairly priced? - A quick and dirty analysis
Replies: 68
Views: 2970

Re: Immediate payable annuity is a bad investment?

To me 'overpay' means relative to a substitute that exists, not just the opinion that the best price** in the market is 'too high' (compared to what?). Compared to what payout rates might be when the global economies return to some sense of normalcy, and move off the 0% interest rate policies. Yes,...
by Frugal Al
Fri Sep 19, 2014 2:52 pm
 
Forum: Investing - Theory, News & General
Topic: Immediate payable annuity is a bad investment?
Replies: 45
Views: 2414

Re: 2015 Volvo XC-60 vs. Acura RDX

I'd be concerned with the new 4 cylinder engine line-up Volvo is using. Not that it's bad, but that we don't know what issues will arise. I'd be further concerned if I'm also choosing a model with the new automatic transmission used in concert with the new engine. If I were to buy a Volvo it's would...
by Frugal Al
Fri Sep 19, 2014 9:06 am
 
Forum: Personal Consumer Issues
Topic: 2015 Volvo XC-60 vs. Acura RDX
Replies: 21
Views: 1418

Re: Acura RDX - test drove it again and it's about off my li

I am curious why someone would select the rdx over the crv? Worse milage and premium fuel would be hard to accept. I am a CRV owner. You do realize it's a 6 cyl with more power? Of course if you don't need or want the power, I agree. In my opinion it drives much differently than the CR-V, and it of...
by Frugal Al
Fri Sep 19, 2014 8:54 am
 
Forum: Personal Consumer Issues
Topic: Acura RDX - test drove it again and it's about off my list
Replies: 29
Views: 3077

Re: Immediate payable annuity is a bad investment?

Citation? Anyone that's gotten many quotes for an SPIA knows that there are some very expensive SPIAs being offered. I said including many SPIA annuities (not all) as making huge rates of return; however, admittedly, the profitability is not as great as that for VA products (everything is relative)...
by Frugal Al
Fri Sep 19, 2014 8:39 am
 
Forum: Investing - Theory, News & General
Topic: Immediate payable annuity is a bad investment?
Replies: 45
Views: 2414

Re: Immediate payable annuity is a bad investment?

It seems that this board generally maligns annuities as a component strategy for retirement...... I, for one, think to logic behind annutization of a portion of one’s assets is sound and annities can be an excellent strategy in some circumstances. I don't think anyone on this board has argued that ...
by Frugal Al
Fri Sep 19, 2014 7:40 am
 
Forum: Investing - Theory, News & General
Topic: Immediate payable annuity is a bad investment?
Replies: 45
Views: 2414

Re: Pension Lump Sum - New Question

Based on this analysis, it appears that that taking the lump sum would be the best thing, as I don't expect to live past 85 (nor would I want to); I am comfortable in my investing knowledge; and can probably achieve about 3% above inflation... Does it look like my methodology was correct? I'm respo...
by Frugal Al
Tue Sep 16, 2014 2:07 pm
 
Forum: Personal Finance (Not Investing)
Topic: Pension Lump Sum - New Question
Replies: 11
Views: 870

Re: The Annuity Puzzlement

Most of the studies that claim an SPIA increases portfolio survival and income have the non SPIA portion of the portfolio in 100% stocks, which can be a behavioral challenge for many even with the regular income from the SPIA. Still, if one can get by that challenge, SPIAs at a relatively young age ...
by Frugal Al
Tue Sep 16, 2014 10:44 am
 
Forum: Investing - Theory, News & General
Topic: The Annuity Puzzlement
Replies: 91
Views: 5561

Re: Experience with dealer finding the exact car you want?

With the upcoming new generation recently introduced, I would think you should have some leverage. Also, why not used? Any other color you would be amenable to? +1 iceman. There are quite a few used Miatas in great condition (garage queens) in many areas of the US. In the used market the automatic ...
by Frugal Al
Sun Sep 14, 2014 6:13 am
 
Forum: Personal Consumer Issues
Topic: Experience with dealer finding the exact car you want?
Replies: 26
Views: 1766

Re: Getting an independent mechanic check on a CPO car?

Some dealers do CPO vehicles better than others--some are downright sloppy. On high maintenance expense vehicles (such as exotic or semi exotic sports cars) it can be worthwhile to get a PPI (pre purchase inspection) done by a qualified mechanic who is familiar with the marque. Even though there is ...
by Frugal Al
Fri Sep 12, 2014 6:09 am
 
Forum: Personal Consumer Issues
Topic: Getting an independent mechanic check on a CPO car?
Replies: 4
Views: 391

Re: Pension buyout - rollover to roth?

