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Old 11-26-2020, 11:18 AM   #41
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I am a big fan of annuities (SPIA, anyway). They have a place. For example, I think it is crazy that essentially everyone needs to understand not only how to save, but how to manage their investments and then their spenddown. AND, I think it is crazy that essentially everyone needs to plan as if they will live a long life; I would prefer that everyone regularly contribute to something like a pension or annuity, so risk-pooling can mitigate the risk of extreme longevity.

However…

As mentioned above, their place is for people whose savings are marginal, that is, they may or may not have enough (depending on how long they live). For those cases, pooling risk makes sense. But you are not in that position. You can easily bear the risk yourself.
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Old 11-26-2020, 11:45 AM   #42
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Originally Posted by big-papa View Post
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.
Agreed.

OP's age calls for 3 or more decades of inflation protection. Despite today's low interest and inflation rates, things could be very, very different decades down the road. Stashing too much into a non-cola'd annuity at a relatively young age is opening the door to inflation risk down the road.
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Old 11-26-2020, 11:54 AM   #43
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Originally Posted by 4nursebee View Post
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.
I put about 10% of my investables into a defered SPIA back a few years ago when the 10 year treasury was yielding 2.75%. At the time most were saying rates were too low to buy a SPIA.
It started paying on my 62nd birthday. My thought when I bought it was it, along with SS at 62, would cover my essential expenses.
I might have done better leaving it invested, but maybe not. I might not have stayed at a 80/20 and 70/30 AA as long as I did. I might have panic sold during one of the few bumps in the road.
Plans have changed and I'll be waiting to 70 to take SS. I'm no where near your 90x expenses, so YMMV.
I've enjoyed the little checks I've received over the last 3 month, so no regrets.
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Old 11-26-2020, 12:16 PM   #44
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Originally Posted by Montecfo View Post
Some quick thoughts:

It does not seem crazy also does not seem necessary, but can do for peace of mind.

One idea: instead of going on one fell swoop, maybe buy 20 percent of targeted annuity per year over 5 years. Likely would get better rates as they rise.

You might want to talk to an advisor. I wonder if individual annuities might be cheaper with your age differences. Also, could explore strategies to make sure you can mitigate risk of early death resulting in a complete loss of investment.

Taking some off the table is always good.
I agree with buying separate smaller annuities. Rates of return may go up.

You might consider making one of those annuities a COLA'd annuity offered by Uncle Sam. IOW, since it sounds like you don't need to take SS at full retirement age or earlier, take it at 70. You get an increase over full retirement age and a COLA.
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Old 11-26-2020, 01:00 PM   #45
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When I look at my own situation (which is somewhat like the OP's), I find that:
1) With mega-corp non-inflation-indexed pension plus social security (indexed), I have my normal spending needs met (house over my head, food, transportation, ...)
2) My portfolio is about 55% equities/43% fixed/ 2% other. On the fixed side, about 20% of it is inflation adjusted and 80% CD's. The 2% is in precious metals. So, between pension, social security and cash I am good to go for my expected lifetime.

Looking at this, my biggest exposure is inflation, not loss of $ in equities. All of the equity could be wiped out without requiring me to eat rice and beans (or worse) for the remaining days...but hyperinflation? That's another story as my pension (annuity) would quickly lose its purchasing power.

That's why I believe if one has exceeding winning the FI game, they still need to keep a decent slug in equities. It is also why I've been slowly but steadily working on the 2% (precious metals) as a potential doomsday inflation hedge.

So that puts me in the crowd of saying if you are going to go the annuity route, $ cost average into them over a decent chunk of time (e.g. 10 years). Or, up the cash equivalent portion to cover more spending years - but then look at your other holdings with an eye to how well they might do if cash were NOT king (e.g. falling fiat currency scenarios).
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Old 11-26-2020, 02:32 PM   #46
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... 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.
With respect, I can't figure out what you are saying here. If you're looking for increased peace of mind, how does "sticking with equities" help with that? Usually people looking for more peace of mind, aka better sleeping, reduce equity holdings.
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Old 11-26-2020, 02:49 PM   #47
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I respect this guy's opinion very much


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Old 11-26-2020, 02:55 PM   #48
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Originally Posted by 4nursebee View Post
Our main expenses are easily covered by SS, pension, and RE.
Quote:
Originally Posted by 4nursebee View Post
A CD ladder would not provide the monthly "income".
In your initial post you stated your income needs were covered; that's why you received suggestions for CDs.

