Trying to Figure out the best way to guarantee income for the rest of our lives.

[ShokWaveRider]

For us Income = Security. As interest rates are going up and it is becoming a good time to secure a decent return for the foreseeable future. We are pretty well set up for now until I start claiming SS at 70 and DW goes on Medicare. We have no heirs other than our selected charities.

Here are my thoughts, hopefully we can get close to ~5% return on our fixed income investments, although I would hardly call them investments.

Estimated income at 70 and 65 respectively without depleting our Nest Egg assuming a conservative 4% before tax return. This does not mean we will not start drawing down on the qualified funds portion of it at some point. These numbers are combined and annual estimates at today SS rates.

Social Security = $54,400
Other Pensions = $11,040

Income from other Sources = ~$120k

Mandatory RMD at 72 for me = ~$30k

All this is taxable, but I have to manage it all manually. We have $0 debt. We want to keep our income below the Medicare premium cliff, currently $182k.

We could buy Annuities and not worry about it at all. But being somewhat conservative, I cannot get my arms around about accepting 3.25% return when I can get 4.5% at current rates easily.

Any advice or recommendations would be appreciated.

 

[aja8888]

.....hopefully we can get close to ~5% return on our fixed income investments, although I would hardly call them investments.

Well, that's a stretch right now, but as rates go up, that may be doable. I'm hoping for that too as at my age (78 3/4), I would put 80% of my investable assets in that area. (no large flock of heirs to leave much to)

With our SS (no pensions) right now, we can live on it with no trouble (paid off house, no loans). This is a good place to be!

I don't like annuities for a lot of reasons.

 

[W2R]

Any advice or recommendations would be appreciated.

Looks pretty nicely set up and normal to me.

Like AJA8888, I really don't need more than my SS (and pension, in my case). I have a paid off house and no loans or dependents, which helps. Although my original plans were to withdraw 3.5%, I haven't withdrawn anything from my portfolio in several years because I have all that I need/want already. But I know it would be perfectly OK to spend more.

If (and only if!) you feel you would have a totally happy life while withdrawing less than planned from your portfolio, then I would encourage you to do that and invest the excess. It's amazing how fast the invested excess will snowball, and this can open new doors for you on down the road. With a slightly bigger portfolio, 4% will become as much income for you as 5% would provide with your current portfolio size.

 

[corn18]

For us Income = Security. As interest rates are going up and it is becoming a good time to secure a decent return for the foreseeable future. We are pretty well set up for now until I start claiming SS at 70 and DW goes on Medicare. We have no heirs other than our selected charities.

Here are my thoughts, hopefully we can get close to ~5% return on our fixed income investments, although I would hardly call them investments.

Estimated income at 70 and 65 respectively without depleting our Nest Egg assuming a conservative 4% before tax return. This does not mean we will not start drawing down on the qualified funds portion of it at some point. These numbers are combined and annual estimates at today SS rates.

Social Security = $54,400
Other Pensions = $11,040

Income from other Sources = ~$120k

Mandatory RMD at 72 for me = ~$30k

All this is taxable, but I have to manage it all manually. We have $0 debt. We want to keep our income below the Medicare premium cliff, currently $182k.

We could buy Annuities and not worry about it at all. But being somewhat conservative, I cannot get my arms around about accepting 3.25% return when I can get 4.5% at current rates easily.

Any advice or recommendations would be appreciated.

Where are you seeing annuities @ 3.25%? I'm seeing them @ 2.54% on immediateannuities.com

 

[ivinsfan]

First of all, when you say the rest of your lives, what are your target numbers? ie 90, 95 a 100 YO.



Are you saying you want maximum income or enough to give you a nice comfortable lifestyle, if it's lifestyle how does your annual budget run.


What's your stock market exposure? For some reason I think you like to hold a lot of cash equivalents but I could be confusing you with another poster.

 

[ShokWaveRider]

First of all, when you say the rest of your lives, what are your target numbers? ie 90, 95 a 100 YO.

Are you saying you want maximum income or enough to give you a nice comfortable lifestyle, if it's lifestyle how does your annual budget run.

No stock, (we won the game)
Next 20 years
Any income under $182k (unless the Medicare Limits change)

Honestly, I think we are there. But, I was looking for some opinions, even if some folks prefer some stock, that is OK. I am thinking Self-Managed withdrawals from MYGAs is the way to go. I am still in the process of pulling my finger out and setting up a ladder of some sort.

