Won the game, considering an annuity

[targatom2019]

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.

 

[Badger]

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.



Cheers!

 

[53anddone]

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.

 

[Bruno]

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.

Cheers!

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

https://edie.fdic.gov/calculator.html

 

[CSdot]

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. &#55357;&#56833;

 

[pb4uski]

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%.

 

[JJpop]

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.

 

[JJpop]

It sounds like you must have 5 million or so and your expenses are covered without it.
I just do not understand the concern.

 

[MRSPOCK]

Perhaps consider some utilities and average paying dividend stocks that give about 3%. For example PPL utility or Johnson and Johnson.

 

[Linda W]

annuity

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

 

[Emerson11]

I'd change my focus

Gosh, if you have capital equal to 90 times your annual spending, I'd suggest spending more time thinking about a legacy and/or ways to enjoy what you've earned. I wouldn't waste time worrying about the minutiae of security.

 

[Skitso999]

Double your money using indexes, then take out half and place it somewhere you consider safe. Sounds like you've done well so far. Why not do more of it, and have so much money it really won't matter if you have a big dip?

Annuities have way too much commission and expenses for my taste.

Alternative is, an annuity through Schwab, Fidelity, or some other LOW cost provider with LOW commissions.

 

[scrinch]

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.

Sorry I'm late to the party here. I think in reading the responses by forum members and OP that what we have here is a lack of understanding about what aspect of an annuity you perceive would give you the "peace of mind." With an immediate annuity, an insurance company takes your capital, regularly increments it with a small interest rate, writes a check to you every month from this "annuity account" that feels to you like income, and then insures you against outliving this capital+interest after 30 years or so when your own "annuity account" has been paid back and the "balance" has gone to zero. The longevity insurance is paid for actuarially, by using leftover capital from those who die early to keep paying those who stubbornly refuse to do so.

Responses so far have pointed out that you can invest this same capital at higher return and at lower risk in FDIC-insured accounts. They have also pointed out that you can set it up with a bank or brokerage to send you the check each month from your own capital accounts that feels like regular income, just like an annuity payment. As for longevity insurance, you have plenty of money to self-insure...you're not likely to outlive your actuarial demise by more than 20 years or so. It sounds like you have enough money to cover another 70 years of expenses.

In reading your responses, it doesn't sound like any of these is the aspect that gives you peace of mind though. I suspect that what does give you that peace is taking the money out of your hands and making it someone else's responsibility to take care of the money and pay you, no matter what, until your dying day. If so, I understand that feeling...now it's not just me looking after our financial well-being, I've got an insurance company taking care of us too. In fact your annuity with the insurance company is probably about equally or slightly more at-risk compared to a self-managed FDIC-insured account, but the risk is very low for both of them. So I think the answer you're looking for is whether the lack of liquidity and lower interest rate inherent in an immediate annuity is sufficiently offset by the peace that comes from knowing that someone else is on the hook to pay your expenses as long as you live. It sounds like in your case it probably is. And you can certainly afford to forego the little additional interest that you would get from alternate investment in bank CD's (at least in the absence of sustained high inflation). I say go for it.

 

[rrs26ja]

Consider an Annuity

Sounds like you did well for yourself. I also managed my own money for 30 years. After I retired my wife was concerned because she has no knowledge or interest in managing the money. We went with investment company whose focus is preservation of capital. Part of what they invested for us is in two different annuities. One is invested in SP 500 the other tracks the NASDAQ. The most we can lose is 10% no matter how bad the market does.

 

[pb4uski]

A good way to test that... call and tell them that you are thinking about cashing out and ask what you would receive if you did a full surrender and see if it is more than 90% of what you put in.

I hope it works out for you but you might be surprised.

 

[Rosedala]

what is an FDIC fixed asset and what does it yield?

I'm not really concerned with anything! But, a guaranteed monthly check for the rest of our lives would improve our great peace of mind.

Have you thought of "Charity Gift Annuities"? Nothing more secure than these annuities and with generous interest percentages according to your ages...while helping your favorite charities. Google them to see the details. Good luck.

 

[BoodaGazelle]

Quick questions.
1. Re: 90X. Does that mean total NW (including RE) divided by annual spending? Mine is 56X. Does that mean I also "won the game"? (no children, can spend it all)
2. Re: FDIC insurance. Aren't many of the bad things that can happen at risk primarily *due* to the government? [hyper-inflation, asset stealing due to having "too much", etc.] How can FDIC insurance provide peace of mind against those things? All of our money except RE is in Fidelity, with approx. 50/50 allocation.. I am 64 and DW is 63. Plan on deferring SS at least a couple more years.

 

[Out-to-Lunch]

Quick questions.
1. Re: 90X. Does that mean total NW (including RE) divided by annual spending? Mine is 56X. Does that mean I also "won the game"? (no children, can spend it all)

IMHO, yes. You seem to have it made!

2. Re: FDIC insurance. Aren't many of the bad things that can happen at risk primarily *due* to the government? [hyper-inflation, asset stealing due to having "too much", etc.] How can FDIC insurance provide peace of mind against those things?

Sorry, this seems like a non-sequitur?

 

[BoodaGazelle]

IMHO, yes. You seem to have it made!



Sorry, this seems like a non-sequitur?

I guess I always thought of FDIC insurance as just in case your local bank failed. Is that still the main reason people on ER would recommend putting ones assets in (say) CDs?

 

[scrinch]

I guess I always thought of FDIC insurance as just in case your local bank failed. Is that still the main reason people on ER would recommend putting ones assets in (say) CDs?

Potential alternative investments to CD's are stocks, bonds, real estate, metals, etc. Bank CD's are perceived to have lower risk of capital loss and more predictable gains than in those other investments. So that stability would be the rationale for investing in CD's. The FDIC insurance for the CD mitigates the risk of local bank failure, so is an aspect of a CD that makes it even safer than an uninsured bank deposit. But you're right, with a CD there is still the risk of hyperinflation, zombie apocalypse, and meteor strike even with FDIC insurance.

 

[BoodaGazelle]

I have lots of "zombie apocalypse" protection devices.