This should be an interesting discussion. We are a different case since we have no children. We have ROTH IRAs, pensions, 401Ks, husband has annuity. Both of us have life insurance. We've been considering cashing out insurance policies and investing, since we have no heirs. I'm not so sure it's needed when there is no mortgage or debt. So would be interested to also hear what others think of this.

I am so financially unsavvy it is a crime. Well, maybe I should not say that. I know that investments need to be handled wisely and that one must pay close attention to your money. I just had no real idea how to go about this. So, I found a really good financial advisor to help me. He charges a fair and completely transparent fee for services. He receives no compensation, directly or indirectly, from anyone but his clients.

I moved my 401Ks into IRAs.I receive a small pension. I have postponed collecting Social Security until I am 70, at which time the payment will be much larger than it would be at my full retirement age (66). I do collect half of my XH's SS at this time.

My advisor does not like annuities. If you are not financially savvy, find a good fee only, not fee based or commission based advisor. You do not want an advisor who is earning a commission on what he sells to you. That makes him a salesman whose first priority is to make sales, not watch out for your money for your benefit.

Before I started with this advisor, I was using a very nice guy at Merrill Lynch. The hidden fees were substantial. I never knew what he was making from managing my money. The new guy is totally transparent and every statement I get lists his fee. I knew in advance what that fee would be.

Good luck. I have lost a lot of sleep over this until I found someone open and honest. The world of financial advisors is a slippery place. Anyone can call themself a financial advisor. Do your homework!

We have traditional IRAs and a 401k. We decided it wasn't worth it to convert the IRAs to ROTHs. I would suggest a Certified Financial Planner who is fee-based only if you are not financially astute. Teach your heirs not to touch the principal unless absolutely necessary. Use only the income generated. That way, wealth can continue to build for succeeding generations.

Dead brought up something I meant to - a financial advisor. We have a wonderful one - after dealing with one who was not-so-wonderful. I also use him for my grandmother's investments as I am her POA.

Golddust I found myself in the same position when my Mom passed away in July. She was very private about her money, income and investments too. Her estate was divided amongst myself and two siblings, and while not millions, a substantial amount to each of us. I began looking at my finances, investments, pension etc. with thoughts of retiring in the next several years and realized I had no idea, nor was I astute, about what I had and needed. I was using a planner at MetLife and realized he wasn't helping me or paying attention to my money. Through a recommendation I found a wonderful financial planner who has been very patient answering my questions and giving me advice. I am so comfortable with him and he picks up the phone when I call, researches for me and I have become so much more organized with most of my money in one place. I highly recommend a recommended CFP as a great place to start to put your financial life in order!

This is a very personal topic (personal in that financial planning should be geared toward your lifestyle and desires in your retirement years; whether or not you have kids or important charitable causes, or plan to do a lot of travel, etc.) We lost a good portion of our IRA investments right about the time we had always planned to start using them. But we have SS's and DH's retirement annuity and our IRA's have come back nicely and now we're drawing from them.
I can say that it's been very rewarding for us to consolidate and get our investments into one financial institution. I would recommend Vanguard for no fees and they are very accommodating to answer questions and give guidance geared toward personal needs for the future. No pressure.
Personally, I don't see the need for life insurance if you have money saved that will be sufficient in retirement or in the event of spouse's death.

I don't really understand the problem....the taxes are being paid on earnings earned over a long period of time...income that was sheltered. Had they not invested in the annuity, they would've been paying taxes all along and the "nest egg" would've been a lot smaller, esp as taxes were a lot higher years ago than they are today. So be happy with what you are getting...even after taxes, it's probably more than what you thought.

When I hit 50 I got serious about planning for retirement and finally found a CFP I like who charges a simple hourly fee for twice annual portfolio reviews and the occasional in person meeting I schedule to go through different retirement scenarios. I make my own trades based on his recommendations - no one else is in control of my funds but me.

