Rich_by_the_Bay
Moderator Emeritus
I have always avoided variable annuities for lots of reasons described everywhere. However, I wonder if there isn't a place for immediate annuites in my plan. I welcome your comments on any aspect of this:
My strategy is to sock away about 5-6 yrs of anticipated income needs as liquid, cash-like investments. The remainder of my nest egg will be in 60/40 or 65/35 stocks and bonds, well spread out. The 5-year income "escrow" fund will be replenished periodically from either stocks or bonds, mostly from whichever does better that year.
When everything is down, I will just drill deeper into my income escrow where I can wait it out for that 5 years if necessary. Nothing new here - it's a widely written-about strategy (e.g. DeMuth/Stein) which feels right to me.
Now, instead of a cash escrow (money market, treasuries, STB funds) growing at 3% per year (in order to remain rock solid), I wondered about buying an immediate annuity with a 5 year payout. It pays about 5.2% a year at age 60-65. True the money is gone after 5 years, but it would be with the cash escrow plan, too. The return is greater, it is solid, and after 5 years i would buy another 5 year annuity from my investment returns. Like with all plans, the actual payouts may very depending on a quadrillion factors, but it seems to make sense to me.
Any advice? Anyone doing a plan like this (with or without annuities)?
My strategy is to sock away about 5-6 yrs of anticipated income needs as liquid, cash-like investments. The remainder of my nest egg will be in 60/40 or 65/35 stocks and bonds, well spread out. The 5-year income "escrow" fund will be replenished periodically from either stocks or bonds, mostly from whichever does better that year.
When everything is down, I will just drill deeper into my income escrow where I can wait it out for that 5 years if necessary. Nothing new here - it's a widely written-about strategy (e.g. DeMuth/Stein) which feels right to me.
Now, instead of a cash escrow (money market, treasuries, STB funds) growing at 3% per year (in order to remain rock solid), I wondered about buying an immediate annuity with a 5 year payout. It pays about 5.2% a year at age 60-65. True the money is gone after 5 years, but it would be with the cash escrow plan, too. The return is greater, it is solid, and after 5 years i would buy another 5 year annuity from my investment returns. Like with all plans, the actual payouts may very depending on a quadrillion factors, but it seems to make sense to me.
Any advice? Anyone doing a plan like this (with or without annuities)?