AdventuresAddict
Dryer sheet aficionado
- Joined
- Mar 8, 2008
- Messages
- 31
I share this view. I think investing solely in a balanced fund and withdrawing at the 4% SWR is both inefficient and riskier. I had proposed my personal view that a better plan would be to combine an annuities portfolio with a balanced fund. One major reason why an annuity should be included is it protects you against the uncertainties in the financial markets. 4% might be sustainable historically, but history may not repeat, especiall now that the financial market is flooded with derivatives that add to the instability. The recent subprime crisis highlighted the depth of the problem. But I am afraid that still more crises may occur with more people going online, more speculators, more pressure on the fund managers to deliver returns that are no longer sustainable. An annuity gives us more certainty. A few annuities spread across different highly-rated insurers and denominated in different currencies smooth out the carrier risks and currency risks. This annuities portfolo should provide a survival income. And, they should provide more income than the 4% SWR for most who are older, because annuities take into consideration the mortality factors when determining the pay-out. The balanced portfolio, on the other hand, should be used to serve the needs of liquidity, potential capital growth and legacy to heir. The 4% from this balanced fund could be withdrawn to pay for discretionary expenses above the survival costs, which is paid for with annuity pay-outs.