We're only in our mid-50s and not planning to retire soon so still socking money away in investments - maintaining a 50/50 split between pre-tax and after-tax. I do not however sock so much away that I can't enjoy life now because you never know - you may not live until retirement age. I also still maintain some life insurance since I'm often the only breadwinner and I think DH would need the additional $ to supplement investments if something were to happen to me at this age. When we're older and sure we have enough $ to sustain us then we may drop the life insurance. I also have LTC insurance - DH does not.

DH doesn't really want to retire though he's been unemployed off and on. He's finally had it with being employed by someone else and is in the process of buying a business so he can keep working as long as he's mentally and physically able.

Assuming this works out it will likely allow me to retire sooner than later. Not sure when that will be but I don't want to stick around after I've started getting daffy. Then it's time to go and let someone younger and sharper take over. Kind of targeting 5-7 years depending on how the business venture goes.

My parents essentially had nothing in the way of cash or assets when they died so that made it simple and tax free.

I'm happy, Anne, of course we are. Ive just read and heard that annuities aren't necessarily the best way to go so I'm researching other options for us.
Both DH and I have life insurance right now.

Mom's largest asset is her home. Located in the University Square subdivision, it is the best neighborhood in her city. Currently, houses in her neighborhood are selling for 106% of asking price, generally in two weeks or less. There is almost no inventory and the prices are just 19% below the all time high in 2007. It's the silicone valley. That said, we have it leased for another year and a half so we plan to wait out the lease and look to investigate putting in a new foundation before we sell. (The soil is adobe and the foundation needs to go deeper and be supported with rebar.) The houses in her neighborhood all have leveling issues.

Who knows how many real estate bubbles will occur within the next year or two... Siblings have suggested buying out the lease but DH doesn't want to do that and we don't want to sell it as a rental. It generates good money as a rental and taxes are only $1,000. a year. It will just set in the trust for awhile.

Life insurance proceeds can be used to offset taxes due from other inheritances. So it's not always a bad idea.

I recommend using a financial consultant that is fee based on the amount of money they manage for you--say, 1 percent, 1 1/2 percent. Insure that they aren't making money on what they recommend--that there is no advantage for them to encourage you to put your money in one particular investment over another.

Also, make sure your statements come to you directly from whatever entity the money is invested with and NOT your financial advisor/consultant.

Bernie Maddoff sent statements to his clients on his letterhead with the fictitious "investments" listed. A lot of otherwise smart people fell for that.

A lot of otherwise smart people with money fell for this.

I didn't know anything about investing (other than very modest 401ks and IRAs for DH and me) until my mother had a catastrophic stroke a few decades ago, and had to go into a nursing home, and I, as an only chld, became her conservator and sole money manager literally in the space of two hours. It was one of the great upheavals of my life. She had had three FPs, one after the other. Two were jerks and one was a bona fide crook. Two of them were still lurking even after she became ill. My mother wasn't exactly dumb. She was a spectacular saver and understood about stocks and mutual funds. She could build up savings accounts like nobody else. But she chose to follow the advice of men who seemed "nice".

So I decided to become my own planner. While somehow maintaining a pretty normal life, I saturated myself in the facts of investment, subscribing to all kinds of financial magazines and newsletters (some good, some ridiculous), listening to "gurus" on the radio and TV (likewise), and gradually acquainting myself with our brokerage house of choice, Fidelity. It took about a year for me to feel confident and a few more years before I stopped obsessively following the market on a daily basis.

A primary teacher was Bob Brinker (radio and website), also Morningstar for awhile, and Fidelity. A few things I have learned:
Pay yourself first and start doing it at as young an age as possible. What works above all with the stock market is TIME - the longer you are invested the better you will do.

