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I'm not recommending any of this, mind you, but I thought I would add the link for discussion.

From the Wall Street Journal's "Online" page (free, at least for now)

It's the financial nightmare that haunts retirees: They live a surprisingly long time or they earn lousy investment returns -- and they end up outliving their savings.

How do you guard against this danger? Your monthly Social Security check provides a partial safety net, and you may have further protection in the form of a traditional "defined benefit" pension.

But Wall Street is hoping you will purchase even more insurance. Indeed, it's promoting a slew of products, both old and new, including the four described below.

http://online.wsj.com/public/article/SB115476382654327878.html?mod=sunday_journal_primary_hs
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But Wall Street is hoping you will purchase even more insurance. Indeed, it's promoting a slew of products, both old and new, including the four described below.

I'm not sure where I read it this weekend, but another article quoted all of the tax dodges and guaranteed income schemes promoted to the "wealthy", and concluded that ONLY the wealthy were able to pay so much for so little return after expenses, even with the promised tax savings.

One advantage of the present tax code and all of the talk of making the future even more complicated, is that people can claim, with some justification, that no one can understand all of the nuances and loopholes. Thus are born "fear investment products."

Sounds like for a core investment portfolio the 4% SWR, a well diverse asset allocation, some use of a bond ladder or similar device once retired, and enough education to understand your own finances is still your best bet. No fear!

Hockeypop
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use of a bond ladder or similar device once retired, and enough educat
ion to understand your own finances
------------------------------------------------------------------------

I am becoming a bigger fan of immediate fixed annuities with stocks being the inflation hedge.

Most people want don't have pension plans & immediate annuities cover that.

The catch is that they pay low commissions and thus little interest in them from salespeople.

buzman
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>>
I am becoming a bigger fan of immediate fixed annuities with stocks being the inflation hedge.

Most people want don't have pension plans & immediate annuities cover that.

The catch is that they pay low commissions and thus little interest in them from salespeople.
<<

My wife and I have no heirs, so for us, purchasing an immediate annuity with a joint-and-survivor option might make sense. As you mentioned, these are generally low-commission products with returns that essentially track the yield of the long bond, so there's not much hyping of them.

Obviously, if someone wanted to take their retirement nest egg and be able to pass it on to their heirs, an annuity might not be the best choice.

#29
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My wife and I have no heirs, so for us, purchasing an immediate annuity with a joint-and-survivor option might make sense.

My father has always believed in the stock market. My mother has always been nervous about it, so when he retired they took *a portion* of their savings and bought an annuity.

A couple years later the company from whom they bought the annuity went out of business, and the checks stopped.

Dad is still in the market, and Mom now buys gold coins and other stuff. The "safety" of an annuity somehow lost its luster for her.
 
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I'm not sure where I read it this weekend, but another article quoted all of the tax dodges and guaranteed income schemes promoted to the "wealthy", and concluded that ONLY the wealthy were able to pay so much for so little return after expenses, even with the promised tax savings.

As noted by the great fat man himself: There's a sucker born every day, and every day is a good day to sucker a sucker.
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Dad is still in the market, and Mom now buys gold coins and other stuff. The "safety" of an annuity somehow lost its luster for her.

My dad thought cash in a shoe box was a risky investment. He lived his early adulthood during the Great Depression, so he didn't think much of stocks or banks.
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My dad thought cash in a shoe box was a risky investment. He lived his early adulthood during the Great Depression, so he didn't think much of stocks or banks.

I've related on other boards that my M-I-L lives with us and I "assume" that she has no money. However, I learned about 25 years ago after a long talk about her finances, that she lies about money. This honorable, wonderful, caring woman couldn't tell her favorite son-in-law to buzz off so she just made things up. It took me a while to figure out she was telling me whatever she thought I wanted to hear.

I've found many "depression children" who just can't and won't discuss money. I guess if you're 6-8 years old, your father dies, and you move from house to house often living with aunts and uncles because Mom can't afford you, it hurts.

We're lucky!

Hockeypop
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<<<I've found many "depression children" who just can't and won't discuss money.>>>

My Dad was 26 when the Depression hit. He had invested in many mining stocks during the 1920's. I know this because he still had the worthless stock certificates when he died in 1979. Dad was lucky. He had a good job and made it through the Depression just fine. But it certainly shaped his prospective on finances for the rest of his life. He never borrowed except to buy our house, and paid off the mortgage as fast as he could. Cars, appliances, vacations were all paid in cash or we didn't get them. That's one of the good lessons he taught me. I did borrow for graduate school and for most of my cars, although I always paid the cars off in 3 years or less.

