Pardon my ignorance but what is an SPIC - does it work the same as an SPIA ?
Sorry, meant SPIA
Pardon my ignorance but what is an SPIC - does it work the same as an SPIA ?
Thread question: For those of you who consider an annuity as part of your Plan B only, what methodology or trigger(s) do (or did) you plan to use to initiate purchasing an annuity? $ threshold? Age target? Stepwise annuitization? Other? Haven't thought about it yet?
Assumptions: We don’t have pensions and Soc Sec won’t guarantee an acceptable minimum retirement income we’d be comfortable with. Our withdrawal rate is (hopefully) very conservative, but who knows what the next 40 years will bring. If all goes well and the market provides historical average or above real returns, we won’t need to annuitize any of our portfolio. But as part of our plan B, if things go south we realize it may be in our best interest to annuitize part of our portfolio before we ever let the portfolio deplete too far.
Thanks for your thoughtful post, it all makes sense to us too. I also believe that while we'll need to be monitoring closely, I also "believe we'll see trouble slowly coming...and would have time to react." The charts above are evidence of same IMO. Most of us don't have volatile asset allocations, so while equities can indeed tank pretty quickly, with more limited exposure that most of us here presumably hold, things won't go south quite so quickly. We're at 50:40:10 and doubt we'll ever again go above 60% equity, fortunately we don't need to. Thanks again, I've gained some added perspective from most of the posts in this thread.That being said - I do see positive value in Single Premium Immediate Annuities. I would include SPIAs in a "Plan B" scenario. I believe your feelings for a "Plan B" are similar to ours, in that our trigger would be if our investments prove to be inadequate to meet our base living expenses (minus Social Security) at our maximum target SWR of 4%. I don't see this trigger leaping at us - I believe we'll see trouble slowly coming (in the reduction of our investment portfolio and annual withdrawal percentage rate increases), and would have time to react before it's too late. We stash 1~2 years of cash as a cushion for those inevitable bumps in the road. I don't see age as a factor - just financial decisions based on the value of our portfolio to our base living expense needs. Nothings off the table in our retirement plans - including purchasing SPIAs and/or reducing our base living expenses (ie. downsizing living quarters).
This makes a lot of sense. I mentioned the scary aspect of deciding in a crisis but a major market downturn wouldn't have such a dramatic effect on a conservative portfolio. I am at 70% equities which was coloring my thoughts - but I have plan B covered with a COLA'd pension and a weekend house I could bail on. If I didn't have plan B covered I think I would hold a more conservative AA and would take the approach you are describing to an SPIA....I also "believe we'll see trouble slowly coming...and would have time to react." ...Most of us don't have volatile asset allocations, so while equities can indeed tank pretty quickly, with more limited exposure that most of us here presumably hold, things won't go south quite so quickly.
Thanks for your thoughtful post, it all makes sense to us too. I also believe that while we'll need to be monitoring closely, I also "believe we'll see trouble slowly coming...and would have time to react." The charts above are evidence of same IMO. Most of us don't have volatile asset allocations, so while equities can indeed tank pretty quickly, with more limited exposure that most of us here presumably hold, things won't go south quite so quickly. We're at 50:40:10 and doubt we'll ever again go above 60% equity, fortunately we don't need to. Thanks again, I've gained some added perspective from most of the posts in this thread.
I'd still be asking "But... what if I need that money someday?!?"Like W2R I am more concerned about longevity risk than portfolio risk. When I hit late 70's or 80. I may decide to give most of the portfolio away and buy a SPIA with the rest to cover all possible expenses.
Excellent point.I'd still be asking "But... what if I need that money someday?!?"