Dan, I would also agree that I'm in the camp that Soc Sec will get fixed eventually. One last point that made me consider an SPIA was death of a spouse and it's impact on the surviving spouse's RMD depletion of IRA withdrawals. I was the executor of my parents' will and assisted in managing their investments. When my father died in 2016, he had the largest IRA balance which my mother inherited. However, the scenario of moving from a joint RMD schedule to a Single RMD schedule quickly accelerated the withdrawals that she had to take from my father's IRA. This forced her to liquidate the IRA quicker than she needed, caused higher tax bills because she had more income(than needed) and her tax filing status changed from married to single, and also created more emotional angst that she would run out of money. Having witnessed this, I decided to use my part of my IRA as the funding source for the SPIA. Why 1. To remove the emotional angst of outliving your money
2.Spread the tax hit over a potentially longer timeframe
3.Created a "paycheck lifestyle" that made my wife feel more comfortable assuming I checked out earlier then her Food for thought that should also be considered in purchasing an SPIA or not.
Dan, I was in the "never an annuity camp" for ten years but eventually bought a SPIA 2 years ago to supplement soc security income. The combination provided a "guaranteed income(eg monthly paycheck)" that covers our basic expenses. Aside from the quantitative arguments for and against annuitizing part of the investment pie, I would recommend that folks consider the psychological/emotional/behavior dimension of having a certain level of guaranteed monthly income coming in. Before I purchased the annuity, I presented the pros & cons of annuity to my wife and her short answer was "I like the security of having a monthly paycheck. It gives me emotional peace". And therein lies another dimension - emotional behavior - that is a very important factor to consider as well. One last point, if in 2034 Social Security income payouts are reduced to the Trust fund depletion, what's one's response that? Reach for a more aggressive asset allocation in an attempt to increase one's Rate of Return to makeup for the Soc Sec shortfall when we're in the late season of our life. Just sayin ........
I had planned on retiring in 2000, but two 50% stock market drawdowns (2000-2002 & 2007-2009) interrupted my plan. On paper my stock investments soared in the late 90s due to tech investments and then after the bubble popped the s&p 500 market went sideways for more than a decade. The market didn't fully recover(from 2000) until 2013. Due to the AI phenomena, the past few years S&P 500 returns feel eerily similar to the late 1990s due the FAANG concentration. Given the debt we're carrying as a country, the geopolitical environment, the Fed's artificial low interest rate environment the past 15yrs causing a mispricing in assets, etc - I think the latter half of the 2020s certainly would lend itself to being more cautious of "high growth assets" and sets us up for a lower returns. All this to say for anyone in retirement, or about to retire, that derives their income from the equity/fixed income markets - asset diversification, income/expense mgt, "time segmentation or buckets" etc is even more important IMHO. I did eventually retire in 2009 but learned that the ideas & concepts that Johnathan has written about are invaluable and best put into practice early. I put many of these concepts into place after 2009 by educating myself, reading and taking a couple of classes. And more importantly, luck was also on my side given that I had the financial income level to set aside the necessary assets. But I say this with great appreciation for anyone reading the HumbleDollar content, thank you Johnathan for creating a forum and an educational platform whereby people who want to be informed, educated and can share their life and economic journeys. Life's experiences hold the most valuable lessons.
Dan, I've found the customer service to be excellent via phone or physical center. I have a friend who just transferred all of his accounts from Vanguard to Fidelity due to VG's customer service issues. I showed him everything that I do using Fidelity's services and he's been very pleased with the move, including the interactions with the local branch acct exec and website tools. Evidently, based on Fidelity rep's comment, Fidelity is picking up a lot of former VG clients due to deteriorating customer service.
I consolidated everything under Fidelity's umbrella a couple of years ago and have been very pleased with their service and website. I also moved all of my mom's financial accounts to Fidelity many years ago since I was managing her money. She died in 2023 and as executor of her estate I was able to easily handle the division of her financial assets to her heirs within 30 days of death. Having visibility to all of her transactions, acct balances and correct beneficiary setup allowed for a smooth and quick dispensation.
Interesting topic. I think one's lifelong attitude - "happy vs unhappy, glass half-full vs half empty" is a major attribute that drives how we live our lives. I also would substitute the word "contented" vs "happiest". I find that "contented or happy" personalities tend to have a greater probability of experiencing the attributes that Jonathan has listed. The highway of life has many potholes and I find that a sense of humor provides needed shock absorbers and contentment provides the guardrails to keep us in our lane.
