Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 11-26-2020, 08:54 AM   #21
Full time employment: Posting here.
 
Join Date: Apr 2005
Posts: 670
You've already received lots of great advice. I just wanted to share one of Jonathan Clements' latest columns because at 57 he's right between you and your spouse's ages and has been mulling over the same issues:

https://humbledollar.com/2020/06/farewell-yield/

Not stated in that particular column but mentioned in another recent one was his decision to start buying immediate annuities at age 60 with a portion of his fixed income position and then to add to it over the years. An "annuity ladder" if you will. Echoing the suggestions of others in this thread, it sure seems to me like that approach, whether with CD's, Treasuries or annuities - or some combination - is prudent given the current unprecedented interest rate environment.
kevink is offline   Reply With Quote
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!

Old 11-26-2020, 08:58 AM   #22
Recycles dryer sheets
 
Join Date: May 2019
Posts: 171
While annuities are a safe investment vehicle, they are only as safe as the company that you purchase the annuity from. If New York Life goes belly-up so does all their annuities.

Also, you have $500,000 of FDIC insurance in joint accounts that are FDIC insured.
JRon is offline   Reply With Quote
Old 11-26-2020, 09:01 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,194
Quote:
Originally Posted by 4nursebee View Post
I would rather leave money in current investments than in FDIC low rate return vehicles.
Then you have your answer, because a joint life annuity is a low rate return vehicle that is not FDIC insured.

Out of curiosity, what is the money that would have been used to buy the joint life annuity currently invested in?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 11-26-2020, 09:05 AM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,194
Quote:
Originally Posted by JRon View Post
While annuities are a safe investment vehicle, they are only as safe as the company that you purchase the annuity from. If New York Life goes belly-up so does all their annuities.

Also, you have $500,000 of FDIC insurance in joint accounts that are FDIC insured.
That's a particularly poor example. NYL is one of the strongest companies in the industry and has the highest possible ratings from S&P, Moody's, Fitch and A.M.Best... essentially all AAA. IMO negligibly different from FDIC insured.

And even if it was a less strong insurer you are ignoring state guaranty fund coverage that is functionally similar to FDIC coverage but with lower coverage limits.

https://www.newyorklife.com/newsroom...h-ratings-2019
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 11-26-2020, 09:05 AM   #25
Moderator
Jerry1's Avatar
 
Join Date: Nov 2014
Posts: 5,159
Quote:
Originally Posted by 4nursebee View Post
I would rather leave money in current investments than in FDIC low rate return vehicles.
Fair enough, but that doesn’t sound like a comment from someone who has “won the game”. So, you want the annuity because you’re looking for better returns in the lower risk part of your portfolio? In that case, I feel like you’re not assigning enough risk to the fact that you would be giving up your principal for a life which is of unknown duration. As was pointed out earlier, at 4% you have to live very long just to get your principal back, making that investment almost interest free for decades. At least with a CD, you will get the benefit of any changes to interest rates in years to come.

Take some time (which you’re doing) and really try to define your main goal here and see if the insurance product is really going to satisfy that goal.
__________________
Every day when I open my eyes now it feels like a Saturday - David Gray
Jerry1 is online now   Reply With Quote
Old 11-26-2020, 09:11 AM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Car-Guy's Avatar
 
Join Date: Aug 2013
Posts: 5,882
Quote:
Originally Posted by JRon View Post
Also, you have $500,000 of FDIC insurance in joint accounts that are FDIC insured.
You can easily cover millions by using several different banks and account categories.

https://www.fdic.gov/resources/deposit-insurance/

The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
__________________
Power is often given but respect must always be earned
Car-Guy is offline   Reply With Quote
Old 11-26-2020, 09:28 AM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,194
As I recall, if a married couple each have $250k in CDs in a taxable account and an IRA in the same bank, they can cover off $1 million in one bank.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 11-26-2020, 09:38 AM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Car-Guy's Avatar
 
Join Date: Aug 2013
Posts: 5,882
Quote:
Originally Posted by pb4uski View Post
As I recall, if a married couple each have $250k in CDs in a taxable account and an IRA in the same bank, they can cover off $1 million in one bank.
Some years ago, I went through all sorts of scenarios on FDIC coverage.... Yes you can get more than 250k coverage at any one bank by using account categories, if they apply in your case. I honestly don't remember them all "but for my case", just using different banks worked best (and/or made me feel the most comfortable . Some of the bank officers/managers didn't seem to understand the FDIC insurance rules as well as some folks on this board... Many did but some did not!
__________________
Power is often given but respect must always be earned
Car-Guy is offline   Reply With Quote
Old 11-26-2020, 09:40 AM   #29
Full time employment: Posting here.
 
