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need to know
German train crash leaves several dead
Sanofi profit hit by falling diabetes revenue
TUI revenue grows, but net loss widens
German output, exports drop in December
Greek protests escalate over refugee camps
France: Facebook infringing on privacy
Fed: Too white, too male, too many bankers?
Film flops hurt 21st Century Fox outlook
Cracking down on college financial-aid cheats


Is the gold rally the real deal or ‘fool’s gold’?
Teen can keep $20,000 gold bar found in lake
Gold one of Wall Street’s best bets early in 2016

Google CEO Sundar Pichai gets $199 million in stock

Tesla downward revision is among the biggest
Tesla earnings: Model 3, Model X in focus

India bans  Facebook’s free Internet service

Why a selloff in European bank stocks is ominous
Bank stocks have taken enough: analyst
Deutsche Bank shares fall again in bank rout

What you can expect in Coca-Cola’s earnings
Current quarter’s earnings outlook dims

Yelp’s billion-dollar path hits a detour
Yelp posts earnings early, CFO to step down

Bloomberg tells FT he’s considering presidential run

Computer virus wants to remind you to have a nice day
Justice Department data exposed in breach

Yellen may say goal is not to slow the economy
Latest sign of a softening U.S. jobs market
Expansion won’t die of old age: S.F. Fed study

23 stocks they’re throwing out with the bathwater

Chipotle wants to give you a burrito — how to get it
What did Chipotle workers do today?
Chipotle closes up shop for a few hours Monday
VOTE: If not Chipotle, where would you eat?

Chesapeake denies bankruptcy plan as shares dive
What are the 8 strongest S&P energy stocks?

20 dividend stocks that Wall Street loves the most
The 20 dividend stocks that Wall Street loves most
Dividend stocks that will give you a raise

Rubio in freefall in New Hampshire betting
Republican primary: 3 things to watch
Voter turnout in each U.S. state (24/7 Wall St.)

How Clinton can rebound after New Hampshire
Blunders may reveal Clinton, Rubio flaws
All those terrible things Hillary Clinton has done

These ‘Buffett stocks’ are bargains in this market

This has been the No. 1 car in America for decades
Cars sink through ice at winter festival
How far can you go on $50 in gas?


In the U.S., socialism is no longer such a dirty word
Bill Clinton: Sanders is ‘enemy of all things big’

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165.88MDow Volume:
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Unchanged
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Decliners
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Price Chg %Chg 1 Day
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/quotes/zigman/33772884/delayed 1,191 -7 0.56%
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/quotes/zigman/3173262/delayed 5,695 +5 0.10%
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/quotes/zigman/2622475/delayed 19,288 +105 0.55%
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/quotes/zigman/1859015/delayed 2,763 -18 0.63%
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Singapore
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/quotes/zigman/16008136/realtime/sampled 1.12 0.00 0.09%
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/quotes/zigman/16008150/realtime/sampled 115.32 -0.53 0.45%
Pound
/quotes/zigman/16008140/realtime/sampled 1.44 +0.00 0.01%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.70 -0.01 0.80%
DXY Index
/quotes/zigman/1652083/delayed 96.69 +0.01 0.01%
WSJ $ Idx
/quotes/zigman/41508961/realtime 89.70 +0.07 0.08%
U.S. 10yr
/quotes/zigman/15866666/realtime 1.74 -0.01 0.74%
German 10y
/quotes/zigman/15866409/realtime 0.23 +0.01 3.95%
Italy 10yr
/quotes/zigman/15866497/realtime 1.66 -0.04 2.55%
Spain 10yr
/quotes/zigman/15866444/realtime 1.74 -0.02 1.17%
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FB /quotes/zigman/9962609/composite 99.75 -4.32 -4.15%
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GOOG /quotes/zigman/59527964/composite 682.74 -0.83 -0.12%
BAC /quotes/zigman/190927/composite 12.27 -0.68 -5.25%
C /quotes/zigman/5065548/composite 37.81 -2.05 -5.14%
F /quotes/zigman/264304/composite 11.59 0.14 1.22%
T /quotes/zigman/398198/composite 37.11 0.23 0.62%
BP /quotes/zigman/247026/composite 29.92 -0.54 -1.77%
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Rates »