When the market falls, do not panic. Instead, buy. If it falls further, buy more. "Buy low, sell high" really works. The 2008 crash was a terrible thing for those on the brink of retirement or in their senior years, because there wasn't a good way to make up that money. But for everyone else, it was one long buying opportunity. Honesty here. I panicked and sold a lot more than I should have. Sold in March 2009 at the very bottom, stupidly. And I was too slow getting back in. Bonks on the head for me! Don't be that person. Historically the market always recovers.

Annuities. Annuities can be very good for investing and saving, although their fees are a bit higher than with other instruments. But if you have heirs, keep the money as Golddust's MIL did - do not annuitize it. Annuitizing means that at a certain point you can request that based on the amount you have in the annuity, the insurance company will pay you a certain amount monthly for the rest of your life. The catch is that, with annuitizing, whatever is left when you die goes to the company, not your heirs. So if you have an annuity, withdraw from it on your own schedule and resist the company's efforts to persuade you to annuitize.

DH and I chose to switch our IRAs to Roth IRAs as soon as it became possible. Our taxes were amortized over three years, so it wasn't so painful. We are glad that we did it. Now there are no taxes owed. In addition, we don't have to begin withdrawing money at any particular age, ever, and we still contribute. The downside of a Roth is that you are taxed on the money you use to invest upfront; in other words, that money is not deductible as it is with a standard IRA.

If you manage your own money, IMO mutual funds are much better investments than individual stocks, because the fund manager is selecting all the stocks and you don't have to worry about what Apple or Merck or Starbucks did today. The big investment houses, Fidelity, Vanguard, T. Rowe Price, etc., will share a lot of information about the managers of their mutual funds, and the investment styles of the various funds, so you know that there is water in the pool when you jump off the diving board. You can buy mutual funds individually or embed them in IRAs and annuities and 401ks.

Our best financial consultant has been our wonderful accountant, who does our taxes and, to keep me on the right path, uses humor, sarcasm, and straight-to-the-heart talk. My mother found him 25 years ago, and the first thing he did was to read her the riot act about her sleazy FPs and the limited partnerships they sold her.

I did not mean for this to be against all financial planners. There are very good ones out there, and so many people benefit from them. I also know, though, that it's possible to do it on one's own. Also, apologies for the length of this! It's like asking me about cats...

Very timely topic for me. At 59 and 55 my husband and I-well mostly I as the financial administrator in our marriage-are starting to have these conversations.

I think we are in good shape for a solid retirement and we just recently went to an estate planning attorney who created revocable living trusts for each of us, a will and healthcare proxies. That was step 1 of my long-delayed plan to start getting organized. Step 2 is to find someone to talk to about how to plan financially for our retirement.

Athough my husband claims he will 'work till they kick me out', I want to be ready to retire with no worries in 5-6 years max. The questions I have mostly relate to managing a dual-income retirement plan. We have always lived below our means, paying large ticket items with cash as we could afford it, etc. Both of us have defined benefit pensions and almost equal social security projected benefits. We each fund the annual maximum allowed in a 403B (nonprofit version of 401K). We have quite a bit of liquid savings. Own our home outright and no debt at all. Now that our kids are almost completely independent, we have been able to implement a budget of living on just one of our salaries so the past couple of years we have been literally saving half our gross annual income. That is also something we started doing just in case one of us is laid off since our employer has been going through a lot of organizational changes. I am not quite sure what and how we need to start setting up our accounts. I'm wondering about whether for example starting Roth IRA accounts would be useful because it's looking like our retirement income will be about equal or even slightly more than what we earn now.

The fee only financial planner is what I'm leaning toward. I'm no expert but I am trying to be an autodidact like sable and I do have an MBA. So paying someone to invest for us probably isn't something we want to do. And we have access to a couple of good solid firms, TIAA-CREF (our 403B provider of choice) and USAA who both offer products and advice that I trust.

At this point I need someone who can talk to me about how best to organize everything, and about my dream which is to be financially able to walk away even sooner than the early retirement benchmark of 62 YO. Of course there is the issue of what the heck I'm going to DO with myself...but that's another topic!

