I am mid-50s, planning to ER in a couple of years. My youngest kid is going off to college next year. That is paid for already, in 529. From a financial perspective, we could retire now. But I want to work another couple of years. I have accumulated pretty substantial savings, with an investment allocation around 55/45, but no pension. I am, by nature, a somewhat anxious guy, so the absence of a pension makes me a bit nervous, even though I could live very nicely on a 2% w/d rate, or less.
I am thinking about buying some fixed annuities. My idea is to buy this in something like four annual installments. The first would be bought now and start paying in 4 years, the next one bought next year and start paying in 3 years, etc. The last one would not be deferred, but instead SPIA. That's the plan, anyway.
The reason I would buy in 4 installments, and with four different (very highly rated) companies, is to blend interest rates, and to diversify against issuer insolvency risk (including to keep each purchase below the applicable state guaranty limit).
I would probably use, in total, less than 10% of my total investment assets to buy these annuities.
I would not buy a COLA feature because right now the pricing does not seem attractive. But I would buy the "return of premium" feature, because that pricing does seem attractive. Of course, I could revisit either of those for each of the annuity purchases after the first one.
I am doing this not because I think it is some brilliant investment decision but instead because i think it will make me feel better to know that, "no matter what" i will always have at least $X per year in income. The same reason why people take comfort in pensions or SS.
The annuity income will be significantly less than I would like to spend each year in retirement. But it would be an amount that I could live on, if I needed to -- certainly more than most people live on.
I am interested in any thoughts you might have about this plan. Maybe something I have not thought of? Any place you like to buy annuities from? Vanguard seems OK, based on a first look.
Thanks.
I am thinking about buying some fixed annuities. My idea is to buy this in something like four annual installments. The first would be bought now and start paying in 4 years, the next one bought next year and start paying in 3 years, etc. The last one would not be deferred, but instead SPIA. That's the plan, anyway.
The reason I would buy in 4 installments, and with four different (very highly rated) companies, is to blend interest rates, and to diversify against issuer insolvency risk (including to keep each purchase below the applicable state guaranty limit).
I would probably use, in total, less than 10% of my total investment assets to buy these annuities.
I would not buy a COLA feature because right now the pricing does not seem attractive. But I would buy the "return of premium" feature, because that pricing does seem attractive. Of course, I could revisit either of those for each of the annuity purchases after the first one.
I am doing this not because I think it is some brilliant investment decision but instead because i think it will make me feel better to know that, "no matter what" i will always have at least $X per year in income. The same reason why people take comfort in pensions or SS.
The annuity income will be significantly less than I would like to spend each year in retirement. But it would be an amount that I could live on, if I needed to -- certainly more than most people live on.
I am interested in any thoughts you might have about this plan. Maybe something I have not thought of? Any place you like to buy annuities from? Vanguard seems OK, based on a first look.
Thanks.
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