5 yr CD
1.3%
2 yr CD
0.7%
1 yr CD
0.5%
MMA $10K+
0.2%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.96% 11.88% 11.62%
Business 13.12% 13.11% 12.85%
Student 13.42% 13.42% 13.14%
Balance Transfer 14.35% 14.30% 14.12%
Airline 15.17% 15.16% 15.10%
Cash Back 15.26% 15.23% 15.27%
Reward 15.28% 15.25% 15.14%
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Bad Credit 22.88% 22.88% 22.73%
Source:CreditCards.com

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Encore
A blog about living in and planning for retirement

Social Security: The Cheapest Annuity in Town

Alicia Munnell, the director of the Center for Retirement Research at Boston College, is a weekly contributor to “Encore.

The Center for Retirement Research at Boston College has just released a new study that shows that the best way for people to turn their 401(k) balances into a stream of income is to “buy” an annuity from Social Security. Many people don’t recognize that Social Security is in the annuity business, but it is and it has the cheapest product in town.

As more people approach retirement with 401(k) plans as their only supplement to Social Security, they face the challenge of how best to use their accumulated 401(k) assets to support themselves once they stop working. They could invest in safe assets and try to live off the interest, but the value of the assets would erode as prices rise and interest income would fluctuate as nominal interest rates rise and fall. They could invest in a portfolio of stocks and bonds and draw out some percent each month, but to avoid outliving their assets that draw is now about 3 percent. They could take some of their money to an insurance company and buy an annuity, but commercial annuities tend to be expensive because they are designed for people with above-average life expectancy and involve considerable marketing costs.

A much better alternative is for the household to “buy” an annuity from Social Security. They can make this “purchase” by using their savings to pay current expenses and delaying claiming to get a higher monthly benefit at an older age. The savings used is the “price” and the increase in monthly benefits is the annuity it “buys.”

For example, consider a retiree who could claim $12,000 a year at age 65 and $12,860 at age 66 – $860 more. If he delays claiming for a year and uses $12,860 from savings to pay the bills that year, $12,860 is the price of the extra $860 annuity income.[1] The annuity rate – the additional annuity income as a percent of the purchase price – would be 6.7 percent ($860/$12,860). Remember that Social Security benefits are indexed for inflation, so the retiree is buying a real annuity. Vanguard – a wonderful company – also sells real annuities but it pays much lower rates.

The reason that Social Security annuities are a better deal than those in the private market is that Social Security can offer a product that is actuarially fair – they are based on the life expectancy of the average person (not those people whose parents lived into their 90s) and Social Security doesn’t have to worry about marketing costs or profits. Moreover, in this period of very low rates, Social Security is an especially good deal because the increase in benefits is not based on current rates but rather is a basic feature of the system. So buying an annuity from Social Security, especially in today’s low interest rate environment, is the best deal in town.

So read the study and tell your friends with some 401(k) assets to use them to delay claiming their Social Security benefit.

Comments

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 18)

View all Comments »
    • Cheap yes! Secured maybe not! Better have a secured one rather than to have an investment that will not be enough for living after retirement. If you determine that an annuity might make sense for you feel free to visit here: http://www.annuitystraighttalk.com/annuities/

    • Since i have started a few ivnmsteent ventures, i am working on them very hard so that i wont have financial troubles in the future. My reasoning is that the harder i work on them the more successful they will become and thus my financial future will be well cushioned and i can retire any time i please. In doing this i have had to do most of the things that you mention in this post

    • Blow through your savings on a gamble that you’ll still be alive. This is what the gubmint wants you to do so they never pay you. Meanwhile, when you do kick the bucket, you pass nothing down to your heirs. I’m going to take SS as soon as I can, though I believe it either won’t be there or won’t buy much by the time us Gen Xers get there.

