AUTHOR: Howard Schwartz on 8/21/2025 FIRST: Mark Crothers on 8/21/2025 | RECENT: Mark Crothers on 8/21/2025
Comments
Defined contribution plans with an annuity option are not a new idea. TIAA started offering them around 1920 and still does for millions of employees of schools and health care employers. I sold a 401(k) annuity option to plan sponsors in the mid 1990s. Very few employees chose it, due I think to poor communication of how it worked. I like guaranteed income which for most people is Social Security. I also like the idea of spending up to 25% of your investable dollars on a single premium fixed annuity to cover living expenses. The rest of your money can then be invested for growth. This is just me. Everyone does what they are comfortable with.
I put 10% of my portfolio in VNQ in 2008 for around $25 after real estate collapsed. It was one of my best decisions. It would not stop going up so I had to keep selling to rebalance which turned out to be one of my worst decisions. Go figure. Now I have none because I stopped making sector bets a few years ago.
The easiest way to avoid AUM fees is to figure how much cash to keep in a risk-free account and put the rest in a balanced fund. There are lots of choices and you can pick your risk level. Alternatively, choose a target date fund and put everything except the cash in it. This may not be tax efficient but will be inexpensive. Use the money you save to hire an hourly paid tax advisor.
I used to sell LTC insurance to my corporate customers for use by their employees. The insurance company underpriced the product, lost millions of dollars, raised the premiums substantially and finally gave the insureds a choice of taking much lower benefits, paying triple the premiums or basically abandoning the policies. It was a train wreck, and I am embarrassed to have sold the product, even though at the time I thought I was helping people. Go with self-funding or a CCRC if you can afford it.
I have a similar story to Mr. Quinn. We sold our 3,000 square foot 1961 colonial last fall to a young couple with two small children. They are remarkably like we were in 1993 when we bought the house. We bought a 3,000 square foot detached house in a 55+ community 15 miles away. We now have two more bathrooms, two fewer attics, one fewer basement and no outdoor work. We also added a water bill since the old house had a well and our taxes sadly rose by a couple of thousand dollars per year. The monthly HOA fee is only $367 because it only covers common expenses, lawn mowing and snow removal. We moved to rid ourselves of the stairs and outdoor tasks and to be able to live more social lives. We accomplished our goals and should have moved 10 years ago.
I earned an undergraduate business degree and an MBA. I made many good decisions and some poor ones over the years. I think I learned 20% of what I know from school and the rest on the job. Personal finance is so complicated now that I don't know how a regular person gets it right without expert assistance. As one of my professors once said, "the world is filled with promoters whose only goal is to separate you from your money".
I don't like debt or keeping lots of cash. If you have a taxable brokerage account you can convert it to a margin account which allows you to borrow money from the broker in an emergency. A bonus is that you can learn about hypothecation agreements.
Very interesting responses to the question. In reading through the portfolios, I did not see one mention of any senior loan funds (also called bank loan funds and floating rate funds). These funds are portfolios of loans made to less than investment grade companies who choose not to issue bonds. The loans are collateralized and are usually at the top of the capital structure, so even though the companies are not investment grade, there is some protection in a bankruptcy. The duration is negligible since the interest rates charged on the loans usually reset every quarter. The best feature for me is that these funds react to interest rate changes the opposite of conventional bonds. I use two funds, one from Fidelity and one from T Rowe Price. They yield 6-7% lately and the funds are very stable, not much price change, even in choppy markets. They pay interest monthly and this is an area where a managed fund can beat an index due to the need for intensive research. This is an underutilized asset class that belongs in many portfolios to the tune of 5-10% of the fixed income portion. Let me know what you think.
We moved to a 55 plus community in September. So far so good. No stairs, no grass cutting, no leaf raking, no pool maintenance, etc. Very friendly diverse group of seniors. I wish we moved 10 years ago.
Comments
Defined contribution plans with an annuity option are not a new idea. TIAA started offering them around 1920 and still does for millions of employees of schools and health care employers. I sold a 401(k) annuity option to plan sponsors in the mid 1990s. Very few employees chose it, due I think to poor communication of how it worked. I like guaranteed income which for most people is Social Security. I also like the idea of spending up to 25% of your investable dollars on a single premium fixed annuity to cover living expenses. The rest of your money can then be invested for growth. This is just me. Everyone does what they are comfortable with.