All the experiences shared here are so useful, thank you everyone who has allowed a peek into a subject-finances-that can sometimes seem like the last conversational taboo :).

Ann

This is a great thread. It is very informative to see how people are managing their investments. I so very much agree that the time to start saving is when you are young and that time is your best ally. My XH did a rotten job with finances despite working in a what could have been a very high paying profession. After our divorce, I got my money in order and did what we should have been doing all along, but I was starting in my early 40's instead of ten years earlier.

Anyway, I notice that a number of people are recommending fee based advisors and I think what you really want is a fee only advisor. Fee only means that they do not collect any commission on sales and are only paid a fee from you. Fee based means they can also collect commissions. It's an important difference.

Here is a link that might be useful: Fee only v fee based

Great post, Golddust! I don't really know what an annuity is or how it works...that's how out of my element I am when it comes to savings and retirement. I got divorced 3 1/2 years ago at the age of 45. We split an IRA we had together, but that's all I've done. My job offers a 401K, but I'm afraid of making a wrong decision and losing money since it happened to some people I know. If my job equally matches my contribution and the bottom drops out again, surely I would still be ahead don't you think? Would the 401K be a better investment for me than and IRA?

msrose - you need to be taking advantage of that 401K! If your employer contributes, that is like free money! Yes, you would still be ahead. I had the same set-up at my work and when things hit bottom recently, I did lose some but it's come back very nicely. Do your homework on which funds to choose.

tina

An annuity is designed to give you income to add to retirement income. You can defer the income if you don't need it (like Mama did) or you can begin to receive the earnings, which is taxable based on your income at the time you take out the earnings from the annuity. Since Mom didn't have to file taxes, it would have been little to no taxes on her annuity earnings. She may have been smarter to remove earnings, pay the 10% taxes and turn it into a life insurance plan or a ROTH. That would have saved the beneficiaries about 20% in taxes.

Mom deferred her earnings, never tapping into it. In the past few months, she was earning approximately $800. Per month.

Since she didn't tap into it, her beneficiaries have a choice on how to disperse it. If she had tapped into it, her beneficiaries would have to take payments over five years. That would have been fine for us but maybe not so good for the others.

Two out of three could take the payments, lowering the tax burden over five years, as it adds to taxable income, if we were to disperse the annuity without paying taxes. That could place some in a higher tax bracket, increasing the percentage of taxes owed on all income for that year.

Because one beneficiary really needs the money, we decided to let the trust pay the taxes before disbursement. We don't want to add any more of a tax burden to ourselves after paying $48,000. to Uncle Sam just last week. We were able to pay at a rate of 32% fed, 10% to the State, using the trusts E.I.N. Now it can be dispersed tax free.

Yes, you need to be taking advantage of that 401K. That is free money. We have the same set up for our employees.

sable_ca, thanks for your inspiring post. You certainly have a good grasp on investing now, quite impressive after your claim of having known nothing before.

My DH has always handled our investments. He's a commodity trader, so is comfortable with handling money, taking risks, & pays close attention to economic conditions. Consequently, I don't really know what's going on. Not good.

At least I file the (overwhelming) paperwork, so I can see what we have. But it's all very complicated, definitely foreign territory. I should just start asking what is all this good stuff, and doing my own research to find out about it. DH never could explain well, so I might as well do it on my own. Thanks, sable, for your example.

I became a widow at 46, my husband was the main income earner. I was barely able to keep my home and continue to put a small portion of my income into a 401k.

