50, just retired, $1m cash

[rubytuesday]

I have an heir so I'd add a death rider to the 80+ annuity. And those two are from 60 until death but what about from now 50 until 60?



Or is that time-frame for bank account and other investments, no 10 year annuity?

Longevity Annuities bought in the early 50s, to start at 80, are an extremely good deal if you don't have a death rider. Adding a beneficiary will cut your annual income after 80 very substantially, probably by the half. Go to immediateannuities.com, and check the annuity payout with or without death rider - there is an enormous difference in payout. Look at it this way: if you die before 80 and your heirs get back the premium, that premium will be pretty worthless due to inflation, ie, even with ordinary inflation under 4%, about 30 years from now the premium will likely have 1/4 of today's purchasing power. Your heirs will not greatly benefit from the refund of that premium. But if you don't have a death rider on that annuity, and you DO live past 80, you will get a very substantial payout. I don't know whether I managed to explain this clearly enough, but getting a longevity annuity 30 years in advance basically only makes sense without a death rider (ie, without beneficiary in case of your premature death).



For a time-limited annuity, to start 10 years from now, with a 20 year payout, you'll get a good interest rate, and time-limited annuities always have a beneficiary.



For the next 10 years (ie, in your 50s), an immediate fixed annuity would give you a regular payout, but your total gain from annuity won't be much. I think it is better to have free access to money during that time than having it tied in an annuity - particularly because bank interest rates WILL go up at this point. For better intermediate-term rates, as I mentioned, you could buy iBonds for $10,000 every year. You can buy them in each of the next 5 years, then cash each of them after 5 years. That would give you additional $ at the age 55-59 before you start getting annuity payout, and it will give you a better gain than an immediate fixed annuity.



If your rent is really that low, and you don't expect rent inflation where you live, then I agree you should continue renting. But in the US, I think it would be insane for a young retiree to rent instead of owning a home.

 

[DrgLrd]

Longevity Annuities bought in the early 50s, to start at 80, are an extremely good deal if you don't have a death rider. Adding a beneficiary will cut your annual income after 80 very substantially, probably by the half. Go to immediateannuities.com, and check the annuity payout with or without death rider - there is an enormous difference in payout. Look at it this way: if you die before 80 and your heirs get back the premium, that premium will be pretty worthless due to inflation, ie, even with ordinary inflation under 4%, about 30 years from now the premium will likely have 1/4 of today's purchasing power. Your heirs will not greatly benefit from the refund of that premium. But if you don't have a death rider on that annuity, and you DO live past 80, you will get a very substantial payout. I don't know whether I managed to explain this clearly enough, but getting a longevity annuity 30 years in advance basically only makes sense without a death rider (ie, without beneficiary in case of your premature death).

For a time-limited annuity, to start 10 years from now, with a 20 year payout, you'll get a good interest rate, and time-limited annuities always have a beneficiary.

For the next 10 years (ie, in your 50s), an immediate fixed annuity would give you a regular payout, but your total gain from annuity won't be much. I think it is better to have free access to money during that time than having it tied in an annuity - particularly because bank interest rates WILL go up at this point. For better intermediate-term rates, as I mentioned, you could buy iBonds for $10,000 every year. You can buy them in each of the next 5 years, then cash each of them after 5 years. That would give you additional $ at the age 55-59 before you start getting annuity payout, and it will give you a better gain than an immediate fixed annuity.

That just feels right, all of it, can't thank you enough.



About the iBonds, I tried that last week and they really screwed me, and I can't do anything because they temp blocked my SS#

"Thanks again for opening a TreasuryDirect account. We are having difficulty verifying the information you provided when opening your account.We cannot answer questions via phone calls or emails related to this topic. For your protection and to help resolve any access issues with your account, please complete the account authorization form https://www.treasurydirect.gov/pdf/rs/acctauth.pdf and mail it to Treasury Retail Securities Site, P.O. Box 7015, Minneapolis, MN 55480-7015. A hold has been placed on your account"


​

I don't really get the reason for strict security issues when buying on their website. Maybe taxes? Not sure if sending them a letter from overseas will help either but I'll try.



