|
CD ladder vs TIAA Traditional Annuity
10-31-2008, 07:34 PM
|
#1
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
|
CD ladder vs TIAA Traditional Annuity
Is there any reason to have a CD ladder as a buffer against market downturns if you have a TIAA Traditional Annuity that covers basic living expenses?
Additionally with the guarantee of income from TIAA traditional what would your AA be? 100% equities? or would there be a place for bonds and TIPs?
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
10-31-2008, 08:42 PM
|
#2
|
Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,130
|
It all depends on the time horizon of when you want to draw down money from your savings.
I'll have a pension to cover my basic expenses and want to draw on my nest egg for extras, particularly travel. So I do feel it is necessary to have a 5 year cash cushion because I want to do all the extras while we are still fit and healthy, and don't want to have to put my aging life on hold because of a market downturn.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
|
|
|
11-01-2008, 08:44 AM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
|
Quote:
Originally Posted by Alan
It all depends on the time horizon of when you want to draw down money from your savings.
I'll have a pension to cover my basic expenses and want to draw on my nest egg for extras, particularly travel. So I do feel it is necessary to have a 5 year cash cushion because I want to do all the extras while we are still fit and healthy, and don't want to have to put my aging life on hold because of a market downturn.
|
Even in a bad downturn, like now, if basic living expenses are covered by a pension or fixed annuity and you have say a one year emergency fund in a MM I don't see the need for a CD ladder as your "extras" could probably be paid for with dividends from the rest of your portfolio. That's why I asked the second part of my question ie what would your non pension/annuity AA be?
The TIAA fixed annuity replaces the CD ladder with the proviso that you don't get access to your capital
|
|
|
11-01-2008, 12:50 PM
|
#4
|
Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,130
|
Quote:
Originally Posted by nun
Even in a bad downturn, like now, if basic living expenses are covered by a pension or fixed annuity and you have say a one year emergency fund in a MM I don't see the need for a CD ladder as your "extras" could probably be paid for with dividends from the rest of your portfolio. That's why I asked the second part of my question ie what would your non pension/annuity AA be?
The TIAA fixed annuity replaces the CD ladder with the proviso that you don't get access to your capital
|
My allocation is 40/50/10 The 10% cash is mostly in I-Bonds plus ~ $40K in MMF and FDIC MM savings. I don't have a CD Ladder.
Dividends from the bonds will cover most of the "extras" plus my pension is non-COLA so will start losing value once I start taking it.
With pensions (another one due age 65) and SS I don't have the need for another fixed income vehicle such as an annuity.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
|
|
|
11-01-2008, 04:40 PM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
|
Quote:
Originally Posted by Alan
My allocation is 40/50/10 I don't have a CD Ladder......
With pensions (another one due age 65) and SS I don't have the need for another fixed income vehicle such as an annuity.
|
Right, what I'm asking is that with the fixed income of a TIAA annuity covering basic expenses what would be a good AA. Does it replace a CD ladder? I suppose you'd just include the annuity in the bonds/fixed income part of your portfolio when you come up with an appropriate AA. However, I'm also interested how having the fixed annuity would effect the choice of your bonds and fixed income investments?
|
|
|
11-01-2008, 05:11 PM
|
#6
|
Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,130
|
The bond portion of my egg is 50% and made up as follows:
VG Wellseley in my IRA and in our after tax account
Fidelity Total Bond in DW's IRA
Schwab Total Bond in my 401(k) - when I retire in 16 months I will roll this into a VG IRA and put it in VG Total Bond
Excluding my penion annuity, my allocation is 40/50/10 as I still believe you need stocks in the long run for growth but I am conservative enough to have many years of cash and bonds to avoid having to be forced to sell stocks when I don't want to.
I'm sure there plenty of other opinions out there on suitable AA's and YMMV. You need to have an AA that will help you sleep at night.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
|
|
|
11-02-2008, 06:41 AM
|
#7
|
Recycles dryer sheets
Join Date: Aug 2005
Posts: 380
|
When you die, the annuity stops, but the CD ladder remains for your heirs unless you are spending the CD's down.....
|
|
|
11-02-2008, 06:52 PM
|
#8
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
|
Quote:
Originally Posted by SteveL
When you die, the annuity stops, but the CD ladder remains for your heirs unless you are spending the CD's down.....
|
But if I buy the annuity with 20% of my savings and live on it, the rest of my portfolio will grow. If I die young TIAA wins, if I live to be 100 I'm way ahead as I would have spent a CD ladder well before that and would have been spending the rest of my portfolio
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|