But you should be asking yourself, if the pension Buyout is a good deal. Have you checked out https://www.immediateannuities.com/ to see whether your lump sum is anywhere close to the value of the pension if paid out as an annuity? There's a lot more to determining the appropriateness of a pension ...
by Frugal Al
Tue Sep 09, 2014 7:13 am
 
Forum: Investing - Help with Personal Investments
Topic: Pension buyout - rollover to roth?
Replies: 4
Views: 405

Re: Ameriprise Equity Indexed Universal Life Insurance

There are three issues here. First, as LadyGeek wisely points out, don't do business with friends and relatives--I'll add, especially when it comes to financial planning. Secondly, one should understand what they invest in. If you can read the policy and totally understand all the terminology (caps,...
by Frugal Al
Sat Sep 06, 2014 6:56 am
 
Forum: Investing - Help with Personal Investments
Topic: Ameriprise Equity Indexed Universal Life Insurance
Replies: 10
Views: 710

Re: Annuity advice

Let's use an example with current year dollars. Take SS for both at 66 -- 2x $2,000 = $4,000/month Take SS for both at 70 -- 2x $2,320 = $ 4,640 /month There's an error in the example. By waiting until age 70, the $2000 would increase 32% (8%/year, non-compounded), to $2,640 , not the $2,320 noted....
by Frugal Al
Sat Sep 06, 2014 5:23 am
 
Forum: Investing - Help with Personal Investments
Topic: Annuity advice
Replies: 13
Views: 812

Re: Retirement Buyout Offer

What is the estimated monthly pension benefit at retirement in 4 years, or at age 65? Is the pension covered by the PBGC? Where (and how) is the rest of your FIL's retirement portfolio invested? What is the Social Security claiming strategy for the couple? I don't think we have enough info here. It'...
by Frugal Al
Tue Sep 02, 2014 5:49 am
 
Forum: Investing - Help with Personal Investments
Topic: Retirement Buyout Offer
Replies: 3
Views: 734

Re: Pension – Lump Sum Rollover or Keep it?

To compare the relative value of the offer to a Single Life Annuity the pension plan used the following interest rates. 1.24% for benefits commencing within 5 years,4.47% for the subsequent 15 years and 5.52% thereafter. ( not sure of the meaning of this as I have been receiving monthly benefit for...
by Frugal Al
Fri Aug 29, 2014 2:59 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pension – Lump Sum Rollover or Keep it?
Replies: 12
Views: 918

Re: When, if ever, should an annuity be used in retirement p

dhodson wrote:I don't believe you learn the full truth at these dinners.

Those "Captain Obvious" commercials come to mind here.
by Frugal Al
Fri Aug 29, 2014 9:09 am
 
Forum: Investing - Help with Personal Investments
Topic: When, if ever, should an annuity be used in retirement plans
Replies: 32
Views: 2373

Re: When, if ever, should an annuity be used in retirement p

I've got better things to do with my time than sit through a sales presentation from someone "trying to help me" as they line their pockets. Variable annuities are suitable for almost no one, especially the VAs that are espoused at "free" dinners. There are exceptions for relativ...
by Frugal Al
Fri Aug 29, 2014 7:45 am
 
Forum: Investing - Help with Personal Investments
Topic: When, if ever, should an annuity be used in retirement plans
Replies: 32
Views: 2373

Re: Motorcycle for short commute?

It's not that the risks can't be mitigated; it's that it's probably the wrong way for most people to be trying to save a buck (at least on US roads). Our very own EmergDoc is a rock/mountain climber, and his position against the motorcycle commuting idea might at first seem a bit hypocritical, but i...
by Frugal Al
Tue Aug 26, 2014 6:02 am
 
Forum: Personal Consumer Issues
Topic: Motorcycle for short commute?
Replies: 63
Views: 3762

Re: Reducing time spent paying bills

I don't like automatic pay debits (pulls), but I understand why some prefer the convenience. I push everything though Quicken and my banks online bill pay. Quicken provides reminders if I haven't seen or otherwise missed an online or mailed bill. It takes a bit to set up, but is then very quick and ...
by Frugal Al
Wed Aug 20, 2014 9:47 am
 
Forum: Personal Consumer Issues
Topic: Reducing time spent paying bills
Replies: 25
Views: 1751

Re: Pension – Lump Sum Rollover or Keep it?