There's also a possibility I will buy a house, cash, soon, which will leave me around $650k. Then it's just a matter of figuring out how much of that to spend on the two deferred annuities. Without rent, $1500 to 2k a month covers everything, for now. And then finding the best annuities, which I could try to do, and then ask an FA to see if they could better.

 

[rubytuesday]

That just feels right, all of it, can't thank you enough.



About the iBonds, I tried that last week and they really screwed me, and I can't do anything because they temp blocked my SS#

"Thanks again for opening a TreasuryDirect account. We are having difficulty verifying the information you provided when opening your account.We cannot answer questions via phone calls or emails related to this topic. For your protection and to help resolve any access issues with your account, please complete the account authorization form https://www.treasurydirect.gov/pdf/rs/acctauth.pdf and mail it to Treasury Retail Securities Site, P.O. Box 7015, Minneapolis, MN 55480-7015. A hold has been placed on your account"


​

I don't really get the reason for strict security issues when buying on their website. Maybe taxes? Not sure if sending them a letter from overseas will help either but I'll try.



There's also a possibility I will buy a house, cash, soon, which will leave me around $650k. Then it's just a matter of figuring out how much of that to spend on the two deferred annuities. Without rent, $1500 to 2k a month covers everything, for now. And then finding the best annuities, which I could try to do, and then ask an FA to see if they could better.

Regarding finding the best annuities, buy them through immediateannuities.com. They are a really honest and rarely decent financial company, and I don't think anyone in the world knows more than they do about annuities. Just e-mail them where you live, and that you want two fixed delayed annuities - one time-limited after 10 years with a beneficiary for a 20 year payout, and a life annuity after 30 years without beneficiary. They will do all the work, they'll give you quotes, and they don't charge you for that preliminary work.



After buying a house, it sounds as though you should buy a longevity annuity for $150k, a time-limited annuity (60-79) for another $300k, and hold onto $200k (from which you will use $50k in the first 5 years to buy iBonds, but then you will cash them in your next 5 years). You can check on immediateannuities.com how much monthly income each premium will give you, and tweak the numbers, ie, adjust the premium, until it gives a satisfactory figure.



If you need to supplement income, bear in mind that you could probably borrow against your house value, or sell the house at some point.



An FA will certainly tell you that you can do much better with investing in the market, but it seems you don't want any market risk (which I get, because I am the same way).

 

[Sunset]

OP - I thought you were in the USA , as your profile says New York but your answers to people suggest you are living out of the Country.

All my suggestions were for someone living in the US, so feel free to ignore them as they don't seem to apply.

 

[Amykat]

I think you would get a lot better answers if you were more clear about your circumstances. People are trying to help you but are sometimes giving advice that does not apply and they would give different advice if they realized more correct information about you.

Next, you are boxing yourself in …there is NO “I must buy house right now, or rent until I die” you are creating that yourself.

You have a fantastic situation which shows you should clearly rent right now and you cannot afford to buy what you want. So the answer is rent! Someday when that changes, if you want to buy, then you can buy.

If you hope to buy a house one day, then it might be smart to not lock up all your money in annuities like you keep wanting to. It would be better to learn how to invest like the rest of us do. You seem to be afraid of your money and you want to get rid of it so you will make a lot of bad choices in order to do that. You don’t HAVE to do this NOW. You can take time and learn how to invest.

I don’t think it is possible to get what you want/need/have been used to, the way you are trying to go about it.

Have you heard of Bogleheads? It is the Vanguard investors forum. You can go there and put your story …but put the real story …I live in PI, I am only 50 with a wife and child to take care of, I have a $1 million windfall and need to invest it for immediate income.

Then find where they have suggestions about what newbies should read and get started.

Also, put this question on any forum …I rent a $500k house for $800 a month and that isn’t about to end. I want to downgrade my house and spent $350k out of my $1 million, to buy a different house, in the PHILIPPINES, not in Santa Monica. So much wrong with that and you know it!!