Fast forward 14 years - a comfortable financial future was assured when I inherited a PILE of $$ from an aunt and cousin I helped for 7 years - never had a clue they had any $$ before I took over their affairs. The attorney who helped me with my relatives' legal/financial matters (truly the top of her field) recommended a fee based financial planner she thought the world of. Me, too. He helped me with their $ and when they needed more income for NH care, he had me look at a local company who invested in complicated real estate contracts that was paying about 2-3% more than anyone else. He had investigated them for 3 or so years before recommending them to any of his clients, went over all the audit reports, etc. He was very pleased with how they ran the business, so I invested about 1/5 of the $ with them. Great to get the interest payments each month. Then one month the check didn't come. Turns out the former legit business had gotten in financial trouble and had gradually become a Ponzi scheme where he was using new investor $ to pay off the old. Then it all collapsed.

The owner is now in jail, the auditing company, the largest most prestigious in the area, is being sued for not catching what he was doing....for years. It's all in litigation now, I may see 1/10th of my capital returned...maybe, or perhaps more if the auditing company makes a settlement - it could bankrupt them.

I still trust the financial planner (he and some of his other clients lost money, as did some of the most savvy investors in our city-nearly 1000 of us - so I don't blame him). He used to charge my relatives for his help, but when they died, he has never let me pay him. I think I am small potatoes to him and he thought I was being so selfless in devoting myself to helping my relatives, I guess he saw me as his pro bono case and rewarded me with free services.

Anyway, there was no way to foresee this was a bad investment option, because the auditors charged with looking behind the scenes failed their duty. Just a warning to you all to be cautious in where you choose to invest. I thought I was.

Olychick - Your story compelled me to respond as soon as I read it. This is EXACTLY what happened to my mother, virtually down to the last detail. "Complicated real estate contracts" - also known as Limited Partnerships, an investing no-no, we now know - the monthly checks roll in, then less, then nothing, then excuses from the broker. Then most of your original investment has vanished. Thank goodness my mom had her stroke before the final collapse of the investment occurred; she would have been distraught over what did finally happen, and she at a rather wobbly 87 years of age. In our case, two brokers went to jail and ours lost his license, but of course anyone can hang out a license, even after something like this. We did not recoup a penny. It was a long court battle that took place out of state, so I just received updates, all bad, and tossed them in the trash. That is when I decided to do it myself.

Olychick, you have had a hard time; I hope that you are on solid ground now and that all your sailing will be smooth.

awm03 - Thank you! I am glad if I was of some help. The plight of women and their money is a very important topic for me It is terribly distressing to see the situations of some women who don't understand or participate in their financial future planning. It is of Crucial Importance. We never know what tomorrow, or even the next hour will bring, and a catastrophe, big or little, is made easier with the knowledge that we have plans in place, and if we have planned, some security. It is all very well (even on some GW forums) to rant about greed and materialism, but it's not greedy or materialistic to be concerned with being able to care for oneself (and with luck, to care for others).

There are rules of thumb for investors to follow who are new to the game....like splitting your savings between equity and interest bearing based on your age...the older, the more interest bearing you should have. But these are really just rules of thumb and your situation is probably more custom than that. But if you can't afford personal advice or aren't interested enough to DIY it, the rules of thumb are better than nothing.

However, should you choose to invest in equities and not have a large enough portfolio to diversify on your own, then I recommend the S&P500 index funds. These are funds that manage your portfolio to the Standard and Poors Index of the top 500 companies. First, they have very low management fees as they have very little management...the fund buys the stocks of the S&P500 and only buy or sell as the companies within that 500 list change which isn't very often. Second, the S&P 500 has consistently outperformed about 80% of mutual funds, so your odds of selecting a better performing fund are low. Most IRA/401K plans have one among their options to select.

And yes, please take full advantage of your co's 401K plan esp with company contribution...it's certainly a core of our retirement income.

Re deferred annuities, we have one that we began with not a lot of money over 30 years ago and the interest earned on it has been very good. As a result, it is a good nest egg for us. We call it our personal social security account. We have not tapped into it yet and don't plan to until we need it. One of the scariest parts to me of living on a fixed income is the inflationary effects that will cause our comfortable income now to become very tight in the future. My use of the deferred annuity will be to supplement our future retirement income as an offset to inflation. I feel much more comfortable knowing I have a way to increase our income in the future should we need to. And, of course, the longer we defer it, the greater the monthly income will be when we tap it.