When it came to investing, Dad was very conservative. He bought some stocks and mutual funds in the sixties and seventies but fairly small amounts. Most of his savings were in CD's. I've been investing since college and often thought Dad could have done a lot better if he'd invested more in stocks. Then I would remember his Depression experience and I understand why he didn't. Anyway, he managed to provide for us pretty well and I never felt deprived, although I really wanted a Corvette in high school. And the lessons in fiscal responsibility he taught me by example allowed me to live comfortably and retire at 54.
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What's interesting... and I don't mean it as criticism because I certainly empathize, but it just reminded me... is that the stock market rebounded significantly in the early 30s. I believe it was 33 or so that it was up more than 100% - i.e. more than doubled.

Therefore, some of the *best* 5 year or 10 year periods for the S&P 500 actually begin in 1929.


Of all lessons to be learned, I think that one speaks volumes about sticking with a plan and not hopping in and out based on emotion. All those who were scared off from stocks in 1929, little did they know they were about to start one of the best performance periods ever.
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>> Therefore, some of the *best* 5 year or 10 year periods for the S&P 500 actually begin in 1929. <<

Did the S&P really act that much differently than the Dow?

The Dow dropped 89% from the 1929 peak to the 7/8/1932 low. Even if you look at the period beginning 12/31/1929, the Dow fell from 248 to 41. So unless you had a five-bagger recovery in 1933 and 1934, the 5-year period would still lose money (as measured by the Dow). 1933 was a great year for stocks, but not THAT great.

#29
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I swear I've seen that listed before, Ziggy, but I'll be darned, I can't confirm it now.

I can say that the period was 1933 to 1938 returned 15.6% CAGR. But it was surrounded by poor periods.

Interesting to note that the market (judging by the S&P) only lost around 8% in 1929 as a whole (because of the pre-October run-up, I realize).
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What's interesting... and I don't mean it as criticism because I certainly empathize, but it just reminded me... is that the stock market rebounded significantly in the early 30s. I believe it was 33 or so that it was up more than 100% - i.e. more than doubled.

This seems exceptionally unlikely. While I am unable to find a chart of the S&P during that time, the Dow continued to go down, even from the 1929 crash, until 1932. It did not even match the 1929 peak until the mid 1950's.
http://mutualfunds.about.com/cs/history/l/bl1929graph.htm
http://www.pbs.org/fmc/book/14business5.htm

To be clear, if you bought at the lowest low following the 1929 crash, you were in when the Dow was at 240 (down from 370.) If you stayed in until 1932, the Dow touched 50.

Therefore, some of the *best* 5 year or 10 year periods for the S&P 500 actually begin in 1929.

I don't believe it. If you bought prior to Black Tuesday, you had to wait a long long long time to get out even. Do you have a link for this claim?

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<<<To be clear, if you bought at the lowest low following the 1929 crash, you were in when the Dow was at 240 (down from 370.) If you stayed in until 1932, the Dow touched 50.

Therefore, some of the *best* 5 year or 10 year periods for the S&P 500 actually begin in 1929.

I don't believe it. If you bought prior to Black Tuesday, you had to wait a long long long time to get out even. Do you have a link for this claim?>>>


The bigger question is what were you going to buy stocks with? Remember, much of the 20's runup was on margin. Those people got wiped out early. By 1932 a lot of "average Joe's" were struggling just to keep a roof over their head and food on the table. They had nothing to buy stocks with no matter how cheap they looked. True, a few wealthy individuals were able to buy stock at the lows, but they were the exception. We have to be careful in our hindsight to recall what the present looked like in the 1929-1932 period.



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That's a fair point, bill. Margin was certainly the issue for the depression in more ways than one.


I had a thought, and I wonder if the index I saw that listed '29 as the beginning of its best period (I think that's where I saw it, on the performance of some index) might have been a small cap or real estate or some index that might have been able to take advantage of the weakness of larger businesses following the crash. I certainly agree it wasn't the Dow or the S&P. I suppose I could also just be going crazy :)
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The bigger question is what were you going to buy stocks with?

I've heard "In the Depression you could buy a car for thirty-five bucks. But who had thirty-five bucks?"

--SirTas
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little interest in them from salespeople.

I guess it is based on the company you keep.

Hawkwin
Who is paid the same regardless of the type of annuity; fixed, immediate, or variable (and regardless of the company).
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A couple years later the company from whom they bought the annuity went out of business, and the checks stopped.

Horrible story - but all the more reason to check out the company that is underwriting the contract. Some companies in this industry have been doing business much longer than FDIC has even been in existance and have weathered both the depression and many, many wars.
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I don't believe it. If you bought prior to Black Tuesday, you had to wait a long long long time to get out even

A possible consideration: One person might be looking at a straight number comparison and the other might be considering reinvesting dividends. I honestly have no idea.
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