John, Great to hear from you, and thanks for a fascinating and thought provoking article. One of the joys of HD is learning about other people's lives and the many different ways we humans navigate the journey. This article reminded me of something my father used to say when one of us returned from a trip. He was sincerely interested in hearing about where you went, what you did, what you learned, and interesting things you may have encountered. Upon your return we would sit down and he would say "So, you left here". That meant start at the beginning and tell your tale. Thanks for catching us up since "you left here".
You are correct, I should have been clearer. Per the IRS the life expectancy for an 82 year old male is about 9.1 years, so the exclusion ratio is 99.6%. But I specified a J&S, so I should have looked at that table. The exclusion ratio is more like 11.6 years, or 78%. Once past the exclusion period, the entire amount is taxable. Thanks for picking that up.
A question. Since annuity returns are so high, would you consider replacing a portion of your dividend producing assets with an annuity to free up some of the assets to do other things, like grandkids college? According to Fidelity’s income annuity tool, an 82-year-old male and 86-year-old female, living in NJ, could get an immediate annuity of $2,000 a month for $217,464. That is an 11% payout rate. This also includes a lump sum cash refund to your beneficiaries of the initial investment less any proceeds received prior to both dying. You mentioned in another comment that you would buy an annuity with after tax dollars, so it would be tax-free income. You have discussed using Muni Bond funds as a method to provide tax-free income to handle inflation. The Fidelity NJ Muni Fund has a current yield of 3.68%. To get the same $2,000 per month you would need $652,174 in the fund. It seems that if you bought the annuity you could lock in the same or more income, get a cash refund if you don’t live long enough to recover the initial investment, and free up around $400K for your family’s immediate needs.
It's great to hear from Jonathan. My takeaway from this is to be mindful of our actions, spending included. To Jonathan's last point, on several recent trips we have stayed at a variety of hotels, motels, inns, and ships. The luxury level varied quite a bit. In Jasper, Canada, there was a significant lack of available hotels due to wild fires the previous year. Our accommodations in a motel was significantly below what we usually select. So you can experience the highs and the lows in the same trip, and reestablish that appreciation for the Ritz. By the way, I have never stayed in a Ritz, but both of my children have.
Randy, I wasn't specifically trying to rebut #3. In my MIL case, her tax savings was brought on by a surgical induced dementia that required expensive memory care. We took advantage of the medical deductions to help her financial, but I'm sure she would have preferred to pay more in taxes and avoid dementia.
Mike, thanks for reading and commenting. I have seen this with my mother-in-law. She also lost her husband's traditional union pension. Her illness a few years after her husband's death allowed a significant amount of medical deductions and she paid no federal tax for the last 4 years of her life.
Bill, Thanks for pointing out the link in Rob Berger's email. I hadn't read his email yet. I am considering an in-kind conversion of a high yield stock (ordinary dividends) whose price is depressed. I hadn't considered doing a conversion with TIPS. I'm sure I speak for all HD readers that I hope we have many, many more years of your knowledge, wisdom, and experience.
William, thanks for reading. I ran "pseudo-RMD" case to simulate the impact had my passing occurred the first year we had to take RMDs. As I said in the last paragraph, I will continue to look at our plan and do some projections for the next few decades assuming various ages at death.
Comments
John, Great to hear from you, and thanks for a fascinating and thought provoking article. One of the joys of HD is learning about other people's lives and the many different ways we humans navigate the journey. This article reminded me of something my father used to say when one of us returned from a trip. He was sincerely interested in hearing about where you went, what you did, what you learned, and interesting things you may have encountered. Upon your return we would sit down and he would say "So, you left here". That meant start at the beginning and tell your tale. Thanks for catching us up since "you left here".
Post: The Number Is Not The Answer
Link to comment from October 11, 2026
You are correct, I should have been clearer. Per the IRS the life expectancy for an 82 year old male is about 9.1 years, so the exclusion ratio is 99.6%. But I specified a J&S, so I should have looked at that table. The exclusion ratio is more like 11.6 years, or 78%. Once past the exclusion period, the entire amount is taxable. Thanks for picking that up.
Post: Is now the time for an annuity?
Link to comment from October 3, 2026
A question. Since annuity returns are so high, would you consider replacing a portion of your dividend producing assets with an annuity to free up some of the assets to do other things, like grandkids college? According to Fidelity’s income annuity tool, an 82-year-old male and 86-year-old female, living in NJ, could get an immediate annuity of $2,000 a month for $217,464. That is an 11% payout rate. This also includes a lump sum cash refund to your beneficiaries of the initial investment less any proceeds received prior to both dying. You mentioned in another comment that you would buy an annuity with after tax dollars, so it would be tax-free income. You have discussed using Muni Bond funds as a method to provide tax-free income to handle inflation. The Fidelity NJ Muni Fund has a current yield of 3.68%. To get the same $2,000 per month you would need $652,174 in the fund. It seems that if you bought the annuity you could lock in the same or more income, get a cash refund if you don’t live long enough to recover the initial investment, and free up around $400K for your family’s immediate needs.
Post: Is now the time for an annuity?
Link to comment from October 2, 2026
It's great to hear from Jonathan. My takeaway from this is to be mindful of our actions, spending included. To Jonathan's last point, on several recent trips we have stayed at a variety of hotels, motels, inns, and ships. The luxury level varied quite a bit. In Jasper, Canada, there was a significant lack of available hotels due to wild fires the previous year. Our accommodations in a motel was significantly below what we usually select. So you can experience the highs and the lows in the same trip, and reestablish that appreciation for the Ritz. By the way, I have never stayed in a Ritz, but both of my children have.
Post: Jonathan’s Parting Thoughts: No. 6
Link to comment from October 2, 2026
Randy, I wasn't specifically trying to rebut #3. In my MIL case, her tax savings was brought on by a surgical induced dementia that required expensive memory care. We took advantage of the medical deductions to help her financial, but I'm sure she would have preferred to pay more in taxes and avoid dementia.
Post: Widow’s Penalty Redux
Link to comment from September 28, 2026
Mike, thanks for reading and commenting. I have seen this with my mother-in-law. She also lost her husband's traditional union pension. Her illness a few years after her husband's death allowed a significant amount of medical deductions and she paid no federal tax for the last 4 years of her life.
Post: Widow’s Penalty Redux
Link to comment from September 27, 2026
Bill, Thanks for pointing out the link in Rob Berger's email. I hadn't read his email yet. I am considering an in-kind conversion of a high yield stock (ordinary dividends) whose price is depressed. I hadn't considered doing a conversion with TIPS. I'm sure I speak for all HD readers that I hope we have many, many more years of your knowledge, wisdom, and experience.
Post: Widow’s Penalty Redux
Link to comment from September 27, 2026
Thanks Edmund. I always find looking at the numbers to be beneficial. It helps me understand the underlying factors and drivers.
Post: Widow’s Penalty Redux
Link to comment from September 26, 2026
John, thanks. I always enjoy your articles. You address important topics to all of us.
Post: Widow’s Penalty Redux
Link to comment from September 26, 2026
William, thanks for reading. I ran "pseudo-RMD" case to simulate the impact had my passing occurred the first year we had to take RMDs. As I said in the last paragraph, I will continue to look at our plan and do some projections for the next few decades assuming various ages at death.
Post: Widow’s Penalty Redux
Link to comment from September 26, 2026