Supersaver but Investing Newbie

[TheWizard]

...My actual living expenses are about $30K/year household...

$30k per year seems quite low, especially for a couple.
How can you pay for a new car or new roof with that?
I suggest monitoring your expenses more closely and adding a buffer for infrequent large purchases.

And with all the free time in retirement, you should go on a Viking River Cruise, so add additional money to account for discretionary stuff like that...

 

[TheWizard]

One additional thing for the OP to consider is cash flow streams in retirement.
Social Security for most of of obviously, but TIAA is arguably the best place to annuitize a portion of your accumulation for lifetime monthly income, assuming you are in decently good health at that time.

So it's a good idea to decide approximately what your plan is for this.
Example: if your (revised) spending level for the year is $60,000 and your projected income from SS plus TIAA annuity is $50,000, this greatly reduces the pressure/stress on your portfolio to fund your basic retirement income...

 

[CautaServans]

WADR, @CautaServans, I strongly differ with @Semi-Retyrd on the value of that thread to you. It is long and complex. At your stage of investing knowledge the best that can come of it is you will get confused and, worse, come to believe that "complex" is a necessary investing style. It's not. In my 50+ years of investing experience, I have come to understand that complex is usually a road to failure. Don't let it be you.

And @TheWizard

Thanks for this guidance. I would prefer to keep it simple, though what is simple for a lot of people here is a learning curve for me! The distinction you make helps.

 

[CautaServans]

$30k per year seems quite low, especially for a couple.
How can you pay for a new car or new roof with that?
I suggest monitoring your expenses more closely and adding a buffer for infrequent large purchases.

And with all the free time in retirement, you should go on a Viking River Cruise, so add additional money to account for discretionary stuff like that...

We bought a little house in 2001 and put some work into it. It's very cheap, and our property taxes are low. We keep our cars for a long time. We have our savings and will pay for expenses out of a "house fund" that we stopped contributing to after not doing anything to the house for a few years.

Your point about taking time to do things and budgeting for it is well taken. We like hobbies. He plays music with friends and disc golf. We both garden and like to cook at home. I preserve food, read, and run for my hobbies. We're pretty cheap.

 

[Diogenes]

For really high earners or for younger folks, the whole bit about thrift, cashflow management and so on, is more important than investment acumen. But once our portfolios become large relative to our current or projected income, we have to mentally shift from being mere savers, to becoming investors.

A late-career person, even if still working full time, might be earning 5X or more annually from the portfolio, than from the W2 or 1099. That nowise means that the earnings are getting spent... they're just getting reinvested. Point being, that the penalty for not taking risks is a staggering opportunity cost. Reliance on certificates of deposit or the like becomes enormously costly.

But this is also scary and disconcerting. After all of those years of diligent saving, what if the market falls? What if we're encumbered by another "lost decade" shortly after a person who's never been in the market, finally enters the market?

 

[TheWizard]

For really high earners or for younger folks, the whole bit about thrift, cashflow management and so on, is more important than investment acumen. But once our portfolios become large relative to our current or projected income, we have to mentally shift from being mere savers, to becoming investors.

A late-career person, even if still working full time, might be earning 5X or more annually from the portfolio, than from the W2 or 1099. That nowise means that the earnings are getting spent... they're just getting reinvested. Point being, that the penalty for not taking risks is a staggering opportunity cost. Reliance on certificates of deposit or the like becomes enormously costly.

But this is also scary and disconcerting. After all of those years of diligent saving, what if the market falls? What if we're encumbered by another "lost decade" shortly after a person who's never been in the market, finally enters the market?

Fear mongering.
I'm not sure what your point is...

 

[COcheesehead]

First - Welcome to this forum. While we do not offer financial advice in the legal sense, we do offer opinions based on many years of experience with no expectation of personal gain.

That said my suggestion is to read my thread on certain alternative investments here -

Why I like certain alternative investments

Often alternative investments are looked upon as more risky, more difficult to value or just plain weird compared to ordinary stocks and bonds. People tend to think of them in the categories of precious metals or other commodities, artwork, rare books, fine wines or other more esoteric things...

www.early-retirement.org

Unfortunately perhaps due to interest, this thread has grown to around 26 pages and would likely take hours to digest. If your time is limited you might want to focus on my posts as they are mostly in the vein of a teacher. Reading the attachments are also important and many questions one might have are answered if the reader can wade through these.

The bottom line is that today most institutions and high net worth individuals allocate around 20% or more of their portfolios to alternative investments. The simple reason for this is they work by either increasing total return or reducing risk or both to an existing portfolio.

Until recently liquid alternatives with decent performance were not generally available to the individual investor. But today you no longer need to be a qualified investor in a hedge fund to access a few good liquid alternative funds.