Our financial situation is a bit unique as DH is quite a bit older than I so we need our retirement income to last longer than for many as I plan on living a good long time, even after he is gone. (God willing we don't get hit by a bus in the meantime!)

But this has raised an interesting point re Soc Sec. He is already receiving his Soc Sec. I worked and am eligible to take my Soc Sec at 62, but if I take my own, it will be at a reduced amount as I'd be taking it before my official retirement age of 66 1/3 (or something like that). However, at 62, I am eligible to get half of his Soc Sec as his spouse and I can collect that until I reach my official retirement age and then I can switch to start collecting from my own without reducing the rate. This information may be helpful to those of you who also had dual incomes....

runninginplace, I congratulate you on working so hard to manage your finances and make a comfortable retirement for yourself.

If you are saving that much money, then it is worthwhile to protect it with the help of a good financial planner. Look for one who understands the importance of capital preservation. It's irrelevant how much money you've saved if it is all lost in a scheme or even just with bad management. (Ask Billy Joel or George Harrison or Sarah Ban Breathnach!)

It's also important to understand the concept of total return....Total return is how much money you've made on your invested dollar from interest and capital gain minus the fees to manage it. Some guys will hawk a product proclaiming a 10% return which is great, but at great risk of losing your capital...if you factor in the loss in the value of your capital with your 10% return, you may find you not only didn't make a very good investment, but that you also have a lot less to invest in the future. Rather a more conservative investment that yields less but preserves capital may be the wiser option.

Annie:

" However, at 62, I am eligible to get half of his Soc Sec as his spouse and I can collect that until I reach my official retirement age and then I can switch to start collecting from my own without reducing the rate."

This is going to sound like a dumb question, but I really get confused by this stuff -- the above is true only if the spouse is deceased, right?

No, Jamies, they do not have to be dead. I collect half of my ex-husband's Social Security and he is still alive and kicking. We were married more than 10 years and I have not remarried, so I am entitled to half of his. That is why you see so many older folks co-habitating -- they don't want to lose their former spouse's social security. I think the husband must be collecting for you to collect on his account.

I am old enough to collect my full SS now, but if I postpone collecting until age 70, my payments will be larger and over my lifetime (presuming a live awhile), the amount I collect will also be larger.

A terrific place to learn more about investing is Personal Finance for Dummies. It's such a help and explains everything in simple language. I still don't fee confident enough to invest myself so I am using a fee ONLY advisor.

But my husband is alive, and collecting his own SS and we are married. I'm still working, but I have put in plenty of SS years so I could stop working any time and still be eligible at 62, or 66, or whatever. I can't quit working now and collect half of his now, and my own later, can I? It sounds so implausible, but Annie says one can collect "As his spouse". ????

jamies,

Let's separate the 2 issues.

Age: Soc Sec allows you to start collecting benefits early at 62, but the sooner you collect, the less you get. Soc Sec also allows you to postpone collecting until age 70. So for example, if at age 66 you reach full retirement age, you will receive $1,000 per month. If you choose to start collecting instead at 62, you will receive only $750. If you postpone collecting until 70, you will receive $1,320. So the later you start collecting, the more per month you receive...

Marriage:
My FIL worked all his life, but my MIL never did...she still received soc sec benefits that were equal to 1/2 of my FIL's. She continued to receive that until he died, at which point she received his full benefit, and her 1/2 benefit ceased.

Put them together:
If I take my benefit based on my earnings at age 62, then my benefit amount will be reduced. However, I can postpone taking my benefit until I reach full retirement at age 66 1/3, ensuring a greater monthly benefit (or wait til 70 for even more). In the meantime, at age 62, I can still receive 1/2 of DH's soc sec benefit as his spouse with no impact on the amount I will receive based on my own benefit.