Current MYGAs for 3 or 5 years are ~4.6% I am hoping for 5% but that maybe optimistic. SPIAs with 10 year Certain are paying 3.25%, 15 and 20 year certain a little more, but not much, 10 year seems to be the sweet spot. I am not comfortable with SPIA lifetime income, at least not yet. We have 5 years of expenses and then some in Cash.

 

[Rianne]

Are you saying your income will be $215,800? I don't understand, what is that "other income $125K?"

You're debt free, out of the stock market, and don't trust individual bonds? I'd stay away from bond funds. BND is down -7.14% in the last 5 years. I don't like annuities either. We considered them but decided to ladder treasuries. It's the best there is right now. But we stayed 50% in the stock market and will continue for a few more years.

Edit: Is your SS taxed in FL?

 

[ShokWaveRider]

Are you saying your income will be $215,800? I don't understand, what is that "other income $125K?"

No, it is just estimated at this point. The $125 is from Taxable accounts. I can always reduce any withdrawals here.

As we do not have any heirs, I am trying to figure out how to get the most out of what we have. We are planning a BTD round the world trip of some sort and a few other extravagancies yet to e solidified.

 

[daylatedollarshort]

If you are planning for 20 years, at a 0% real return, TIPS would provide a 5% safe withdrawal rate, taxable if not in a retirement account, (100 / 20 years = 5%). Real returns are currently higher than 0%, so your SWR would be over 5% depending on your real yields, which currently range from .27% to .99%, and can be found here - United States Rates & Bonds - Bloomberg. A 1% TIPS bond would return 9%, before taxes, with 8% CPI inflation.

The potential problem with 4% nominal yields is that, unless offset by fixed expenses, like a fixed mortgage rate, if inflation is 8%, your expenses may go up 8% a year and your real investment yield is -4%. Run -4% real returns in a spreadsheet going out several years or more and the results can be pretty concerning. (The 4% nominal bond might be a better deflation hedge, but deflation isn't usually the main concern for retirees.)

 

[ivinsfan]

No, it is just estimated at this point. The $125 is from Taxable accounts. I can always reduce any withdrawals here.

As we do not have any heirs, I am trying to figure out how to get the most out of what we have. We are planning a BTD round the world trip of some sort and a few other extravagancies yet to e solidified.

As you know from reading here, Being and feeling safe are not necessarily the same as getting the most from the dollars you have. My person opinion is rates will continue to rise and you should just keep doing what you are doing.



Minor comments would be once your spouse turns 65 I'd start pulling from that RA to make sure I take the max under the first band for Part b...this will of course help pull down your RMD at 70. But that's pretty minor.

 

[ivinsfan]

If you are planning for 20 years, at a 0% real return, TIPS would provide a 5% safe withdrawal rate, taxable if not in a retirement account, (100 / 20 years = 5%). Real returns are currently higher than 0%, so your SWR would be over 5% depending on your real yields, which currently range from .27% to .99%, and can be found here - United States Rates & Bonds - Bloomberg. A 1% TIPS bond would return 9%, before taxes, with 8% CPI inflation.

The potential problem with 4% nominal yields is that, unless offset by fixed expenses, like a fixed mortgage rate, if inflation is 8%, your expenses may go up 8% a year and your real investment yield is -4%. Run -4% real returns in a spreadsheet going out several years or more and the results can be pretty concerning. (The 4% nominal bond might be a better deflation hedge, but deflation isn't usually the main concern for retirees.)

It's not a large amount but SWR probably should be buying the max amount of I bonds per year.

 

[ShokWaveRider]

Thanks for all the great input. What do folks think of SPIA 10, 15 and 20 year guaranteed? OK the money would be gone at the end, but it is steady income. Currently we have to go it sum to spend over $40k as year, and that is on the high size. We have zero debt and that includes no mortgage or car payments. We do have a lease car, but I really do not consider that real debt and is included in the $40k, and could pay the whole lease off anytime. I plan on having a car lease till we both cannot drive anymore.

My gut still says use MYGAS or CDs (assuming over 4% return) and manage it myself. While that is OK now, I may not be so inclined at 80, assuming I make it that far.

 

[MarieIG]

I would not buy annuities which loose the income potential before the second to die. One spouse, or the surviving spouse could need expensive care towards the end of life. You also may want to move into a high end CCRC.

