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Subject:  Re: Horror Stories II Date:  3/8/2003  1:49 PM
Author:  pauleckler Number:  35852 of 88823

There seem to be some inconsistencies here. So I wonder if Mr. Blenis fully understood his choices.

I am surprised at the $250K cash value of an annuity paying $1K/mo. I would think something like $100-150K is more likely. Therefore, portions of that $250K were probably severance pay or 401K funds.

Secondly the annuity probably could easily have been designed to pay for a minimum number of years, or to pay half to his spouse, or to pay full amounts to either him or his spouse. All of these things cost, but they cover the uncertainty in the case.

Mr. Blenis' big problem seems to be living expenses. In describing his lifestyle, he implies that he could live comfortably on $1k/mo, plus $1K for his house and trailer payments. Add say $6K for income taxes and those are numbers he and his wife can probably expect to collect from Social Security and perhaps small pensions. Then his nest egg provides a nice buffer, and he will probably do fine.

If this is the case, he should be able to live off his wifes income while she is working and bank or reinvest his 72(t) payments. (Low stock market is a great time for 72(t) in that case because he is paying income taxes on depressed values).

His income prior to retirement was close to $70K. The $500K implies major participation in a savings plan or 401K (unless he inherited), so his living expenses are likely to be something like $60K.

With his new job paying $20K, $24K in 72(t) distributions, and $29K wife's income his total income is $73K. Since he is only able to save $5K per year, his spending appears to be out of control.

Perhaps he has allimony, child support, or major uncovered medical bills we don't know about, but he faces the inevitable.

He will never be able to retire unless he figures out how to cut his expenses!! Otherwise, whenever he can no longer work, he will blow through his savings and be forced to adopt a much more meager life style.

Its a classical situation. To retire, he must get spending under control.

I question whether Mr. Blenis ever really planned to retire. His payments are sustainable only if the stock market continued to rise from 1998 levels. Otherwise, he had not hope of sustainable income.

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