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Old 12-15-2012, 03:29 AM   #21
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I am not classifying my annuities in my allocation. What would be the interest in doing so ?

Originally Posted by seraphim View Post
My wife has a 403b annuity we need to keep for another couple years. (She's retired, I will be shortly). In the overall allocation, how should I classify it - cash or 'bond'? I've been pretty much ignoring it for allocation purposes, but I'm curious as to the proper way of icluding it in an allocation.

It returns about 3% annually.

Thanks in advance.

Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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Old 12-17-2012, 08:40 AM   #22
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Here's an article from the 11/30 WSJ concerning how you may look at an annuity in conjunction with your other retirement (or other) investments.

While we don't consider our SPIA it in our investment plan AA, others may see it a different way.

Annuity Advice: Balancing the Portfolio -

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Old 12-17-2012, 10:14 AM   #23
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Originally Posted by youbet View Post
I concur with what you're doing Mulligan. But you're not doing "the opposite."

Your pension is COLA'd. I was talking about non-COLA'd pensions which decrease in real value over time and therefore require an offsetting increase in portfolio income to maintain a level standard of living. Over a couple of decades, the real value of a non-COLA'd pension will likely drop by 50% or more.

Sadly, I have friends who just don't get this concept and feel their non-COLA'd pensions, which they began in their late 50's, will still be "close enough" when they're in their 80's. Uhhhhh..... Noooooo......

In your case, since you COLA'd pension more than covers your expenses, as long as the COLA formula being used winds up more or less covering what your personal rate of inflation actually turns out to be, you're good to go regardless of your portfolio size or investment performance.

I wish my pension was COLA'd!!
Just a reponse to a few posts going back and forth...

The person I mentioned does not have a COLA'd pension...

The good news is they live on less than the pension, so saving more money...

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