    • If people actually saved then the idea of taking social security might have merit. But the savers are rare; spenders are everwhere. Waiting to take social security is the most rational route. The foolish nonsavers will grab the money and when they hit their seventies wish they had not.

    • I would rather collect the $12,000 and supplement it with $860 from my saving each year. At this rate, my $12,000 will last 13.95 years at 0% interest. If I get hit and kill by a truck, my wife will have what is left of the $12,000 plus the annual $12,000. If I delay getting SS and spend the $12,000 she gets none of that but $860 more per year.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

MarketWatch - Stock Market Quotes, Business News, Financial News
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New York Markets Open in:

Futures: /quotes/zigman/43106711/delayed S&P 500 -0.3% /quotes/zigman/48241424/delayed DOW -0.3% /quotes/zigman/43108768/delayed NASDAQ -0.2%

need to know
German train crash leaves several dead
Sanofi profit hit by falling diabetes revenue
TUI revenue grows, but net loss widens
German output, exports drop in December
Greek protests escalate over refugee camps
France: Facebook infringing on privacy
Fed: Too white, too male, too many bankers?
Film flops hurt 21st Century Fox outlook
Cracking down on college financial-aid cheats


Is the gold rally the real deal or ‘fool’s gold’?
Teen can keep $20,000 gold bar found in lake
Gold one of Wall Street’s best bets early in 2016

Google CEO Sundar Pichai gets $199 million in stock

Tesla downward revision is among the biggest
Tesla earnings: Model 3, Model X in focus

India bans  Facebook’s free Internet service

Why a selloff in European bank stocks is ominous
Bank stocks have taken enough: analyst
Deutsche Bank shares fall again in bank rout

What you can expect in Coca-Cola’s earnings
Current quarter’s earnings outlook dims

Yelp’s billion-dollar path hits a detour
Yelp posts earnings early, CFO to step down

Bloomberg tells FT he’s considering presidential run

Computer virus wants to remind you to have a nice day
Justice Department data exposed in breach

Yellen may say goal is not to slow the economy
Latest sign of a softening U.S. jobs market
Expansion won’t die of old age: S.F. Fed study

23 stocks they’re throwing out with the bathwater

Chipotle wants to give you a burrito — how to get it
What did Chipotle workers do today?
Chipotle closes up shop for a few hours Monday
VOTE: If not Chipotle, where would you eat?

Chesapeake denies bankruptcy plan as shares dive
What are the 8 strongest S&P energy stocks?

20 dividend stocks that Wall Street loves the most
The 20 dividend stocks that Wall Street loves most
Dividend stocks that will give you a raise

Rubio in freefall in New Hampshire betting
Republican primary: 3 things to watch
Voter turnout in each U.S. state (24/7 Wall St.)

How Clinton can rebound after New Hampshire
Blunders may reveal Clinton, Rubio flaws
All those terrible things Hillary Clinton has done

These ‘Buffett stocks’ are bargains in this market

This has been the No. 1 car in America for decades
Cars sink through ice at winter festival
How far can you go on $50 in gas?


In the U.S., socialism is no longer such a dirty word
Bill Clinton: Sanders is ‘enemy of all things big’

/conga/frontpage.html 367407

Markets »