You have everything you need to make a success if this, you just have to put it in the right places!!

 

[HGTVFanatic]

I will try again from a VPN with US server, all other info is correct.

Yeah, that's what I thought when I tried to set up my SSN account and I got the same message. I am in U.S. They ask you stuff that you did from 30 years ago. Who remembers? I was positive I answered all questions correctly but got one wrong so was also kicked out. I had to pull my credit reports to get the correct information.

 

[DrgLrd]

Have you heard of Bogleheads? It is the Vanguard investors forum.

I will check that out, thanks, a question about that. I have Schwab and Etrade or whatever Etrade is now, I think Morgan Stanley, but the question is are there any Vanguard funds only available directly through Vanguard, and not through Schwab or Etrade? Like the ones that send payouts to your bank account every month, doesn't seem like would be through an Etrade purchase.

 

[DrgLrd]

Yeah, that's what I thought when I tried to set up my SSN account and I got the same message. I am in U.S. They ask you stuff that you did from 30 years ago. Who remembers? I was positive I answered all questions correctly but got one wrong so was also kicked out. I had to pull my credit reports to get the correct information.

Which did you get wrong? For me I'm thinking phone number, what's the easiest way to to get a credit report?

 

[DrgLrd]

An FA will certainly tell you that you can do much better with investing in the market, but it seems you don't want any market risk (which I get, because I am the same way).

I'll be doing as you suggested with immediateannuities, for FA I meant an annuity guy like Stan or John Lenz and his firm.

One consideration is when I thought I had to use my NY address, the coverage was $1m. But since I can use my overseas address, the state of the insurance company or companies must cover the 150k and 300k, so they may have be in different states.


I just noticed this:

if you don't mind leaving your premium to the insurance comp if you die before 80 (ie, the premium does not get refunded to your heirs)

Well that's an incentive to not die lol. I wonder if you have to prove you're alive before they start paying. I'll compare the rates with and without heir.

 

[rubytuesday]

I'll be doing as you suggested with immediateannuities, for FA I meant an annuity guy like Stan or John Lenz and his firm.

One consideration is when I thought I had to use my NY address, the coverage was $1m. But since I can use my overseas address, the state of the insurance company or companies must cover the 150k and 300k, so they may have be in different states.


I just noticed this:





Well that's an incentive to not die lol. I wonder if you have to prove you're alive before they start paying. I'll compare the rates with and without heir.

I don't think you need to consult anyone except immediateannuities.com regarding annuities (ie, other sources might just confuse you and induce you into doing something unfavorable). They deal with annuities only, ie, not with investment accounts (for THAT, you should consult those other places people told you about - Vanguard, Etrade, whatever). You'll see, the folks at immediateannuities.com are very straight-forward, transparent, and comprehensive. Re "coverage" for the annuities, I assume you mean state insurance coverage for the annuities in case that the insurance company fails (where, btw, I think there is a greater chance of a nuclear wipeout of the entire world than of failure of a major high-rated US insurer. Those guys have survived through stuff like the Civil War and the 1929-1939 depression)? I don't know how that works, but immediateannuities.com will know. Frankly, I think it would be an irrelevant concern with a long-standing reputable US insurer.



One more thing regarding buying your house in the Philippines. I don't know anything about houses over there, but do they appreciate with time? If you buy a $350k house (rather than continuing to rent for less than $1k/month) at the age of 50, is there a reasonable expectation that you can sell that house for $500k when you are 70? If not, maybe it would be better to continue renting, as other people suggested. I would never say to rent if you were in the US (where both the rents and houses inflate all the time, but your rent inflation drains your assets, while your house inflation increases the value of your assets), but I don't know what the situation is with that in the Philippines.

 

[DrgLrd]

One more thing regarding buying your house in the Philippines. I don't know anything about houses over there, but do they appreciate with time?

In developed areas, very much so. I'm tempted to buy but I'm also ok renting for now. What I like about your advice is that I'm still mostly liquid after buying the annuities. So I still have years to decide if I want to buy and find the 'perfect' house, while saving investing for growth. If I wanted an SPIA I'd have to get the house first.