Does that help?

I knew about the postponing and the decreased benefit. That is clear to me.
DH started taking his benefit at full retirement age. He is receiving it now. I'm not 62 yet.

If I decided to take half of his when I turned 62, would he get less? I/O/W would our household receive 1.5 times the amount of SS that it gets today? That's just all new to me. I had no idea!

Then, when I turn 66, he would continue getting his full benefit and I would get my full benefit based on my own earnings - ?

My higher earning years are behind me. The work I'm doing between now and age 66 is not increasing the size of my SS benefit.

Annie wrote: ". In the meantime, at age 62, I can still receive 1/2 of DH's soc sec benefit as his spouse with no impact on the amount I will receive based on my own benefit."

I thought you can file and receive PART (37%) of the 1/2 of your DH SS at 62. To receive the full 1/2, you need to be 66. At least that's how it was explained to us. Maybe I'm wrong????

ML

My bad....I misstated....your spousal benefit will be reduced if you start collecting early....thanks for correcting me, ML!

That makes more sense. 37% of a half is not incentive to stop working if you can still work.

But good to know nonetheless. Thanks annie and ml!

DH started taking his SSI at 62. He is now 65. In Dec. when I turned 62 I decided to also apply for my SSI. When they did the calculations they found that my amount was slightly less than what 50% of DH's benefit currently is. So I get my benefit and then they add on the amount to make my benefit be exactly 50% of what DH gets.

I didn't work the last 5 years before I started getting SSI. Your benefit is linked to your 35 years of work history. But I posted only 000 for those 5 years. I will link to an excellent overview of SSI.

We have a very very good retirement due to DH's plans from the U. Also we put away money in a 401 K with matching benefits for 31 years. We had inheritance also.

We are fortunate that we don't have to touch any savings at all. We will have to withdraw a percentage when DH turns 70 1/2 . It is calculated at that time. Other than that we have no need for it so it stays where it is.

We made the decision to take our SSI starting at 62 because one never knows how long one is going to live. Yes you get more at 70...but will you feel like doing MORE at 70 ? We did the calculations and projected what the differences would be if we lived to 85 and started SSI at 62/66/70. Yes we would have gotten more and yes it is tempting but each couple/person has to decide what they want and also how much other money they have to spend.

Here is a link that might be useful: SSI

I just wanted to point out that we are not talking about SSI here -SSI is not retirement benefits. SSI (Supplemental Security Income) is a special program for disabled people who do not have enough work credits to qualify for SSD (Social Security Disability).

Social Security is the retirement program, with many different aspects, depending on your circumstances.

jamies, it's not 37% of half...it is 37% instead of 50% so if your DH gets $1000 at full retirement age you'd get $500, but at 62 you'd get $370....

Is it? ML says:
"I thought you can file and receive PART (37%) of the 1/2 of your DH SS at 62"

Given what I know about SS, I tend to think she must be right. (37% of 500)

Sorry..I am talking about plain old social security..nothing to do with disabled at all. I shouldn't have put SSI..I meant just SS. Didn't mean to confuse the issue. c

Annoe wrote: "
jamies, it's not 37% of half...it is 37% instead of 50% so if your DH gets $1000 at full retirement age you'd get $500, but at 62 you'd get $370...."

YES. At 66 the spouse can collected 50% of the benefit.

Maybe this helps, from the SSA:

"
A spouse receives one-half of the retired worker's full benefit unless the spouse begins collecting benefits before full retirement age. If the spouse begins collecting benefits before full retirement age, the amount of the spouse's benefit is reduced by a percentage based on the number of months before he/she reaches full retirement age.