IMO the big downsides to an annuity don't apply to you:
- loss of principal due to an earlier than expected death thus leaving less for your heirs
- loss of control of your money by handing it over to an insurance company - which ironically makes it uninsured.

Why not the best of both worlds - purchase a variable annuity invested in equities? That gives you an equity position to cover inflation, and the ability to annuitize down the road when rates are (maybe) better. They're higher cost but doesn't seem like that would impact you.

PS I'm not by any means a variable annuity proponent, but VAs are the only way I know to get an annuity invested in equities.
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Old 11-26-2020, 03:00 PM   #49
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A couple thoughts as I did not read all the responses:

1. Nothing wrong with taking a percentage and putting it in an Single Premium Annuity, maybe allow you to feel free to spend more (as you have 90x expenses)
2. Buying several over a few years rather than all at once might work
3. With the market at what some people believe is high (PE ratios etc..) it might be a good time to buy....interest rates have less impact than life expectancy on annuities (having someone 10 years younger impacts the joint payout quite bit). Maybe buy one for the 62 year old with cash refund upon death or installment refund upon death.

4. Don't use Fidelity or schwa for the annuity go to stan the annuity man or immediate annuities better rates
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Old 11-26-2020, 05:20 PM   #50
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Interesting point that it takes you a long time to "make" money... if the payout rate is 4% then for the first 25 years the insurer is just returning your premium to you... it isn't until the 26th year that you are collecting any interest... so that would be 81 for a 55 year old.

That reminds me... my BIL's mom had a VOYA deferred annuity that was earning next to nothing. We ended up surrendering it crossing tax years... a surrender for 1/2 the gain in Dec and then the other 1/2 of the gain and basis in Jan... that spread the gain over two tax years so she didn't have to pay taxes on the gain in her situation.

We put the proceeds into Wellesley and set up an automatic monthly redemption with the proceeds going to her checking account. She was happy as a clam.

Years later, she had to go into a nursing home and I found out that there was a bit of confusion because she and her daughter were referring to it as her Vanguard "annuity" even though it wasn't really an annuity... but it worked very well for her.
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Old 11-27-2020, 12:54 AM   #51
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I won the game with 62x my yearly expenses and just moved 18x to FI(Total US Bond/Saving). I don't look for yields or return in FI or else just overweight the equities because I like to keep it simple for my little peanut brain.
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Old 11-27-2020, 05:21 AM   #52
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A quick Google search for FDIC insurance for couples returned this:
Married couples will have another option for maximizing their FDIC insurance coverage. You and your spouse each can open individual accounts at a single bank, resulting in each of you having up to $250,000 FDIC-insured. You can then also open a joint account and each have $250,000 insured in that account. Between those three accounts, you could have up to $1 million FDIC insured at one bank.
We have individual and joint checking/savings/CDs accounts in the same Credit Union. Are the rules different between FDIC insurance and NCUA (National Credit Union) that my credit union uses?

I was told the $250k/person were for all accounts held by that person at that CU. That means the combined insurance coverage at that CU for the 2 of us is $500k not $1 million. Now I'm confused.



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Old 11-27-2020, 05:24 AM   #53
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Your situation sounds similar to mine except for the fact we have a couple of kids. But we have won the game, in our late 50s, etc.

I had a large portion of our Assets in CDs that I bought in 2017/2018 for just the reason you say - 100% safe, enough return (3% of so) that between them and my equity and bond investments expenses were covered and then some. But as they are expiring now I am not buying more at <1%.

Therefore, even though I don't need to I have actually increased my percentage in equities from around 45% to 55% or so. (Also bought a bunch of preferred stocks this summer when they were depressed but that's another conversation).

I think one point that has not been made here is that all equities are not alike. You can buy equities that are awfully low risk in both price and payout. What I have been doing is rolling CDs into company stock like JNJ that pay a similar 2.5 - 3% and simply forget about the share price. That dividend is not going anywhere. Utilities are another income option. I own nothing of the tech sector - don't need to.

I also like preferreds and munis as a safer investment than common equities but like CDs the pricing is not so attractive at the moment hence new money ends up back in stocks.

This is not going to last forever in five years I'll sell the JNJ (or whatever) and buy a muni or a CD, etc. There are also many fund and ETF options for you what are very hands off and can be very safe but they are just too hands off for me - I have the time and enjoy the research into individual issuances.
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Old 11-27-2020, 06:07 PM   #54
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We have individual and joint checking/savings/CDs accounts in the same Credit Union. Are the rules different between FDIC insurance and NCUA (National Credit Union) that my credit union uses?