Here's a consideration; if the house I'm in is worth around $500k and my rent is only $10k per year, and I can buy a house or apartments for $250k, and the rental income is $10k per year, seems like a smart purchase?

 

[rubytuesday]

In developed areas, very much so. I'm tempted to buy but I'm also ok renting for now. What I like about your advice is that I'm still mostly liquid after buying the annuities. So I still have years to decide if I want to buy and find the 'perfect' house, while saving investing for growth. If I wanted an SPIA I'd have to get the house first.



Here's a consideration; if the house I'm in is worth around $500k and my rent is only $10k per year, and I can buy a house or apartments for $250k, and the rental income is $10k per year, seems like a smart purchase?

My own experience with being a landlord was bad, so I don't recommend it to anyone who is not extremely knowledgeable about landlord-tenant laws, has a lawyer, and is prepared to absorb major losses from destructive or manipulative tenants. It seems to me that being a landlord is a greater gamble than stock market investments, so I personally wouldn't do it. I'd sooner earn money by going back to work than being a landlord. Why would you not buy that $250k house for yourself? Particularly if you expect it to appreciate? You can rent again after 70 or 75 or 80, AND have proceeds from the sale of the house which appreciated in the meantime.

 

[Amykat]

OP I don’t know what Vanguard funds are sold by other companies. Moving to your next question about buying something for $250k to rent for $10k a year, you do realize there will be expenses to take out of that right? And I’m sure you will be subject to PI taxes on that income, which you probably are not paying on income you bring in from outside the country?

If you are happy with that rate of return, you could put that amount into Vanguard High Yield Corp Bonds which pays over 4% currently and pays monthly. You also don’t have to do any work to produce that income like you would if you owned an apartment building. I suspect your income is low enough you don’t have to worry much about the taxes?

 

[DrgLrd]

Why would you not buy that $250k house for yourself?

Everything about it is worse than the one I'm in, size, location, etc. The apartments though are in a nice location. I could eventually tear them down and build a house, or they could remain a current income stream for me and eventually a future one for my family, which is a consideration because that 80+ annuity has no survivor benefits.

 

[DrgLrd]

If you are happy with that rate of return, you could put that amount into Vanguard High Yield Corp Bonds which pays over 4% currently and pays monthly.

I'm only getting VWEHX from that which doesn't look good at all, is there another one?

 

[Amykat]

I’m not sure that 2nd hand houses appreciate, they often do not. I’ve lived in SE Asia for quite a long time and there is a cultural preference for new houses. Next, it is nearly impossible to get a loan for a used house so you are stuck with cash buyers only. If you have a house that only 1 percent of the population can afford …because you bought a very expensive house, well that doesn’t help. Also, the climate, extreme heat and humidity and possible exposure to salt if near the ocean, just rots everything, plus termites and poor building practices in general. That sort of lends itself to a depreciating asset. And it isn’t even in your name!!

It feels like it must be appreciating because new developments are going up at higher and higher prices, but they offer financing for one thing. And they are new!

This is why the OP can rent a 500k house for $10k a year, quite common really, because people are stuck with those houses.

 

[Amykat]

I'm only getting VWEHX from that which doesn't look good at all, is there another one?

That’s the one. You want to buy it for the yield. You just keep it, not buy and sell, the yield will move around …the price has gone down recently so now is a good time to buy some. The price will go up and down also, you just ignore that.

 

[DrgLrd]

That’s the one. You want to buy it for the yield. You just keep it, not buy and sell, the yield will move around …the price has gone down recently so now is a good time to buy some. The price will go up and down also, you just ignore that.

Over the past 12 months, yield is 4.24% and the fund is down -4.05%, expense ratio is 0.23%


What does that mean in real numbers, say $100k invested in March 2021

 

[Amykat]

Well the exp ratio is .13 for Admiral shares which is what you would have.