Here's the link to the article that you're referring to. i'm not a premium subscriber and it's available for public consumption: https://www.morningstar.com/portfolios/experts-forecast-stock-bond-returns-2025-edition
After a 30yr career in IT, I decided at 56yo to "rewire" vs "retire". I wasn't sure what rewiring would actually look like, but I was game to give it a try. My financial goal was to be "financially independent" by my mid 50s, so if I wanted to work or "rewire" I could. I was fortunate to work for good employers, living below our means and a corporate buyout sped me on my way. Have never regretted the decision to "rewire" since "time" and how you spend it is one of the most precious gifts the good Lord gives you. I happened to have the gift of time & independence to assist my parents in the latter stages of their lives, as well as enjoy more time with my loving wife.
Richard, I resisted purchasing a SPIA for 10 yrs and really didn't foresee myself allocating resources to annuities. However, at 70yo, I joined the "dark side" and recently purchased 2 annuities(kept under the State Guarantee levels) from Mass Mutual & NY Life for the following reasons:
Simplicity - I don't have a pension but wanted enough guaranteed income to cover fixed expenses + some discretionary spending. It aligned with my Soc Sec claiming strategy to start drawing max monthly allowance @ 70yo plus SPIA income to cover shortfall that Soc Sec didn't cover.
Psychological - since I have enough guaranteed income sources to cover our annual expenses, the wife feels better and I don't have to worry about stock mkt returns as much.
Annuity payout and mortality credits were higher in 2023 than many years given the rise in interest rates plus our age. Our breakeven for return was about 13yrs so after that we're rewarded if longevity favors us which family history supports. If we die before the 13yrs, the kids get a payout of whatever principal remains.
Asset allocation decisions - having enough guaranteed income allows me to be a little more aggressive with asset allocation for future possible returns and heir's inheritance. So, the the investment bucket is allocated to 5 index etfs and thus called it a day
So, those were my reasons and I sleep well at night. I believe Jonathan had posted previously that he was considering a similar strategy. Anyway, your mileage may vary but those were my reasons.
Comments
Kathy, I currently live in the RTP area like you. My wife and i have just started discussions concerning CCRCs. May I ask which CCRC you chose?
Post: Assisted Living – How will you choose?
Link to comment from May 12, 2025
Dan, I would also agree that I'm in the camp that Soc Sec will get fixed eventually. One last point that made me consider an SPIA was death of a spouse and it's impact on the surviving spouse's RMD depletion of IRA withdrawals. I was the executor of my parents' will and assisted in managing their investments. When my father died in 2016, he had the largest IRA balance which my mother inherited. However, the scenario of moving from a joint RMD schedule to a Single RMD schedule quickly accelerated the withdrawals that she had to take from my father's IRA. This forced her to liquidate the IRA quicker than she needed, caused higher tax bills because she had more income(than needed) and her tax filing status changed from married to single, and also created more emotional angst that she would run out of money. Having witnessed this, I decided to use my part of my IRA as the funding source for the SPIA. Why 1. To remove the emotional angst of outliving your money 2.Spread the tax hit over a potentially longer timeframe 3.Created a "paycheck lifestyle" that made my wife feel more comfortable assuming I checked out earlier then her Food for thought that should also be considered in purchasing an SPIA or not.
Post: A False Sense of Security
Link to comment from April 29, 2025
Dan, I was in the "never an annuity camp" for ten years but eventually bought a SPIA 2 years ago to supplement soc security income. The combination provided a "guaranteed income(eg monthly paycheck)" that covers our basic expenses. Aside from the quantitative arguments for and against annuitizing part of the investment pie, I would recommend that folks consider the psychological/emotional/behavior dimension of having a certain level of guaranteed monthly income coming in. Before I purchased the annuity, I presented the pros & cons of annuity to my wife and her short answer was "I like the security of having a monthly paycheck. It gives me emotional peace". And therein lies another dimension - emotional behavior - that is a very important factor to consider as well. One last point, if in 2034 Social Security income payouts are reduced to the Trust fund depletion, what's one's response that? Reach for a more aggressive asset allocation in an attempt to increase one's Rate of Return to makeup for the Soc Sec shortfall when we're in the late season of our life. Just sayin ........