This is yet another case of very long time horizons and a nominal pension. The young age of the prospective pensioner really makes this a long lasting decision. While many of us here might be willing to take a long bond today at 5% to 6%, this decision would ultimately be for a very long bond, of 40...
by Frugal Al
Wed Aug 20, 2014 8:15 am
 
Forum: Investing - Help with Personal Investments
Topic: Pension – Lump Sum Rollover or Keep it?
Replies: 12
Views: 918

Re: POLL: Breaking up with advisor

Advisors have a job to do,they need to make a living like everyone else,I don't begrudge them,for many an individual they provide valuable services. :happy Toons, I know you well enough from your postings that you are referring to "good" advisors. I definitely agree they can provide valua...
by Frugal Al
Mon Aug 18, 2014 1:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: POLL: Breaking up with advisor
Replies: 47
Views: 3130

Re: Retirement luxury vehicle

Red CPO Lexus ES350 :D http://atcm.co/S2PVDP/166E6A92 Folks, isn't this 3 years old and close to 40% less than new? This particular example has been wrecked twice. I agree with livesoft, if your negotiating skills are good you can pick up a CPO Lexus, without an accident record, for a decent price.
by Frugal Al
Mon Aug 18, 2014 10:46 am
 
Forum: Personal Finance (Not Investing)
Topic: Retirement luxury vehicle
Replies: 62
Views: 4518

Re: Leaving job - What to do with pension fund?

It's seldom a good idea to raid one's pension to pay down debt. You claim to be debt averse, yet you do have debt. Taking the pension proceeds to payoff debt is taking the easy, albeit expensive, way out. Don't do it. We don't have enough info on your pension growth, but if you don't leave it in the...
by Frugal Al
Tue Aug 12, 2014 11:06 am
 
Forum: Personal Finance (Not Investing)
Topic: Leaving job - What to do with pension fund?
Replies: 1
Views: 465

Re: AARP: The Great Pension Sell-Off

Problem is: a lump sum is likely to be taxable income in the year received; I'm not aware of any way to roll it over into your IRA, for instance. Dodecahedron has a handle on it. If it's a qualified pension plan you can roll it over: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Ro...
by Frugal Al
Wed Aug 06, 2014 9:00 am
 
Forum: Investing - Theory, News & General
Topic: AARP: The Great Pension Sell-Off
Replies: 30
Views: 3629

Re: AARP: The Great Pension Sell-Off

Certainly, there are valid reasons to take a lump sum: You don't need the income, you know something about your life expectancy that they do not, you hate insurance companies, ... ...or the prospective pensioner has left the employ of the sponsoring company , has a long time horizon, and seeks grow...
by Frugal Al
Wed Aug 06, 2014 7:50 am
 
Forum: Investing - Theory, News & General
Topic: AARP: The Great Pension Sell-Off
Replies: 30
Views: 3629

Re: Need help deciding whether to sell inherited business

All good points, jimb. Another question to be determined is whether the brother with 50% ownership is working the business and getting pay and fringe benefits in excess of fair and reasonable compensation, thereby resulting in a paper loss.
by Frugal Al
Tue Jul 29, 2014 12:12 pm
 
Forum: Personal Finance (Not Investing)
Topic: Need help deciding whether to sell inherited business
Replies: 12
Views: 845

Re: Best way to reach initial allocation in a bull market?

Leerar, you need to learn how the Sharpe ratio works before using it to make a point.
by Frugal Al
Tue Jul 29, 2014 11:58 am
 
Forum: Investing - Theory, News & General
Topic: Best way to reach initial allocation in a bull market?
Replies: 28
Views: 2646

Re: Pension Lump Sum vs Immediate Annuity

I know there are a ton of other personal factors in the decision, all of which require consideration, of course. These seem to have been well covered in previous topics. In my case, the "retirement" annuity is to be purchased by my employer from an insurance company and seems to be compet...
by Frugal Al
Mon Jul 28, 2014 9:43 am
 
Forum: Personal Finance (Not Investing)
Topic: Pension Lump Sum vs Immediate Annuity
Replies: 4
Views: 612

Re: Vanguard quietly adds longevity annuities

In addition to TIPS, the insurance companies are also able to hedge annuity longevity risk and inflation risk through the sale of life insurance. In general, the insurance companies are long life insurance and high inflation, as was mentioned above, reduces the life insurance payments in real dolla...
by Frugal Al
Mon Jul 28, 2014 8:41 am
 
