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StanleyBing

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  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "1)The insurance companies selling those annuities didn't get the profits necessary to build those huge Corporate edifices from out of thin air."

    Then use a mutual company where the shareholders are the policy holders. USAA is a fine example and they have a great reputation across their business line.

    "2)What do you think the insurance companies do with the money they receive from selling you annuities? THEY INVEST THAT MONEY IN DIVIDEND PAYING COMPANIES, then skim off the profit and pay you a suckers benefit."

    They DO use some of that money to buy dividend paying companies, but their general accounts are closely monitored and can't be so aggresive as to be overly weighted to equities of any sort. You may call it a "suckers bet", but because they have a longer time horizon things like 2002, 2008 or even the entire decade of the 2000s don't mean as much to them. They operate like endowments and foundations. Consider it this way; who's taking a bigger risk with an S&P 500 fund, a 65 yr old or a 25 yr old, and why?

    These SPIAs make sense largely only for people that are too afraid of the equity markets to face the ups and downs and even then they can't be over-weighted because the principle of the investment is out of the reach of the owner and they face a possible liquidity problem should they just have to have that money for other needs.. These are the kind of people that left the market in 2008 because they couldn't sleep at night and missed the upside of 2009. I know everyone here is a maket timing genius with a cast iron constitution, so a SPIA, even for a part of their income needs would never make sense.
    Mar 18, 2013. 12:00 PM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    “however he was wrong when he claimed that you needed to do a rate above 4% to match his typical annuity payout.”

    I never said that. What I pointed out was that withdrawal rates above 4% fail too often in REAL WORLD, not “AVERAGE RETURNS” as used in this article to be comfortable for most people. That means the 6% Berkshire Hathaway is offering to the 65 yr old or the 7.+% the 75 yr old was being offered isn’t that bad a deal in this terribly low interest rate environment. You’ll just need something, somewhere, with a growth aspect to it to make up for the fact that SPIA income stream will have declining buying power each year due to inflation. Yes, a risk, but it’s one with a small part of you income needs, not the whole enchilada.

    “Mr Bing has said you should not annuitize more than about 30% of your portfolio, and likes to use 5% to 6% as the return from an annuity.”

    Again, you have a reading comprehension problem. You’re mixing the 5-6% return from a VARIABLE annuity into THIS problem involving a SPIA that just happens to pay a 65 yr old 6%. If you don’t even know the basics of the topic you’re doomed to failure.


    “ (because even at a 6% payout, just stuffing the cash in the mattress you could take out that 6% every year for 16 years!)”

    Great plan because you’ll surely not have to worry about longevity risk, since you know exactly when you’ll be dying…. Again, no need to buy fire insurance, just never have a fire! Genius! What a money saving idea!!!!

    “ Mr Bing will tell you to do a variable annuity.”

    No, he wouldn’t. There’s where you’re wrong, again. I would NOT ever suggest a VA in an “income now” situation. I’ve never said anything of the sort. This is the problem with discussing a topic with people who are not only fast and loose with the truth, but are unaware of how much they simply don’t know about a topic.

    “ That means taking on market risk. If you are going to take on market risk, what else could you do?”

    In an “income later” situation, you can avoid market risk for the base amount you’ll eventually be applying that 5-6% withdrawal rate to. Then, later, that base amount is the figure you’ll be applying the 5-6% (depending on the carrier, not depending on your age, as with a SPIA). THAT ability for protected growth of that base amount is the most powerful argument for annuity ownership, in my opinion.

    There’s where you’re wrong, again. With a living benefit in a VA you don’t face market risk in the benefit base the 5-6% withdrawal rate is eventually applied to


    “With 15 years at an average of 8% growth per year…”


    There we go again, assigning a standard deviation of ZERO to an equity portfolio. See the links I provided above about how that provides vastly over optimistic performance numbers over using real world returns.

    “Yes, I assumed 5% growth in dividends, and 8% growth in stock prices. I'm comfortable with that.”

    Sounds like you missed the entire decade of the 2000s where nothing of the sort occurred, and the 1970s. In two of the last five decades the market’s failed to return, even on AVERAGE, the assumptions you’ve made. It’s one thing if you’re happy to risk a 40% failure rate of your portfolio plan for income, it’s another when you tell folks there’s little risk in it based on very flawed assumptions.

    More importantly, averages mean even less than you think. 5+5+5+5+5+5 = an average of 5, but so does -19+17+8+ -9+8+5 do you think BOTH returns histories mean the same end result to a portfolio where there are withdrawals? Hint, NO. In fact, if you’re taking withdrawals just changing around the sequence of the numbers in that second example changes the end result.

    Google the terms “Monte Carlo simulation” and “sequence of returns risk” to see other object sources discuss what some posters here seem to not understand.


    “If you aren't, run your own numbers or talk to Mr Bing or some other annuity salesman..”

