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

[TheWizard]

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?

You need first to understand that TIAA VAs have a 4% Assumed Investment Return (AIR).
So if I'm getting $1600 a month from a CREF Stock annuity now, then it has to increase in value by 4% for me to get the same $1600/month a year from now.

If CREF Stock's NAV (including dividends) decreases by 20% over the next twelve months, then my monthly payout for that month would be 0.80/1.04 = 0.7692
of my present amount, which is around $1230 for that month.

Fortunately, the broad stock market tends to go up around 10% per year, ON AVERAGE.

You can track CREF Stock, including dividends, by watching QCSTIX. I do it at Financial Times:
https://markets.ft.com/data/funds/tearsheet/historical?s=QCSTIX

 

[pb4uski]

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.

The IRR on a 10-year annuity certain is about 3.5%.... not too bad. But I think a CD/UST/GSE bond ladder is just as good and you can access that money if you need to.

 

[ShokWaveRider]

The IRR on a 10-year annuity certain is about 3.5%.... not too bad. But I think a CD/UST/GSE bond ladder is just as good and you can access that money if you need to.

I tend to agree, I have no issue with self-managed withdrawals. I do need some tax deferral till December 2024 though.

 

[HarryHawk]

What are your plans for long term care? Those expenses can throw a real monkey wrench into the works for the spouse. Having liquidity provides at least the opportunity to minimize impact.

Long term care can bleed a couple's assets dry, leaving the surviving spouse very little left.

 

[OldShooter]

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

Enough to pay the bills in what year? 2022? 2042?

 

[OldShooter]

... what's the standard deviation that you observed?

Be careful with this. Despite its popularity, SD applies only to normal, aka Gaussian, distributions. These are statisticians' playthings: https://en.wikipedia.org/wiki/Normal_distribution

The problem is that SD is not useful for distributions that are not Gaussian, and there are lots of distributions that are not. For example, stock prices and the weather.

Stock price distributions are not symmetric, have fat tails, and have a slight upward bias. Importantly, too, the samples are not independent -- which is a requirement for a Gaussian distribution. Multiple studies show the momentum effects. So beware of going too far with SD in the markets.

Another example of SDs being useless is with the current crop of "1000 year" floods. Weather is not Gaussian either and the distribution with global warming is not even static, but an ignorant assumption that it is Gaussian yields the silly "1000 year" pronouncements.

 

[Lawrence of Suburbia]

Enough to pay the bills in what year? 2022? 2042?

Any year after age 70 or preferably at bit more, at a minimum. You get an 8%+ SPIA payout. Add enough to what you're getting from S.S. to pay the basic bills. This reduces the withdrawal rate percentage from your remaining portfolio and, with basics covered, you can increase the percentage of stocks owned to keep ahead of inflation.

Is a SPIA a magic bullet? Probably not for everyone. If one is so rich that the withdrawal rate is 2% or something, one probably doesn't need SPIA. If one's withdrawal rate is 3-5%, one is a likely candidate. Above 5-6%, one probably doesn't have enough saved to retire.

 

[TheWizard]

...Is a SPIA a magic bullet? Probably not for everyone. If one is so rich that the withdrawal rate is 2% or something, one probably doesn't need SPIA. If one's withdrawal rate is 3-5%, one is a likely candidate. Above 5-6%, one probably doesn't have enough saved to retire.

Change SPIA to Pension in the above and see if it still makes sense...

 

[all4j]

If it were me, I'd likely go with one of the approaches already mentioned. However, I'll throw another possibility in the mix in case someone else has experience/insight. You sound like a candidate for a charitable remainder (or uni-) trust. I've not looked into recently & don't know how competitive the rates are or your tax situation. Perhaps overkill and/or excess complications.

 

[FloridaJim57]

TIAA

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...

Not to hijack the thread, but may I ask "what does qualify for TIAA" ?

 

[NW-Bound]

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...

It appears that the OP's finance is reasonably secure, and I don't recall that he is a big spender. So, why there's a problem?

Just two days ago, I talked to my wife about our finance. If I take the 4% SWR and add to it our SS (mine yet to be claimed), it is way way more than $200K. Higher Medicare premium does not scare me (nice problem to have). And we don't even spend $100K, not having any debt nor expensive habits.

So, I have not bothered with FIRECalc long ago, and concentrated on other financial matters. Yes, I still like to make more money from investing activities, because it's fun.

PS. I also told my wife I discovered that just the dividends and interests from the portfolio plus our SS are way more than $100K, and of course more than we spend. The capital gains and my substantial trading gains are just to look at.

 

[TheWizard]

Not to hijack the thread, but may I ask "what does qualify for TIAA" ?

See attached PDF file.

 

[almost there]

Any way to get the annual 120k down? And owe less taxes every year?
Thats what I would focus on anyway.