Join Date: Nov 2014
Location: Austin
Posts: 975
Quote:
Originally Posted by 4nursebee View Post
Why?

52/62
One reason is because it's pretty difficult, maybe impossible, to purchase a SPIA these days with a COLA. Meaning the younger you are, the more time for inflation to eat away at the purchasing power of the income stream from the annuity.
big-papa is offline   Reply With Quote
Old 11-26-2020, 09:46 AM   #30
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 68
Quote:
Originally Posted by Jerry1 View Post
Fair enough, but that doesn’t sound like a comment from someone who has “won the game”. So, you want the annuity because you’re looking for better returns in the lower risk part of your portfolio? In that case, I feel like you’re not assigning enough risk to the fact that you would be giving up your principal for a life which is of unknown duration. As was pointed out earlier, at 4% you have to live very long just to get your principal back, making that investment almost interest free for decades. At least with a CD, you will get the benefit of any changes to interest rates in years to come.

Take some time (which you’re doing) and really try to define your main goal here and see if the insurance product is really going to satisfy that goal.

Jerry, for comparison sake, take the amount of money you need or want to retire. Many people choose an amount that equals 25x ish their annual budget or needs. Picture this amount for you in your head. Now triple that amount. That is the equivalent of what we have in our life (actually we are nearing that amount). What I think to do, is take 1/3rd the amount, the original amount needed to retire, and purchase an annuity. Said annuity would pay out an amount each month sufficient to meet all needs for both of us, after taxes, without any other income sources.
4nursebee is offline   Reply With Quote
Old 11-26-2020, 09:55 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 10,890
How about TIPS for inflation protection? Inflation is probably your only exposure. Well, stocks too, if you aren't well diversified
RunningBum is offline   Reply With Quote
Old 11-26-2020, 09:57 AM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,547
Quote:
Originally Posted by pb4uski View Post
Then you have your answer, because a joint life annuity is a low rate return vehicle that is not FDIC insured. ...
This. +1
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 11-26-2020, 10:01 AM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,547
Quote:
Originally Posted by RunningBum View Post
How about TIPS for inflation protection? Inflation is probably your only exposure. ...
This was our conclusion re risk: Two digit inflation. Our solution was TIPS. Virtually all of our fixed income portion is in TIPS, which will inevitably yield significantly better than the quoted YTM numbers that you see, which assume zero inflation.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 11-26-2020, 10:03 AM   #34
Full time employment: Posting here.
 
Join Date: Aug 2012
Posts: 624
Quote:
Originally Posted by 4nursebee View Post
Jerry, for comparison sake, take the amount of money you need or want to retire. Many people choose an amount that equals 25x ish their annual budget or needs. Picture this amount for you in your head. Now triple that amount. That is the equivalent of what we have in our life (actually we are nearing that amount). What I think to do, is take 1/3rd the amount, the original amount needed to retire, and purchase an annuity. Said annuity would pay out an amount each month sufficient to meet all needs for both of us, after taxes, without any other income sources.