Forum: Investing - Theory, News & General
Topic: Vanguard quietly adds longevity annuities
Replies: 85
Views: 6920

Re: Ditch car and commute to work in 250cc scooter in Raleig

Wow i'm shocked at how many people say not to get a motorbike due to safety. In Europe these are very very common. Their popularity in Europe and Asia makes them safer--drivers are more aware of cyclists around them. Also the commutes are generally much shorter in those regions, and at slower speed...
by Frugal Al
Sat Jul 26, 2014 6:50 am
 
Forum: Personal Consumer Issues
Topic: Ditch car and commute to work in 250cc scooter in Raleigh?
Replies: 79
Views: 6695

Re: $32k Subaru Outback or $14k Mitsubishi Outlander Sport

In my department of 20 we've now got 4 Outback owners, and they all seem to love them. As with GM, Honda, and Toyota, Subaru is not without its issues. They are apparently suffering teething problems with the FB series, 4 cyl, engine they introduced in 2010/2011 http://www.nj.com/news/index.ssf/201...
by Frugal Al
Wed Jul 23, 2014 7:41 am
 
Forum: Personal Consumer Issues
Topic: $32k Subaru Outback or $14k Mitsubishi Outlander Sport
Replies: 46
Views: 5113

Re: What about the 2015 Volvo XC60?

Browser, I think the XC-60 looks pretty good. It has had a few issues with oil consumption complaints, but they are not widespread--hopefully those issues have been resolved (rings/seals). I wouldn't touch the new for 2015 4 cyl engines and trannies--too new. I suspect if you stick with the 6 cyl ve...
by Frugal Al
Tue Jul 22, 2014 9:51 am
 
Forum: Personal Consumer Issues
Topic: What about the 2015 Volvo XC60?
Replies: 6
Views: 795

Re: Poll - Do you use Quicken?

Windows version. Been using it about 20 years--no problems. I had a couple glitches when my bank changed their system, but was able to recreate data due to diligent back-up protocol. I use all features. I find the fingertip history, charting, graphing, cashflows, balance sheets, aggregation, etc., t...
by Frugal Al
Tue Jul 22, 2014 7:27 am
 
Forum: Personal Finance (Not Investing)
Topic: Poll - Do you use Quicken?
Replies: 85
Views: 5195

Re: SPIA quotes from Vanguard

3) This has no meaning in the absence of a comparative context. It is equally valid to say "Take joy in the low cost of guarantees." I actually agree somewhat with this point (see my edit). My point is that all guarantees come with a price, and often it's quite high. Today, over an averag...
by Frugal Al
Sun Jul 20, 2014 1:51 pm
 
Forum: Personal Finance (Not Investing)
Topic: SPIA quotes from Vanguard
Replies: 8
Views: 1189

Re: SPIA quotes from Vanguard

With caveats: * The internal rate of return of a SPIA is meaningless. In the context that we don't know when we might pass on, thus making the time element rather nebulous. * It is the monthly/yearly guaranteed lifetime income that's important. Guaranteed up to the given state's solvency fund, usua...
by Frugal Al
Sun Jul 20, 2014 1:27 pm
 
Forum: Personal Finance (Not Investing)
Topic: SPIA quotes from Vanguard
Replies: 8
Views: 1189

Re: Cash out pension?

OP used 4% real, which I would not necessarily call the "optimistic view." It seems like a good, middle-of-the-road estimate to me. I didn't have time to crunch the numbers but it looks like it is probably best to take the lump. I do think using 4% real is too optimistic an estimate going...
by Frugal Al
Fri Jul 18, 2014 4:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: Cash out pension?
Replies: 30
Views: 1718

Re: Whole Life Conundrum

IRR = 2.066% worst case. You are also getting the death benefit which you need. It's not a total disaster... You're right, just a partial disaster. Only in our current interest rate environment would this seem reasonable. Bluemarlin's suggestion to 1035 it to a low cost Vanguard annuity is a good o...
by Frugal Al
Thu Jul 17, 2014 9:59 am
 
Forum: Personal Finance (Not Investing)
Topic: Whole Life Conundrum
Replies: 22
Views: 1692

Re: Newbie whole life insurance policy question

"Life insurance adds a layer of safety next to your investments. I was in this business in 2008 as the world fell apart. I saw first-hand older clients tell us that they were so happy they had CV that did not lose value when they watched their investments dip close to 40%. Every one of them wi...
by Frugal Al
Thu Jul 17, 2014 5:16 am
 