Post: A False Sense of Security
Link to comment from April 29, 2025
I had planned on retiring in 2000, but two 50% stock market drawdowns (2000-2002 & 2007-2009) interrupted my plan. On paper my stock investments soared in the late 90s due to tech investments and then after the bubble popped the s&p 500 market went sideways for more than a decade. The market didn't fully recover(from 2000) until 2013. Due to the AI phenomena, the past few years S&P 500 returns feel eerily similar to the late 1990s due the FAANG concentration. Given the debt we're carrying as a country, the geopolitical environment, the Fed's artificial low interest rate environment the past 15yrs causing a mispricing in assets, etc - I think the latter half of the 2020s certainly would lend itself to being more cautious of "high growth assets" and sets us up for a lower returns. All this to say for anyone in retirement, or about to retire, that derives their income from the equity/fixed income markets - asset diversification, income/expense mgt, "time segmentation or buckets" etc is even more important IMHO. I did eventually retire in 2009 but learned that the ideas & concepts that Johnathan has written about are invaluable and best put into practice early. I put many of these concepts into place after 2009 by educating myself, reading and taking a couple of classes. And more importantly, luck was also on my side given that I had the financial income level to set aside the necessary assets. But I say this with great appreciation for anyone reading the HumbleDollar content, thank you Johnathan for creating a forum and an educational platform whereby people who want to be informed, educated and can share their life and economic journeys. Life's experiences hold the most valuable lessons.
Post: I’m concerned about the stock market. How concerned are you? Jonathan, any comforting words?
Link to comment from March 30, 2025
Dan, I've found the customer service to be excellent via phone or physical center. I have a friend who just transferred all of his accounts from Vanguard to Fidelity due to VG's customer service issues. I showed him everything that I do using Fidelity's services and he's been very pleased with the move, including the interactions with the local branch acct exec and website tools. Evidently, based on Fidelity rep's comment, Fidelity is picking up a lot of former VG clients due to deteriorating customer service.
Post: Breaking Up Is Hard To Do
Link to comment from March 7, 2025
I consolidated everything under Fidelity's umbrella a couple of years ago and have been very pleased with their service and website. I also moved all of my mom's financial accounts to Fidelity many years ago since I was managing her money. She died in 2023 and as executor of her estate I was able to easily handle the division of her financial assets to her heirs within 30 days of death. Having visibility to all of her transactions, acct balances and correct beneficiary setup allowed for a smooth and quick dispensation.
Post: Breaking Up Is Hard To Do
Link to comment from March 7, 2025
Interesting topic. I think one's lifelong attitude - "happy vs unhappy, glass half-full vs half empty" is a major attribute that drives how we live our lives. I also would substitute the word "contented" vs "happiest". I find that "contented or happy" personalities tend to have a greater probability of experiencing the attributes that Jonathan has listed. The highway of life has many potholes and I find that a sense of humor provides needed shock absorbers and contentment provides the guardrails to keep us in our lane.
Post: Who’s Happy?
Link to comment from February 28, 2025
Here's the link to the article that you're referring to. i'm not a premium subscriber and it's available for public consumption: https://www.morningstar.com/portfolios/experts-forecast-stock-bond-returns-2025-edition
Post: Is There a Change Coming in the Direction of the Markets’ Winds?
Link to comment from January 15, 2025
After a 30yr career in IT, I decided at 56yo to "rewire" vs "retire". I wasn't sure what rewiring would actually look like, but I was game to give it a try. My financial goal was to be "financially independent" by my mid 50s, so if I wanted to work or "rewire" I could. I was fortunate to work for good employers, living below our means and a corporate buyout sped me on my way. Have never regretted the decision to "rewire" since "time" and how you spend it is one of the most precious gifts the good Lord gives you. I happened to have the gift of time & independence to assist my parents in the latter stages of their lives, as well as enjoy more time with my loving wife.
Post: Time’s Up
Link to comment from November 16, 2024
Richard, I resisted purchasing a SPIA for 10 yrs and really didn't foresee myself allocating resources to annuities. However, at 70yo, I joined the "dark side" and recently purchased 2 annuities(kept under the State Guarantee levels) from Mass Mutual & NY Life for the following reasons:
- Simplicity - I don't have a pension but wanted enough guaranteed income to cover fixed expenses + some discretionary spending. It aligned with my Soc Sec claiming strategy to start drawing max monthly allowance @ 70yo plus SPIA income to cover shortfall that Soc Sec didn't cover.
- Psychological - since I have enough guaranteed income sources to cover our annual expenses, the wife feels better and I don't have to worry about stock mkt returns as much.
- Annuity payout and mortality credits were higher in 2023 than many years given the rise in interest rates plus our age. Our breakeven for return was about 13yrs so after that we're rewarded if longevity favors us which family history supports. If we die before the 13yrs, the kids get a payout of whatever principal remains.
- Asset allocation decisions - having enough guaranteed income allows me to be a little more aggressive with asset allocation for future possible returns and heir's inheritance. So, the the investment bucket is allocated to 5 index etfs and thus called it a day
So, those were my reasons and I sleep well at night. I believe Jonathan had posted previously that he was considering a similar strategy. Anyway, your mileage may vary but those were my reasons.Post: An Annuity Instead?
Link to comment from December 29, 2023