So my advice is read and then decide if the ideas make sense to you.

Cheers, Dennis

I think your thread may be exactly what the OP is looking for. Some of the funds described in that thread have the highest risk adjusted returns of any funds I have seen along with some of the lowest volatility. Index funds have almost double the volatility and in some cases achieve lower returns.

 

[Diogenes]

Fear mongering.
I'm not sure what your point is...

1. Just because we succeeded earlier in life, in an earlier stage - possibly even succeeded brilliantly! - doesn't mean that we will succeed now.
2. There is always something to worry about. These worries aren't academic hand-wringing, mere edge-cases or nugatory trifles.
3. Continued success means embracing discomfort.
4. There's no such thing as "winning the game".
5. As we grow older, our "human capital" diminishes, while our fiscal capital grows. That brings a new set of responsibilities.
6. It's never too late to fail.

 

[CautaServans]

For really high earners or for younger folks, the whole bit about thrift, cashflow management and so on, is more important than investment acumen. But once our portfolios become large relative to our current or projected income, we have to mentally shift from being mere savers, to becoming investors.

A late-career person, even if still working full time, might be earning 5X or more annually from the portfolio, than from the W2 or 1099. That nowise means that the earnings are getting spent... they're just getting reinvested. Point being, that the penalty for not taking risks is a staggering opportunity cost. Reliance on certificates of deposit or the like becomes enormously costly.

But this is also scary and disconcerting. After all of those years of diligent saving, what if the market falls? What if we're encumbered by another "lost decade" shortly after a person who's never been in the market, finally enters the market?

Exactly. You have your finger on my pulse to be sure. I'm pretty amazed that my retirement funds from CDs and TIAA made much more than I do in gross salary in 2025.

I'm thinking that I should continue budgeting my CD taxes (on about $2K/month) from my wages while I work but then dollar-cost-average into international ETFs in Schwab with my meagre but still too-much salary. My regular take-home is about $1,145 every two weeks. I have been saving between $5k and $12k a year depending on if I take on additional work.

I'm just at a point where I feel like I have enough. It's what is coming in over and above that that I want to allocate and not just spend.

FWIW, I don't recycle dryer sheets. I don't even use them!

 

[CautaServans]

In most cases nowadays, you are not forced to annuitize your "restricted" TIAA Traditional.
But .....it's entirely possible that a particular institution could write that into their employer contract.

In my case, I annuitized a considerable amount with TIAA back in 2013 and it pays a bit more than double my SS benefit each month.

I have a few small restricted TIAA Traditional holdings that I'm exiting over a nine year period using something called a Transfer Payout Annuity.
This money stays in my TIAA 403(b) but I move it into stock index funds...

I really need to learn about these things. I saved this post because I just met the contact person at my U who works with TIAA and determines our plans. The state will cover annuities if the company goes sideways up to $250K. So, I am looking for an "out." I have about 30% in Traditional but will want to annuitize only about $250K of it when the time comes to retire.

Are you charged for taxes when you move money out of Traditional? If so, can you pay out of the amount you move or do you have to draw from savings?

 

[Al18]

You may want to choose annuities from several companies, rather than buying 1 from a single company to spread the default risk. You might also want to pick a fixed deferred annuity for x number of years (MYGA), which operate a lot more like CD's. Many let you withdraw up to 10% per year, penalty free or you can let it ride and collect interest at the end, or a combination of the two.

 

[CautaServans]

You may want to choose annuities from several companies, rather than buying 1 from a single company to spread the default risk. You might also want to pick a fixed deferred annuity for x number of years (MYGA), which operate a lot more like CD's. Many let you withdraw up to 10% per year, penalty free or you can let it ride and collect interest at the end, or a combination of the two.

Wow! That's helpful! I never thought about using another company. It shows I have a lot to learn. I'm saving this one! I was baffled by the annuity choices, but I will learn about MYGA.

 

[Al18]

A good source of annuity info is Compare Annuities with America’s Top Expert | The Annuity Man
You can also search his video's on Youtube

 

[TheWizard]

I really need to learn about these things. I saved this post because I just met the contact person at my U who works with TIAA and determines our plans. The state will cover annuities if the company goes sideways up to $250K. So, I am looking for an "out." I have about 30% in Traditional but will want to annuitize only about $250K of it when the time comes to retire.

Are you charged for taxes when you move money out of Traditional? If so, can you pay out of the amount you move or do you have to draw from savings?

Any withdrawal from a tax-deferred 403(b) or 401(k) is taxable as Ordinary Income. Transfers from one investment to another within the 403(b) are not withdrawals and are not taxable...

 

[TheWizard]

You may want to choose annuities from several companies, rather than buying 1 from a single company to spread the default risk. You might also want to pick a fixed deferred annuity for x number of years (MYGA), which operate a lot more like CD's. Many let you withdraw up to 10% per year, penalty free or you can let it ride and collect interest at the end, or a combination of the two.

