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Re: Stockpiling Cash
Old 05-31-2006, 01:52 PM   #21
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Re: Stockpiling Cash

Originally Posted by DOG51
Rich, I read on raddr's board that you were considering an immediate annuity for cash flow purposes to cover basic living expenses. Have you decided against going in that direction?
No. I plan to do that when I stop part-time work, likely around age 65 barring surprises. I've reworked those numbers and gotten some additional advice and it is a great alternative for us. Long way off. Maybe the market will do so well that such maneuverings to increase cash flow won't even be a consideration.

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Re: Stockpiling Cash
Old 05-31-2006, 02:02 PM   #22
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Re: Stockpiling Cash

Originally Posted by brewer12345
With TIPS, the cash payout is equal to whatever real rate you agreed to times the principal amount, which is stepped up by CPI. The step up increase in your princpal over time is taxable even though you don't get this in cash (unless you sell some of the TIPS). With CDs, you get a cash payout equal to the rate times the principal. If you choose to receive the interest payments in cash, the cash received nicely matches taxable income. Alternatively, you can choose (with most banks) to let the CD interest to be added to the principal amount and not be paid in cash until the CD matures. In this case, cash flow does not match taxable income.
As as I tried to state previously (probably didn't do a good job) is that while I agree with Brewer on TIPS not being a good option if you need the income to live on (generally) with a one year TIPS you ARE getting that cash back (the CPI adjustment) in one year. I don't see much difference between that and a one year CD where you might get the interest in two parts (half in six months and half in a year)

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