Yes but you have already stated that you have all your living expenses and then some covered by the pension, ss and RE.
You keep coming round to that. If you want a belt and suspenders guarantee to cover your living expenses twice over and then still have 2x the amount needed left over then you should follow your emotions and not logic and mathematical analysis and get the annuity. All people are pointing out here is that you almost certainly don't need to and that there are alternatives.
Believe me I am not criticizing because I wrestle with these same scenarios in my own head all the time but so far have every time talked myself out of an annuity especially in these low interest rate environments.
As I said before, you have won the game and you have to go with what feels right to you.
finnski1 is offline   Reply With Quote
Old 11-26-2020, 10:05 AM   #35
Moderator
Jerry1's Avatar
 
Join Date: Nov 2014
Posts: 5,159
Unless I’m missing something (entirely possible), that monthly amount would not be indexed to cover inflation. So, are your expenses going to decrease at the rate of inflation going forward? You said you’d rather leave it alone than take CD rates of return. I don’t think you’re getting any better real return from an annuity at this point but of course it’s all in the details of the contract.
__________________
Every day when I open my eyes now it feels like a Saturday - David Gray
Jerry1 is online now   Reply With Quote
Old 11-26-2020, 10:37 AM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 29,179
Quote:
Originally Posted by 4nursebee View Post
Why?

52/62
Ages determines how much of a payout you get from a lifetime annuity.

Personally, if we decide to buy an annuity to cover part of our portfolio, we probably won't start until at least one of us is 75 so that we get a higher payout.

Young ages and low interest rates usually mean a much lower payout.
__________________
Retired since summer 1999.
audreyh1 is online now   Reply With Quote
Old 11-26-2020, 10:55 AM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,194
Quote:
Originally Posted by 4nursebee View Post
.... What I think to do, is take 1/3rd the amount, the original amount needed to retire, and purchase an annuity. Said annuity would pay out an amount each month sufficient to meet all needs for both of us, after taxes, without any other income sources.
You could do the same thing with a CD ladder and an savings account. Take that 1/3 and put the first year of payments in a savings account and set up an automatic monthly withdrawal to move the monthly payments to your checking account... then use the rest of the money to buy, 1,2,3,4,5,6 et al CDs. As the CDs mature, an amount equal to a year of payments go into the savings account and the remainder goes into the longest duration CD. Rinse and repeat and you have effectively created a similar cash flow at a reasonable return.

But the big difference... if you want or need that money you can cash out the CDs or if you both die the next day the money is still there for your heirs and charities. With the joint life annuity, if you both die the next day the money is gone and if you want or need the money then you're out of luck.

Then with the money beyond 20 years you could start buying EE savings bonds... they are guaranteed to double in 20 years which is a 3.53% rate, then after 20 years you could cash in the EE bonds and use the proceeds to fund the annual payments.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 11-26-2020, 11:05 AM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,547
4nursebee, you should understand that @pb4uski was formerly an insurance company executive and in the annuity business. Around here he is a bit of a guru on fixed income investments, particularly short-term. It is from this expertise that he is advising against your annuity idea.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 11-26-2020, 11:12 AM   #39
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 68
Quote:
Originally Posted by audreyh1 View Post
Ages determines how much of a payout you get from a lifetime annuity.

Personally, if we decide to buy an annuity to cover part of our portfolio, we probably won't start until at least one of us is 75 so that we get a higher payout.

Young ages and low interest rates usually mean a much lower payout.
Yeah, we already calculated the payout on immediate annuities.com
4nursebee is offline   Reply With Quote
Old 11-26-2020, 11:18 AM   #40
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 68
It seems like the bulk of people here are against the idea.
It seems like nobody does this, hence others can't answer about regrets.
Thank you for sharing your thoughts.

A CD ladder would not provide the monthly "income".
I appreciate the perspective of those older and wiser, including insurance folks.
For our values, I don't see how alternatives suggested would offer peace of mind.
Not sure what we will do. Might just stick with equities.
4nursebee is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Won the Game, take low risk path with $$? capjak FIRE and Money 48 05-03-2017 09:32 AM
Remembering Bill Paxton: "It's Game Over Man! Game over" cyber888 Other topics 4 02-27-2017 03:38 PM
Why adjust your AA when you have won the game? DawgMan Stock Picking and Market Strategy 45 12-15-2016 10:39 PM
How Much Is Enough for Game Over Won!! Trawler FIRE and Money 122 12-20-2015 08:42 PM
Won the game? Where to set AA? Lsbcal FIRE and Money 81 12-04-2013 12:05 PM

» Quick Links

 
All times are GMT -6. The time now is 08:31 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.