Originally Posted by bamsphd
The first issue I see with that approach is that while immediate annuities certainly tend to decline in cost as the applicant increases in age, they are also strongly correlated with interest rates. Wouldn't such continuous comparisons cause one to buy the annuity when the price of the annuity was unusually high?
The only time you'd be whipping out your wallet to actually purchase the annuity would be when your portfolio was failing. It seems that you'd have two choices under those circumstances:
1. Bite your lip and buy the annuity, or
2. Stop spending from your portfolio, put it into CDs or Treasuries, get a job (or cut your spending back to Social Security or live off your kids), ... and wait for annuity prices to improve.
Otar would suggest not even retiring until the portfolio was bulked up enough (or buttressed with annuity protection) to avoid that failure in the first place.
Originally Posted by kumquat
In our case, we have a WR of 2.5 - 3%. We aren't trying to be safe, it's just that we don't
need want to spend more. There is a good chance that our assets will allow our kids to ER. Is that a bad thing?
We don't seem to be spending it fast enough either, but I still haven't found a good solution to our concerns of affluenza & entitlement. It's interesting that the IRS' annual gifting limits aren't too far off from the max amount of money that can be socked away in tax-deferred accounts each year.
Of course we could skip a generation, make a (hypothetical) grandkid a Roth IRA beneficiary, and essentially gift them their own annuity. But again affluenza, entitlement...
Originally Posted by rescueme
That means that (my) portfolio withdrawls are in excess of that magic 4% (even with the SPIA income), but by the age of 70 when all of our "income sources" come on-line (including two small single-life non-COLA'ed pensions for DW), our WD rate drops to just over 2% (even with "excess withdraws" in the previous 11 years), and stays there for our expected passing.
Our ER epiphany was realizing that our portfolio didn't have to last the rest of our lives. It only has to last until spouse's military pension starts in 2022. That's when we started loosening the purse strings...