    Continuing to lie about me does nothing to change the numerous holes in logic regarding basic statistics, economics and markets in your proposition.
    Mar 18, 2013. 11:51 AM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "Yeah, I bought $100,000 in bonds ca. 2001, but Mr Bing doesn't understand how bonds work either. "

    Yawn... I understand bonds and I understand how you've made massively brillant asset class switch call after asset class switch call. All unverified, but brilliant market timing all the same....
    Mar 18, 2013. 11:21 AM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "How much of the portfolio should be annuitized? "

    With someone who's afraid of equity markets, STILL no more than 30%. You really seem to have a willful reading comprehension problem.
    Mar 18, 2013. 11:19 AM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "Because of the return of principal income net of taxes matters. For an apples to apples comparison taxes should be incorporated in your example ."

    Good point, 75% of the income stream of the annuity is tax exempt for the first 25 years.
    Mar 18, 2013. 11:17 AM | Likes Like |Link to Comment
  • Short The Lemon [View article]
    Again, I wish you a great deal of luck, but trying to talk down the unlimited potential for loss that a short amounts to, because in reality you'll be in a margin account and will get a margin call before "infinity" sets in is hardly reassuring.

    True, some people will hold a declining asset down 80% (shame on them), but the fact is their possibility of loss still has a limit and it isn't one imposed by a margin call.

    If your plan is to DK a short trade if it gets too far away from you, well, are you serious? You think brokerage firms will just say "oh well"?

    The quote stands, period, since liquidity isn't at risk when one owns something, only when they're short or magined to the hilt.

    Again, god bless and good luck, but people should know the risks they're taking, and I doubt everyone reading your advice does.
    Mar 17, 2013. 10:06 PM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "Is 7% what they actually pay a 65 yo man?"

    There are plenty of places to get a quote. If you google "SPIA instant rates". Be careful about the credit rating of the carrier. Buffett's Berkshire Hathaway is offering 6% for a 65 yr old and they'll tell you at the quote site that that rate, if you die at the expected age, amounts to giving you your money back + 2.37% growth. The longer you live to receive payments, the higher that "growth" rate.


    http://bit.ly/ZTxKNA
    Mar 17, 2013. 09:51 PM | Likes Like |Link to Comment
  • The Perfect Portfolio, Evolved [View article]
    "The 1929 depression was admitted to be manufactured on purpose by the Federal Reserve Bank."

    What the who?
    Mar 17, 2013. 09:22 PM | Likes Like |Link to Comment
  • The Perfect Portfolio, Evolved [View article]
    PendragonY, you're completely out of bonds? Would it make more sense to be mindful of duration and the risk you're taking on with it, rather than dumping bonds as an asset class, seeing that rates will go up at some point?
    Mar 17, 2013. 09:18 PM | 1 Like Like |Link to Comment
  • Short The Lemon [View article]
    About the strategy of shorting a stock based on rational valuations, a wise man once told me; "The market can be irrational longer than you can remain liquid". I believe that advice applies to individual stocks as well.

    I admire those who succeed at it, but given that the gain is limited and the potentail loss isn't, not to mention you can be absolutely right, but dead wrong by being early, thanks but no thanks.

    Best of luck.
    Mar 17, 2013. 09:06 PM | 1 Like Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "Your article showed the results of the 30% of the portfolio they "should" annuitize."

    Again, a distortion of what I've said. I made it clear I'm not much of a fan of SPIAs in most cases. My only point is if you're going to dismiss them have a factual basis to do so.
    Mar 17, 2013. 08:39 PM | 1 Like Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "I am not laughing."

    You would be if you understood economics, finance and markets.

    "the numbers are the numbers."

    No, you DIDN'T use the real numbers, you used an average. Again, consult any basic statistics or finance textbook and learn the effects of assigning a standard deviation of ZERO to a portfolio.
    Mar 17, 2013. 08:36 PM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "Quit with the strawman already!

    You are not going to annuitize 100% of the portfolio, so you do not need to take 6% of the entire portfolio either."

    The point is that this has been a discussion of taking 6% from a portfolio. Now you call that a "strawman" and want to change the rules. 'Tis funny.
    Mar 17, 2013. 08:33 PM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "Assumptions are unrealistic IMO so numbers are irrelevant."

    Correct, by (without knowing it) assigning a standard deviation (you know he's running to wikipedia to learn what that means) of ZERO to the equity portfolio returns (people reading with even the slightest understanding of finance and markets are laughing up a lung right now) he's made them practically risk-free.

    The only real evaulation of a portfolio's ability to survive a retirement span while delivering a specific yield, is a simulation using REAL market returns and even that approach has flaws (remember that advice; "past performance is no.....")
    Mar 17, 2013. 08:03 PM | Likes Like |Link to Comment
  • Smackdown: Dividends vs Annuities, The Main Event [View article]
    "Put the numbers in from 2007/8....investments still blow it away. "

    You mean start at the market's bottom and they do better? Well, of course. Start your test just BEFORE the market's tanked in 2000, 2002 or 2008 and see what happens. Better still, don't use market averages at all and apply a Monte Carlo test, see how often a 100% equity portfolio fails when it tries to deliever an income stream even as low as 4.5%.
    Mar 17, 2013. 07:33 PM | Likes Like |Link to Comment
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