I think the yield you quoted is for the calendar year 2021. So if you had 100k invested during those 12 months you would have been paid approx $4240.00. They pay monthly, the yield changes over time, and the price of the bond fund changes so you might have $98,000 for a while, you might have $102,000 for a while, etc. Every month you won’t get the exact same amount but fairly close.

You can look up the history of the yearly yield, this was the lowest and it has started to trend up, I think that will continue? Most years lately it has paid in the mid 5% up to 6% range.

You don’t get bothered by the price changes, you don’t sell, you just keep taking your checks. When the price goes down, the yield goes up usually and you might just end up with a larger check soon. During years when the price is high, if you want, you can take some capital gains.

 

[DrgLrd]

So if you had 100k invested during those 12 months you would have been paid approx $4240.00.

It was March 2021 to today, so it would have made $4240 but lost $4050? Doesn't rising inflation mean decreasing bond returns?

I like the concept though, do you have other High Yield symbols I can check?

 

[pb4uski]

Over the past 12 months, yield is 4.24% and the fund is down -4.05%, expense ratio is 0.23%


What does that mean in real numbers, say $100k invested in March 2021

$100,000 of VWEHX purchased in Mar 1, 2021, with dividends reinvested would be worth $99,952 on Feb 28, 2022 per Portfolio Visualizer

Portfolio	Initial Balance	Final Balance	CAGR	Stdev	Best Year	Worst Year	Max. Drawdown	Sharpe Ratio	Sortino Ratio
Vanguard High-Yield Corporate Inv	$100,000	$99,952	-0.05%	4.03%	3.63%	-3.55%	-3.55%	-0.01	-0.01

https://www.portfoliovisualizer.com...3=Portfolio+3&symbol1=VWEHX&allocation1_1=100

 

[DrgLrd]

$100,000 of VWEHX purchased in Mar 1, 2021, with dividends reinvested would be worth $99,952 on Feb 28, 2022 per Portfolio Visualizer

Thanks, any suggestions for a better performing fund? I'm sure there's a thread for that somewhere...

 

[Amykat]

What is the point exactly of cherry picking one year, which includes the recent falling prices of nearly everything? As I said, the balance in your account will vary, but it isn’t a locked in loss unless you sell it. If you want to buy something when the price is low, then the recent performance might not look good?

Is is better to have 100k all the time and get 1% (as in a CD) or

97K for some months 4.5%
105K some months 4%
100k some months 4.25%

For example?

If you want to sell some, you wait for the months when the price is higher.

I’m trying to just keep it simple. It meets your needs as far as I can see right now. It pays enough, it pays monthly, it is safer/better than rental real estate might be where you live, and I think better than an annuity at this time. You can change it when you get better at investing.

 

[rubytuesday]

Everything about it is worse than the one I'm in, size, location, etc. The apartments though are in a nice location. I could eventually tear them down and build a house, or they could remain a current income stream for me and eventually a future one for my family, which is a consideration because that 80+ annuity has no survivor benefits.

Again, if you were in the US, I would say you should definitely buy a house, but with everything that was brought up here about housing trends in the Philippines, it really does sound as though you should sit tight, and continue renting. It sounds as though the prices of NEW housing constantly increase over there, but an aging house would be more of a liability than an asset. If the situation is as described, neither you nor your kids need to really ever own a house.



So, after buying a longevity annuity that starts at 80 for $150k, you would have $850k left over. If you are not buying a house, you can increase the premium for your 20-year annuity (from 60 to 79) to $450k (which would give you 50% more income during that time). That would leave you with $400k. Out of that, you could buy iBonds for $10k every year (which you could cash in your later years if you needed supplemental $), and pay your ongoing expenses for 10 years in your 50s. It sounds as though you would still have $ left over from the initial $400k after 10 years of living off of that and buying iBonds every year.



Bear in mind that with this scheme a high inflation would eat you alive long-term. It sounds as though in the Philippines house ownership would not protect you from inflation. There are Treasury Inflation Protected Securities (TIPS) which are designed to keep your money always at the inflation-adjusted level of value, but I don't have them, so don't know details about them. They would track inflation in the US though (ie, not inflation in the Philippines, which could be theoretically higher).