Midpack
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While I don't agree entirely (mostly in terms of timing more than principles), it's a timely article with some thought provoking ideas - and I am all for that!
If the quote is of interest to you, the article might be as well. [Disclosure: I found this link from Wade Pfau's blog].
Investing for Retirement: SPIAs, TIPS, Stocks and the 4% Rule or the whole 4-page article in PDF format if you prefer http://advisorperspectives.com/newsletters12/pdfs/Investing_for_Retirement.pdf
And some interesting opinions on the article from Wade Pfau.
If the quote is of interest to you, the article might be as well. [Disclosure: I found this link from Wade Pfau's blog].
Joe Tomlinson's article said:Relying only on stocks and bonds to fund a decumulation strategy may no longer be feasible, given today’s low interest rate environment and the prospect of muted returns from the equities market. Investors should instead consider using single-premium immediate annuities (SPIAs) to fund at least a portion of retirement needs.
Investing for Retirement: SPIAs, TIPS, Stocks and the 4% Rule or the whole 4-page article in PDF format if you prefer http://advisorperspectives.com/newsletters12/pdfs/Investing_for_Retirement.pdf
And some interesting opinions on the article from Wade Pfau.
Wade Pfau's Blog said:In my view, he has several important findings about the allocation between stocks, TIPS, and SPIAs:
-While partial annuitization has little impact on failure rates, it does help to dramatically reduce the magnitude of failure. Expected bequests are also reduced. The proper choice depends on how a retiree weighs the tradeoff between their ability to leave a bequest and their fear of running out of money.
-A TIPS ladder is quite exposed to longevity risk.
-SPIAs act as "turbo-charged" bonds. This suggests that there is not much room for bonds in a retirement portfolio. Instead of stocks and bonds, you may wish to instead be thinking more in terms of stocks and SPIAs.
-This final point is something I am still thinking through and don't have any clear opinion of my own yet. Conventional wisdom is that it is a bad time to annuitize when interest rates are low. Rather, wait for rates to rise. But I believe that Joe is essentially arguing that the overall case for partial annuitization (relative to the alternatives) becomes stronger precisely when interest rates are low.
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