 

[BADGERWIN]

Desired Asset allocation?

 

[TheWizard]

I'd recommend doing an immediate annuity, with 10-year guarantee period, at TIAA, if you qualify.
Problem is, most ppl don't qualify for TIAA.

I do and have more retirement income than I need now, meaning I have a negative withdrawal rate...

 

[ShokWaveRider]

Desired Asset allocation?

No Stock, No Bond Funds.

 

[ShokWaveRider]

I do and have more retirement income than I need now, meaning I have a negative withdrawal rate...

I think we will fall into the same category. We need to step up our spending. But cannot do so till 2024 when I turn 70.

 

[levindb]

We take a slightly different approach than others:

1. Assume our investments will earn 3% more than inflation.
2. Then calculate how much we can spend each year to run out of money at age 105.

Now the rest of the story...
We have a home with a fixed mortgage (28 years left). The equity in our home will provide a nice cushion, a very nice cushion, should things go bad. SSA (inflation protected) provides 70% of our NEEDS, and 1.6% SWR can provide the remaining 30%. We have an additional 2.8% that we can withdraw to DIE WITH ZERO...and enjoy the ride along the way.
Current AA is 70/30.

We are very fortunate to have more than we need.

 

[Lawrence of Suburbia]

Buy a SPIA >age 70. Just enough to pay the bills. Done!

 

[MarieIG]

MYGAs to SPIAs?

 

[TheWizard]

I'd recommend doing an immediate annuity, with 10-year guarantee period, at TIAA, if you qualify.
Problem is, most ppl don't qualify for TIAA.

I do and have more retirement income than I need now, meaning I have a negative withdrawal rate...

I agree with TheWizard.
I have TIAA annuity income based on variable indexes such as the Broad Stock Market and Commercial Real Estate.
It has worked out well thus far, nine+ years in...

 

[cyber888]

I agree with TheWizard.
I have TIAA annuity income based on variable indexes such as the Broad Stock Market and Commercial Real Estate.
It has worked out well thus far, nine+ years in...

Hey Wizard, you mentioned the occasional increase, with this year being 5%. So, you did 9 years now .. what's the difference between your 1st year and 9th year with the Tiaa increases over the 9 year period ? Just curious. Did $1000 become $1,100 over the 9 year period ?

 

[TheWizard]

Hey Wizard, you mentioned the occasional increase, with this year being 5%. So, you did 9 years now .. what's the difference between your 1st year and 9th year with the Tiaa increases over the 9 year period ? Just curious. Did $1000 become $1,100 over the 9 year period ?

I'll have to check on my PC upstairs, give me a little while...

 

[TheWizard]

Hey Wizard, you mentioned the occasional increase, with this year being 5%. So, you did 9 years now .. what's the difference between your 1st year and 9th year with the Tiaa increases over the 9 year period ? Just curious. Did $1000 become $1,100 over the 9 year period ?

Ok, I have lifetime payout annuities with TIAA Traditional, TREA, and CREF Stock, the latter two adjusted monthly.
I normalized my monthly payouts to $1000 to start for simplicity.
My starting month was June, 2013 and the latest month is September, 2022.
My TIAA Traditional payout went from $1000 to $1109.60.
My TREA payout went from $1000 to $1402.00.
My CREF Stock payout went from $1000 to $1606.80.

Per month for all of the above.

Even though CREF Stock was the winner, it had a fair amount of volatility over the years.
But stock index funds in your portfolio have volatility too.
So beware...

 

[cyber888]

Ok, I have lifetime payout annuities with TIAA Traditional, TREA, and CREF Stock, the latter two adjusted monthly.
I normalized my monthly payouts to $1000 to start for simplicity.
My starting month was June, 2013 and the latest month is September, 2022.
My TIAA Traditional payout went from $1000 to $1109.60.
My TREA payout went from $1000 to $1402.00.
My CREF Stock payout went from $1000 to $1606.80.

Per month for all of the above.

Even though CREF Stock was the winner, it had a fair amount of volatility over the years.
But stock index funds in your portfolio have volatility too.
So beware...

Wow, that's amazing, Mr. Wizard ! so CREF Stock could still drop back to $1000 from $1600 ? or maybe just $1400-1500 .. what's the standard deviation that you observed?