Post: Automatic Income stream? How important to you?
Link to comment from June 27, 2026
I put 10% of my portfolio in VNQ in 2008 for around $25 after real estate collapsed. It was one of my best decisions. It would not stop going up so I had to keep selling to rebalance which turned out to be one of my worst decisions. Go figure. Now I have none because I stopped making sector bets a few years ago.
Post: What’s in your portfolio ?
Link to comment from June 25, 2026
The easiest way to avoid AUM fees is to figure how much cash to keep in a risk-free account and put the rest in a balanced fund. There are lots of choices and you can pick your risk level. Alternatively, choose a target date fund and put everything except the cash in it. This may not be tax efficient but will be inexpensive. Use the money you save to hire an hourly paid tax advisor.
Post: Financial Planning
Link to comment from June 23, 2026
I used to sell LTC insurance to my corporate customers for use by their employees. The insurance company underpriced the product, lost millions of dollars, raised the premiums substantially and finally gave the insureds a choice of taking much lower benefits, paying triple the premiums or basically abandoning the policies. It was a train wreck, and I am embarrassed to have sold the product, even though at the time I thought I was helping people. Go with self-funding or a CCRC if you can afford it.
Post: How do you prepare for the long term care cost as retiree?
Link to comment from June 22, 2026
I have a similar story to Mr. Quinn. We sold our 3,000 square foot 1961 colonial last fall to a young couple with two small children. They are remarkably like we were in 1993 when we bought the house. We bought a 3,000 square foot detached house in a 55+ community 15 miles away. We now have two more bathrooms, two fewer attics, one fewer basement and no outdoor work. We also added a water bill since the old house had a well and our taxes sadly rose by a couple of thousand dollars per year. The monthly HOA fee is only $367 because it only covers common expenses, lawn mowing and snow removal. We moved to rid ourselves of the stairs and outdoor tasks and to be able to live more social lives. We accomplished our goals and should have moved 10 years ago.
Post: Thinking about downsizing? Think seriously
Link to comment from June 22, 2026
I earned an undergraduate business degree and an MBA. I made many good decisions and some poor ones over the years. I think I learned 20% of what I know from school and the rest on the job. Personal finance is so complicated now that I don't know how a regular person gets it right without expert assistance. As one of my professors once said, "the world is filled with promoters whose only goal is to separate you from your money".
Post: How financially illiterate are Americans?
Link to comment from June 20, 2026
I don't like debt or keeping lots of cash. If you have a taxable brokerage account you can convert it to a margin account which allows you to borrow money from the broker in an emergency. A bonus is that you can learn about hypothecation agreements.
Post: Leverage
Link to comment from June 20, 2026
Very interesting responses to the question. In reading through the portfolios, I did not see one mention of any senior loan funds (also called bank loan funds and floating rate funds). These funds are portfolios of loans made to less than investment grade companies who choose not to issue bonds. The loans are collateralized and are usually at the top of the capital structure, so even though the companies are not investment grade, there is some protection in a bankruptcy. The duration is negligible since the interest rates charged on the loans usually reset every quarter. The best feature for me is that these funds react to interest rate changes the opposite of conventional bonds. I use two funds, one from Fidelity and one from T Rowe Price. They yield 6-7% lately and the funds are very stable, not much price change, even in choppy markets. They pay interest monthly and this is an area where a managed fund can beat an index due to the need for intensive research. This is an underutilized asset class that belongs in many portfolios to the tune of 5-10% of the fixed income portion. Let me know what you think.
Post: What’s in your portfolio ?
Link to comment from June 17, 2026
I just read the interview. It was very well done. Bravo Adam!
Post: Adam Grossman on The Long View
Link to comment from May 29, 2026
We moved to a 55 plus community in September. So far so good. No stairs, no grass cutting, no leaf raking, no pool maintenance, etc. Very friendly diverse group of seniors. I wish we moved 10 years ago.
Post: Percentage that “age in place”
Link to comment from May 25, 2026