Low risk options - am I missing anything?

[Sun456]

I'm about to put some more money into my annuities. I'm very risk adverse and don't seen any place to put money right now. I currently have bonds (individual, not in a fund), preferred shares and cash. Is there any other ultra conservative investments I'm overlooking?

 

[brewer12345]

Ugh, not the a word.

How about I bonds and pen fed CDs?

 

[Sun456]

Oops. Forgot. I have I-bonds also but kind of forget about them because of the limits they put on buying them. Will look into the CDs. Also considering EE bonds but haven't yet bought any.

 

[pb4uski]

You're overlooking inflation risk, but I suspect that you know that already.

What type of annuities? SPIAs? SPDAs?

 

[brewer12345]

For the lower risk portion of my portfolio, I bottom fish in the fixed income portion of the closed end fund world. The lone attractive opportunity I have been buying there lately is WIW: Life, Investments & Everything: WIW: Another Dollar Selling For 90 Cents

 

[Sun456]

I'm actually factoring in inflation risk to the amount of annuities. I have three equity indexed and 1 variable (the highest daily one from Prudential). I currently have the lifetime guarantee riders that will provide $110K starting at 65. If I put $200K more into them then I get $152K starting at 65. My yearly expenses are about $35K-$40K. With an assumed 3.3% average inflation the future $152K is worth about $79K in today's dollars. Halve that again to get to 40 years in the future then I'm meeting my baseline expense at 86 (I'm currently 46). Everything in excess each year I can reinvest at prevailing rates of the times or save up for major expenditures.

I'm not including SS into my annuity amount because, well, you know, who knows if it will be there. If it is then I get that on top of my annuity income.

But I've currently got some bonds being called, some preferred stocks being called and a whole pile of cash to decide what to do with. I do want to have it diversified out and doing what it can to try to keep up with inflation but at this stage I'm not willing to take much risk as I don't need it. Hence I thought I'd cast out to the forum for ideas.

Edit: Thanks brewer. I was composing my post while you posted the above info. I will look into that also.

 

[Moscyn]

I am also risk adversed with a mixture of annuities, fixed income funds, ibonds, cash and CDs and a 20% allocation to securities and currency trading just to keep me interested in my boring portfolio. Actually, the 20% allocation generates a better return compared to the boring investments but I don't plan to increase this allocation. I know I most probably am not beating inflation in some years but this is something risk adversed investors have to acknowledge and accept. So, if you want to sleep better and your portfolio is sustainable, I guess there's not that many other variety of risk adversed investments to choose from.

 

[Meadbh]

I am also risk adversed with a mixture of annuities, fixed income funds, ibonds, cash and CDs and a 20% allocation to securities and currency trading just to keep me interested in my boring portfolio. Actually, the 20% allocation generates a better return compared to the boring investments but I don't plan to increase this allocation. I know I most probably am not beating inflation in some years but this is something risk adversed investors have to acknowledge and accept. So, if you want to sleep better and your portfolio is sustainable, I guess there's not that many other variety of risk adversed investments to choose from.

Let's put it this way. A cash/fixed income portfolio has a 100% risk of losing out to inflation over time. Equities help you manage that risk.

 

[brewer12345]

I have three equity indexed and 1 variable

Gak! Choke!

Do you understand what you own there?

 

[Sun456]

Gak! Choke!

Do you understand what you own there?

Yes I do. I read each and every page. I SW modeled them. I have notes in a spreadsheet so I know the salient points as I age. I've read (and negotiated) 1000+ page contracts for a living. Yes they are confusing. But I would never buy something I did not or could not understand. That is the primary reason I'm not gambling in the stock market right now. I can't understand what it will do in response to all the interference from the govt.

I do not recommend anyone invest in them if they do not understand them. But if you do know what you want to get out of them and they meet the need then I don't see why they shouldn't be utilized. I'm not a blindly follow the herd type of person. Might be why I am where I am today.

 

[brewer12345]

Yes I do. I read each and every page. I SW modeled them. I have notes in a spreadsheet so I know the salient points as I age. My IQ is north of 160 and I've read (and negotiated) 1000+ page contracts for a living. Yes they are confusing. But I would never buy something I did not or could not understand. That is the primary reason I'm not gambling in the stock market right now. I can't understand what it will do in response to all the interference from the govt.

I do not recommend anyone invest in them if they do not understand them. But if you do know what you want to get out of them and they meet the need then I don't see why they shouldn't be utilized. I'm not a blindly follow the herd type of person. Might be why I am where I am today.

Glad to hear it. So often these things are aggressively sold to neophytes who have no idea what they are buying and generally get fleeced by an unscrupulous salescritter.

 

[Sun456]

Glad to hear it. So often these things are aggressively sold to neophytes who have no idea what they are buying and generally get fleeced by an unscrupulous salescritter.

Tis sad but true. The people selling them don't always know them very well and tend to be unscrupulous. Any one considering them must know how to read contracts and must do lots of research. I understand why they have a bad reputation. However, I'm very happy with the products I bought because I did not have a pension and now I do.

 

[mathjak107]

here is the problem with putting to much money into inflation adjusted annuities.

they may reflect the cpi but they will not reflect your own cost of living index.

like now, inflation in the cpi looks tame but as we all can tell you as we look at what we are spending in our lives it is far from tame unless you refinanced or recently got a new mortage way below the old one.

you need money in other investments to grow your personal cost of living money and not count on a cola adjustment in ss or an annuity to do it.