165.88MDow Volume:
Avg Vol: 129.39M
Unchanged
121
Decliners
4802
Advancers
1600
Price Chg %Chg 1 Day
Range: 1 Day
  • 1 Day
  • 5 Days
  • 1 Month
  • 3 Months
  • 6 Months
  • 1 Year
  • 2 Years
Dow
/quotes/zigman/627449/realtime 16,027 -178 1.10%
Nasdaq
/quotes/zigman/12633936/realtime 4,284 -79 1.82%
S&P 500
/quotes/zigman/3870025/realtime 1,853 -27 1.42%
GlobalDow
/quotes/zigman/629063/realtime 2,092 -11 0.54%
Gold
/quotes/zigman/33772884/delayed 1,191 -7 0.56%
Oil
/quotes/zigman/2260836/delayed 30.43 +0.74 2.49%
FTSE 100
/quotes/zigman/3173262/delayed 5,693 +4 0.07%
DAX
/quotes/zigman/2380246/delayed 8,966 -13 0.15%
CAC 40
/quotes/zigman/3173214/delayed 4,043 -23 0.57%
FTSE MIB
/quotes/zigman/1482176/delayed 16,188 -253 1.54%
IBEX 35
/quotes/zigman/2759620/delayed 8,072 -51 0.62%
Stoxx 600
/quotes/zigman/2380150/delayed 313 -1 0.36%
Asia Dow
/quotes/zigman/6959860/realtime 2,465 -50 1.99%
Nikkei 225
/quotes/zigman/5986735/delayed 16,085 -919 5.40%
Hang Seng
/quotes/zigman/2622475/delayed 19,288 +105 0.55%
Shanghai
/quotes/zigman/1859015/delayed 2,763 -18 0.63%
Sensex
/quotes/zigman/1652085/delayed 24,017 -271 1.11%
Singapore
/quotes/zigman/1709939/delayed 2,623 +65 2.53%
Euro
/quotes/zigman/16008136/realtime/sampled 1.12 0.00 0.09%
Yen
/quotes/zigman/16008150/realtime/sampled 115.32 -0.53 0.45%
Pound
/quotes/zigman/16008140/realtime/sampled 1.44 +0.00 0.02%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.70 -0.01 0.80%
DXY Index
/quotes/zigman/1652083/delayed 96.69 +0.02 0.02%
WSJ $ Idx
/quotes/zigman/41508961/realtime 89.70 +0.07 0.08%
U.S. 10yr
/quotes/zigman/15866666/realtime 1.74 -0.01 0.64%
German 10y
/quotes/zigman/15866409/realtime 0.23 +0.01 3.95%
Italy 10yr
/quotes/zigman/15866497/realtime 1.66 -0.04 2.58%
Spain 10yr
/quotes/zigman/15866444/realtime 1.74 -0.02 1.20%
U.K. 10yr
/quotes/zigman/15866328/realtime 1.42 +0.00 0.08%
Japan 10yr
/quotes/zigman/15866525/realtime -0.02 -0.06 163.32%
Crude Oil
/quotes/zigman/2260836/delayed 30 +1 2.49%
Gold
/quotes/zigman/33772884/delayed 1,191 -7 0.56%
Corn
/quotes/zigman/25518691/delayed 361 -1 0.35%
DJIA F
/quotes/zigman/48241424/delayed 15,938 -50 0.31%
S&P F
/quotes/zigman/43106711/delayed 1,847 -6 0.30%
Silver
/quotes/zigman/32655632/delayed 15 0 0.30%

Quotes

Symbol Price Change % Change
FB /quotes/zigman/9962609/composite 99.75 -4.32 -4.15%
AAPL /quotes/zigman/68270/composite 95.01 0.99 1.05%
GOOG /quotes/zigman/59527964/composite 682.74 -0.83 -0.12%
BAC /quotes/zigman/190927/composite 12.27 -0.68 -5.25%
C /quotes/zigman/5065548/composite 37.81 -2.05 -5.14%
F /quotes/zigman/264304/composite 11.59 0.14 1.22%
T /quotes/zigman/398198/composite 37.11 0.23 0.62%
BP /quotes/zigman/247026/composite 29.92 -0.54 -1.77%
GE /quotes/zigman/227468/composite 28.17 -0.37 -1.30%
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Rates »

5 yr CD
1.3%
2 yr CD
0.7%
1 yr CD
0.5%
MMA $10K+
0.2%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.96% 11.88% 11.62%
Business 13.12% 13.11% 12.85%
Student 13.42% 13.42% 13.14%
Balance Transfer 14.35% 14.30% 14.12%
Airline 15.17% 15.16% 15.10%
Cash Back 15.26% 15.23% 15.27%
Reward 15.28% 15.25% 15.14%
Instant Approval 18.21% 18.18% 18.00%
Bad Credit 22.88% 22.88% 22.73%
Source:CreditCards.com

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