For example, based on the full retirement age of 66, if a spouse begins collecting benefits:

At age 65, the benefit amount would be about 46 percent of the retired worker's full benefit;
At age 64, it would be about 42 percent;
At age 63, 37.5 percent; and
At age 62, 35 percent. "

Here is a link that might be useful: Social Security Spouse benefits percentages

This post was edited by maddielee on Mon, Apr 15, 13 at 15:24

Sable,
Thank you for sharing your knowledge and experience and for so clearly explaining Annuities. I know what Annuities are however you explained them in such a way that I can now explain them to others.
I try to listen to Bob Brinker whenever possible and I agree 100% with what you wrote in the last paragraph of your second post.
Vesta

So here is one of my dumb questions: if an annuity is nothing more than receiving an interest stream on a sum of money, why would anyone do that and give away the principal rather than just invest the money and keep it? I *think* the logic is that one is guaranteed a certain income level, but I'm still wondering...

I don't think there are any dumb questions. This stuff is complicated!

The idea of an annuity is to keep the principal and live off the earnings. You don't give up the principal. If the annuity is non qualified, the principal is post tax funds so taxes have already been paid and it isn't double taxed.

The earnings is what is taxable and that can be a big hit. 40% is what the trust paid on the earnings of Mom and Dad's annuity.

The deferred annuity guarantees a payment for life, so you can't outlive your income, unlike investing your own money and living off of it...if you are long-lived and burn through the income and principle, they keep paying. And unlike investing your own money, the insurance co. bears the risk of fluctuations in income off of the principle.

Vesta - Thank you (sorry to be late responding). I don't listen to B. Brinker very much these days, but I clearly recall a Saturday afternoon a long time ago when I suddenly yelled at DH, "I get it! I understand!" It was like a terrible algebra problem in high school suddenly becoming clear. He was of crucial help to us.

Annie - As I have understood annuities - at least the ones owned by my mother and DH and me - you cannot touch the interest and principle if you have chosen to receive payment for life, also known as annuitizing. Did I misunderstand your post?

sable, I meant that by comparison....if you invested the money yourself and then paid yourself an income stream off of it figuring you'll live to 82, then you can burn through all the money. By 83, you're SOL.

However, if you have a deferred annuity and they calculate the income stream on an actuarial basis figuring you'll live to 82, and you make it to 90 or 95 or more, they keep paying. They bear the risk of you living longer than expected, not you.

That was the point I was making. However, for a deferred annuity, it depends on how the contract was written. They can pay out a death benefit to the beneficiary based on the remaining principal and interest earned. It also depends on how it was withdrawn. For example, when we tap ours, it will be with both our lifetimes in the calculation so it will continue to pay the benefit until both of us are gone. So if DH goes first, I don't have to "inherit" it....I'm already included in it.

Annie - So it seems that the action in what you are calling a deferred annuity is what I am calling annuitizing. Contracting with the insurance company to pay you a fixed amount for the rest of your life. In which case, according to everything I've understood, heirs cannot inherit the remainder of the money, if there's any left. The remainder reverts to the company. Of course, if there are no heirs this doesn't matter. In that case a dependable income is very desirable.

It was my intention here not to argue the fact, but to clarify it for the sake of those who are trying to understand the ins and outs of annuities. IMO the best annuity has three options: Either just let the money grow, or withdraw it when and if one chooses, or annuitize. No rigid rules to follow, unlike, e.g. with non-Roth IRAs.

Sable, that is what I have been reading as well--that the principal goes to the insurance firm, not to the individual or heirs.

As I said, it depends on the specific annuity and your contract with the insurance company as to what happens to the principle and interest upon death. Some have minimum payment guarantees so if the annuitant hasn't received the minimum payout upon death, it goes to the beneficiary. It also depends on when the annuity was started as the rules and products have changed over time.

You would need to discuss this with the specific company offering the specific product to see what they provide for.

From the link below:

The death benefit for deferred annuities is usually equal to any money left in the contract, plus the interest accrued up until the annuitant’s death. For all types of annuities, contract add-ons, called riders, can be purchased to increase the death benefit.

Here is a link that might be useful: Annuity death benefits