I was told the $250k/person were for all accounts held by that person at that CU. That means the combined insurance coverage at that CU for the 2 of us is $500k not $1 million. Now I'm confused.

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I was explained it depend how they are titled. Check this site out and you can find out.

https://edie.fdic.gov/calculator.html
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Old 11-27-2020, 06:51 PM   #55
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When you guys say 90x, are you saying your investable assets (stocks, bonds, cash) = 90 times want you are expected to spend per year?

So assuming your house is paid, 90 times the annual cost of food, electricity, insurance (home, auto, health, life), property taxes, water, gas and auto maintenance, cable, phone, wifi, travel, hobbies/enjoyment of life, plus some amount to a fund to cover eventual repair/replacement of major items (autos, hvac, roof).

So about $5-10M. ��
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Old 11-27-2020, 06:59 PM   #56
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That is what the OP said... 90X... and I interpreted that as their investable assets (excluding residence) are 90x their projected spending.

The 4% rule would equate to 25X, so there are 260% overfunded.... IOW, their WR would be 1.1%.
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Old 12-01-2020, 05:05 PM   #57
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We are both retired. Assets continue to grow, we likely have three times what we need to maintain lifestyle, in other words we are approaching 90X.

I used to trade a lot, had early success. One of the pieces of advice I always respected was that during periods of success one should take money off the table and buy something, that way if failure or bad market conditions appear one has something to show for the success. I considered buying a Harley, never did. I really never bought anything, and did run into massive failure. I ended up with nothing to show for it.

Our main expenses are easily covered by SS, pension, and RE. We did a small annuity to tide us over until SS age @ 70. Assets have grown significantly since this was purchased, not once have we regretted the decision. When I retired a few months ago, we also pulled all expenses for 2021 out of the market (sold stock) calculating the amount using the VPW method. No regrets pulling this money out and missing gains either.

With such a large asset base, we are considering taking up to 1/3rd of it to purchase a joint life annuity. The payout rate without any inflation adjustments would be near 4%. I think we highly value the potential peace of mind this could bring. We could basically ignore the market the rest of our lives.

We have no kids. No legacy concerns. We would almost guaranteed be okay if we did not get the annuity.

Have any of you done this? Any regrets?
What are your thoughts?
Could peace of mind be better or otherwise obtained?

For this "problem" and your thoughts on the matter I am grateful!
I doubt you have won the game in your own minds.
If SS and pensions cover your expenses I do not get your reasoning and I am extremely pessimistic about this stufff.
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Old 12-01-2020, 05:07 PM   #58
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It sounds like you must have 5 million or so and your expenses are covered without it.
I just do not understand the concern.
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Old 12-01-2020, 05:15 PM   #59
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Perhaps consider some utilities and average paying dividend stocks that give about 3%. For example PPL utility or Johnson and Johnson.
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Old 12-01-2020, 05:55 PM   #60
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Originally Posted by 4nursebee View Post
We are both retired. Assets continue to grow, we likely have three times what we need to maintain lifestyle, in other words we are approaching 90X.

I used to trade a lot, had early success. One of the pieces of advice I always respected was that during periods of success one should take money off the table and buy something, that way if failure or bad market conditions appear one has something to show for the success. I considered buying a Harley, never did. I really never bought anything, and did run into massive failure. I ended up with nothing to show for it.

Our main expenses are easily covered by SS, pension, and RE. We did a small annuity to tide us over until SS age @ 70. Assets have grown significantly since this was purchased, not once have we regretted the decision. When I retired a few months ago, we also pulled all expenses for 2021 out of the market (sold stock) calculating the amount using the VPW method. No regrets pulling this money out and missing gains either.

With such a large asset base, we are considering taking up to 1/3rd of it to purchase a joint life annuity. The payout rate without any inflation adjustments would be near 4%. I think we highly value the potential peace of mind this could bring. We could basically ignore the market the rest of our lives.

We have no kids. No legacy concerns. We would almost guaranteed be okay if we did not get the annuity.

Have any of you done this? Any regrets?
What are your thoughts?
Could peace of mind be better or otherwise obtained?

For this "problem" and your thoughts on the matter I am grateful!
Hi Given your level of portfolio some companies offer annuities that return your capital to you at your death. You need to negotiate these. Then you get comfort of mind and get to leave your estate to relatives
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