In my considered opinion, TIAA is extremely unlikely to go into default on their annuity payout obligations.
Since 2013, there have been several years where my monthly Traditional annuity payout has been increased by a small amount solely at TIAA's discretion due to strong reserves.
No other insurance company is likely to do that with an SPIA...

 

[CautaServans]

In my considered opinion, TIAA is extremely unlikely to go into default on their annuity payout obligations.
Since 2013, there have been several years where my monthly Traditional annuity payout has been increased by a small amount solely at TIAA's discretion due to strong reserves.
No other insurance company is likely to do that with an SPIA...

I think you are probably right, but some of TIAA's choices and factors beyond their control concern me. They went from non-profit to for-profit. They had a class-action suit brought against them for high, hidden fees. They are 4% invested in private equity, which itself is not a problem, but clients have no way of seeing it in our accounts, so far as I can tell. Layer on top of that, through no fault of TIAA, the spate of colleges and university closures and disinvestment in the public sector are things to consider if we count on younger teachers, professors, researchers, and others who are invested in TIAA, undergoing a sector shift that reduces jobs.

 

[Time2]

I can't really cry about what I should have done.

Not like my neighbor that got out of the market after 9-11. He never got back in and what he held for 24 years was not even keeping up with inflation, 1% and 2% stuff. I never told him about the over $1M it cost him. I'm afraid he would avoid me.

 

[Al18]

I just checked TIAA AMBest credit rating - it’s A++, which is one of the highest, so little chance of having of a problem. Instead of buying a SPIA, you could buy two MYGA for $125K each for 7 years. Spend 5-10% each year from one, while letting the interest accumulate in the other. When they’re up for annual, you can decide how to proceed based on spending plans and health.

 

[TheWizard]

I just checked TIAA AMBest credit rating - it’s A++, which is one of the highest, so little chance of having of a problem. Instead of buying a SPIA, you could buy two MYGA for $125K each for 7 years. Spend 5-10% each year from one, while letting the interest accumulate in the other. When they’re up for annual, you can decide how to proceed based on spending plans and health.

A high credit rating, correct.
I never looked into MYGAs, likely not available in 2013.
But I have over $9000 a month coming in from my TIAA annuities, fixed and variable, so I'm happy with that...

 

[TheWizard]

I should mention that TIAA annuities are not available to the general public.
Only to employees of certain educational and nonprofit companies.
So that's a minor issue when trying to compare annuity payouts...

 

[CautaServans]

I just checked TIAA AMBest credit rating - it’s A++, which is one of the highest, so little chance of having of a problem. Instead of buying a SPIA, you could buy two MYGA for $125K each for 7 years. Spend 5-10% each year from one, while letting the interest accumulate in the other. When they’re up for annual, you can decide how to proceed based on spending plans and health.

That's great advice! Thanks!

 

[CautaServans]

A high credit rating, correct.
I never looked into MYGAs, likely not available in 2013.
But I have over $9000 a month coming in from my TIAA annuities, fixed and variable, so I'm happy with that...

That's awesome! I'm really grateful that people are saying which kinds of annuities they are taking. I understand them when I read basic descriptions, but I think it is something else altogether to understand the implications of the different types.

 

[pb4uski]

Late to the party, but since the OP seems uncomfortable with equities but concerned about inflation risk, perhaps they should look into TIPS and a TIPS ladder as a way of providing inflation adjusted cash flows in retirement and avoiding SORR.

 

[pb4uski]

...They are 4% invested in private equity, which itself is not a problem, but clients have no way of seeing it in our accounts, so far as I can tell. ...

You won't see it in your account, nor should you. TIAAs obligation is to pay you interest as stated in the contract. In order to pay you interest they invest your money in a wide variety of different assets like stocks, bonds, real estate, etc that are expected to yield more than what they are paying you, but their obligation to pay you doesn't change if what they invest in does well or does poorly.

It would only impact it in the extreme where they are unable to pay, but that is an extremely remote risk for a A++ rated company.

 

[pb4uski]

... Are you charged for taxes when you move money out of Traditional? If so, can you pay out of the amount you move or do you have to draw from savings?

It depends on what you move it to, which is why you need to be very careful.

To avoid a transfer being taxable you want to do a rollover to a traditional IRA which is also a tax-deferred account. Typically, the plan will send you a check made out to your broker followed by "FBO (your name)". FBO stands for "For the Benefit Of". You then deposit the check into your traditional IRA account with your broker. At tax time, your plan will send you a 1099-R for the withdrawal from the plan but with coding that it was a rollover. So it will be reported on your tax return but not included in income since it is a rollover.