 

[hmango]

There is a book called Nest Egg Care by Tom Canfield that covers a methodology on how to maximize your withdrawals. His book is referenced on the FIRECalc website under the Resource tab. It has some helpful information on how to deal with all the unknowns (e.g., longevity, market returns, etc.) and develop a plan for how to enjoy more now while you are alive.

 

[almost there]

As its all taxable, what is your current age? 120k income source? IRA? Have much time left for Roth conversions? I would focus more on Taxes....As the way things are going they will be going up in the future...

In a similar boat. SS next year (Jan 2024) at 62 will be 38k (added "both wife and I" to clarify) ,
annuity from cash bal. acct. 18k, rental income 38k.
Did years of roth conversions to get the IRA down to 500k. Built a 5 yr CD ladder with that and will pull 30k a year out of till its gone.
The rest will grow in roth accounts. For or the kids, if we go over 90/100 etc. I set mine up this way to keep in a low tax bracket.
Not super concerned about big gains these days. More worried about the govt. taxing me to death going forward.

 

[Al18]

In 2022, the maximum SS benefit is $2364 or $28368 per year.

 

[almost there]

In 2022, the maximum SS benefit is $2364 or $28368 per year.

Yes, my wife and I are 3 months apart. I used both...
Also taking in Jan 2024. Me 62/4 months, her 62 / 1 month.
Mine is $2175 today + her 33% $718 (we are both 60 as of today)
Should see a 10%+ bump combining both Jan. 2023 and Jan. 2024 increase

 

[TheWizard]

In 2022, the maximum SS benefit is $2364 or $28368 per year.

No it isn't.
I get close to $4000/month, but I filed at 70.
Perhaps you mean for filing at FRA?

 

[braumeister]

No it isn't.
I get close to $4000/month, but I filed at 70.
Perhaps you mean for filing at FRA?

I'm sure he meant filing at 62.

 

[ShokWaveRider]

In 2022, the maximum SS benefit is $2364 or $28368 per year.

Not sure where you get that number from.

My projected for 70 (2024) before WEP is currently ~$4,000 a month. A small Canadian Pension will qualify for WEP. DW is currently collecting her SS after WEP has been calculated.

 

[Al18]

Almost there in post #40 mentioned he would start collecting SS soon at age 62 of 38K per year, which sounded too hi. The number I posted was off SS website for a single earner.

Almost there then clarified the 38K was for him and his wife.

Simple miscommunication - didn’t mean to start a war.

 

[Gearhead Jim]

DW and I are ages 75/77.

For our own investments, the 4% rule of thumb would allow us to take 4%/$4,000 per year, and increasing with inflation.

A quick look at immediateannuities.com shows that $100k would get us $8,040 per year as long as either of us is alive. That's 8%. No inflation adjustment.

Trying to do the math myself (?), it appears that the annual spending power of the annuity and the 4% rule, would be equal at about the 15 year point if we presume 5% annual inflation. If we both die prior to that, we would have been better off to buy an annuity. If we live longer than that, the 4% rule gets ahead on an annual basis and soon gets ahead on the total payout. (We would not annuitize more than about 25% of our investment).

Although we both seem healthy, still being alive at 90/92 seems questionable. Being alive and having enough brain power and mobility to enjoy the money, seems much more of a long shot.

Thoughts?

 

[almost there]

From the "One thing that seldom gets mentioned" category
Everyone I have known personally spends less in their 80's than 60's, 70's.
Did a quick search and it seems I am not the only one who noticed.
Maybe its not discussed much here as its "Early Ret.org"
Having been here 13 years now, time is flying by...

"Do retired people spend less as they get older? Apparently, they do. On average, retirees age 60 or older trim their spending by 2.5 percent a year, or by about 20 percent over a 10-year period, according to a new report by United Income"

The other side is Inflation & Health care.
But those in their 80's in my circle hardly spend anything.
They notice the cost of goods / food / gas going up more than most.
It bothers them, but has little effect on their actual finance's.

 

[MarieIG]

From the "One thing that seldom gets mentioned" category
Everyone I have known personally spends less in their 80's than 60's, 70's.
Did a quick search and it seems I am not the only one who noticed.
Maybe its not discussed much here as its "Early Ret.org"
Having been here 13 years now, time is flying by...

"Do retired people spend less as they get older? Apparently, they do. On average, retirees age 60 or older trim their spending by 2.5 percent a year, or by about 20 percent over a 10-year period, according to a new report by United Income"

The other side is Inflation & Health care.
But those in their 80's in my circle hardly spend anything.
They notice the cost of goods / food / gas going up more than most.
It bothers them, but has little effect on their actual finance's.

Spent a lot on care for DF during his final years. Before that, he liked to spend money on the family, so his spending went up, not down. Obviously YMMV