Forum: Investing - Help with Personal Investments
Topic: Newbie whole life insurance policy question
Replies: 30
Views: 2419

Re: Oil Change due: Synthetic vs Regular Oil

Realistically if the car doesn't normally see cold starts approaching zero F or lower, the difference in cold start performance relating to engine life of a dino vs synthetic is probably 650,000 miles vs. 700,000 miles. IE, something else will fail on your car before oil related wear takes it out. ...
by Frugal Al
Wed Jul 16, 2014 9:30 am
 
Forum: Personal Consumer Issues
Topic: Oil Change due: Synthetic vs Regular Oil
Replies: 33
Views: 2868

Re: Oil Change due: Synthetic vs Regular Oil

It's actually been found that synthetic oil will prevent "wear matting " not so sure this is an issue with today's engines , but the reason why I don't use synthetics in cars that the manufacture do not recommend using it . I think you mean wear "mating," not matting. The claim ...
by Frugal Al
Wed Jul 16, 2014 7:34 am
 
Forum: Personal Consumer Issues
Topic: Oil Change due: Synthetic vs Regular Oil
Replies: 33
Views: 2868

Re: Newbie whole life insurance policy question

This is his reply to me, I post it just to know how to respond to his questions. You don't have to respond to his questions and you don't have to meet with him. I'm not saying to be rude, but to rebut his arguments is an act in futility for a layperson--they are well indoctrinated. He may truly bel...
by Frugal Al
Wed Jul 16, 2014 5:26 am
 
Forum: Investing - Help with Personal Investments
Topic: Newbie whole life insurance policy question
Replies: 30
Views: 2419

Re: Oil Change due: Synthetic vs Regular Oil

How many miles are you driving between oil changes? My concern for you is your short trip usage and only changing every 6 to 8 months. A significant number of short trips constitutes severe use. Severe use and only changing twice a year may not be optimal, depending on the number of miles you're dri...
by Frugal Al
Mon Jul 14, 2014 2:21 pm
 
Forum: Personal Consumer Issues
Topic: Oil Change due: Synthetic vs Regular Oil
Replies: 33
Views: 2868

Re: Ditch car and commute to work in 250cc scooter in Raleig

freebeer wrote:Kymco is #1 brand in Taiwan and high quality - no need to pay the Honda/Yamaha/etc.

Agreed, Kymco makes an excellent scooter. I've ridden them many times. My only reservation is that they don't have the parts distribution in the US that Honda/Yamaha/Suzuki have.
by Frugal Al
Mon Jul 14, 2014 1:20 pm
 
Forum: Personal Consumer Issues
Topic: Ditch car and commute to work in 250cc scooter in Raleigh?
Replies: 79
Views: 6695

Re: Ditch car and commute to work in 250cc scooter in Raleig

I would never consider a 250cc scooter, too slow and the dinky wheels are not great for stability. Everything in vehicle design is a compromise. There's more to motorcycle/scooter stability than just the wheel size: rake/trail, wheelbase, suspension compliance. Many of the the larger scooters have ...
by Frugal Al
Mon Jul 14, 2014 1:11 pm
 
Forum: Personal Consumer Issues
Topic: Ditch car and commute to work in 250cc scooter in Raleigh?
Replies: 79
Views: 6695

Re: SPIA pricing and risk beyond 30 years

I'm wondering if my assumptions of how annuities are priced are wrong, or if the SPIA market is really this competitive? The best SPIA prices are, indeed, very competitive and efficient, but you are also cherry-picking the most competitive prices, and perhaps with little regard to a company's finan...
by Frugal Al
Mon Jul 14, 2014 8:16 am
 
Forum: Investing - Theory, News & General
Topic: SPIA pricing and risk beyond 30 years
Replies: 5
Views: 1174

Re: Imputed income (rent) Owner occupied houses.

I am simply fascinated that Bogleheads who analyze investment portfolios to multiple decimal places do not analyze their imputed income and its related housing expenses. I'm certain there are many Bogleheads who DO analyze imputed income and housing expenses, especially those who are nearing retire...
by Frugal Al
Sun Jul 13, 2014 7:26 am
 
Forum: Investing - Theory, News & General
Topic: Imputed income (rent) Owner occupied houses.
Replies: 21
Views: 2425
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