That is one of many options on modern annuities, however generally options are not quite as good a deal as the basic annuity, so when you are shopping, it might not hurt to compare rates and consider alternative ways to accomplish the extras. From a sales point of view, these extras are designed to close sales that otherwise might be lost, as well as move away from direct apples-to-apples price shopping. (I'm not licensed any more.)
I only learned #1 this week when we had a scheduled call with an SS worker trying to start spousal benefit for my wife. (He was nice, by the way.) I missed this in my financial planning--she is not entitled to a spousal benefit since her income is higher than half my "FRA" benefit, yet we work together and file as self-employed. Reporting more income in her name would have (and will) increase her benefit. That's okay, I'm not perfect, but thanks for mentioning this, Adam. I wish I had heard it sooner.
I'm interested as to how you do the direct debit from checking. Can you explain? I've done it online, but not scheduled in advance. Is it just a matter of setting the scheduled date in the future?
For my part, I both pay the safe harbor amount, or more if I anticipate a bigger bill, and advise others to do so--right when we file the 1040 for the previous year. That eliminates withholding and forgetting both.
On the other hand, I also like and have used IRA withdrawals dedicated to taxes, often when I'm doing tax planning around November.
On the one hand, you are moving toward the margins, less relevant and more peripheral. On the other hand, you have discretion and choices in a wider measure. It will be interesting to see how these competing trends settle with you. May you find both meaning and contentment.
So sweet! Thanks for writing about this experience. Loving others through presence and awareness of their burdens. At 17 my father was in intensive care for three weeks and we thought he would die. It was overwhelming to all of us, but especially for me as the oldest child and only son and most of all for my mom. It left lasting scars.
This is one of those things that many tax advisors love to site for reasons why you shouldn't handle things yourself. I'm good at math and handle things myself, so I was quite conscious of and concerned about this as I went through these years.
However, as I ran scenarios I realized this was a bit of a false flag for me. Why? In the short term I was concerned about keeping my marginal tax rate at 12%, but I realized in the long term I would sooner or later be happy to keep it at 24% (using today's married tax brackets). That meant that worrying about these cliffs was insignificant long term compared to getting those tax-deferred dollars out sooner.
At the same time, I do always wait to decide how much to place in traditional IRAs vs Roth IRAs until I'm ready to file. That gives me a $17,200 cushion (in 2026) to dance around the edges of any cliffs when I actually file. Of course those traditional contributions are just going to be converted to Roth "next year."
I suspect you probably do know how to value an annuity in your asset allocation, but if you want to convert it to a lump sum for the purposes of portfolio management, an easy approximation is to value it as the amount of money that would be throwing off that income with an equivalent level of risk. For instance, a traditional annuity might have about the level of risk of a home mortgage, now paying perhaps 5% depending on origination date, so 10,000 in annual cash represents about $200000. Of course it's not precise, but I think it works pretty well for allocation purposes.
Sweet, Mike. I love hearing your story and find points of resonance with my own journey. As a Doctor of Ministry in Marriage and Family and LMFT, I have thought about providing more financial coaching to people in ministry. I agree with a recurring theme in this discussion--it's only fun coaching people who have ears to hear! But as I approach 70, that's okay because I don't need the money and I like to do a lot of other things, like "coach" grandkids about whatever they have ears to hear at the moment.
As a Rice grad I'm always interested in things including the words "Rice U" so I've noticed that a number of courses related to finance offered at Rice are also available via Coursera--they may even be free if you don't need a certificate, I haven't explored further.
I thoroughly enjoyed Robert Schiller's "Financial Markets" which I found on Coursera a while back. It sounded like one of those courses that becomes famous on a given campus, inviting many diverse majors to find room for it in their schedules.
I do have a classmate (chemical engineer in his case) who did a CFP in his 40s. He ended up contenting himself with managing the family funds without taking on the everpressing and complex client relationships which are the heart of any service profession.
Congratulations, Javier, in not only educating yourself but also completing the demands of both a graduate education and a certification process!
Comments
That is one of many options on modern annuities, however generally options are not quite as good a deal as the basic annuity, so when you are shopping, it might not hurt to compare rates and consider alternative ways to accomplish the extras. From a sales point of view, these extras are designed to close sales that otherwise might be lost, as well as move away from direct apples-to-apples price shopping. (I'm not licensed any more.)
Post: Financial Choices
Link to comment from September 12, 2026
I only learned #1 this week when we had a scheduled call with an SS worker trying to start spousal benefit for my wife. (He was nice, by the way.) I missed this in my financial planning--she is not entitled to a spousal benefit since her income is higher than half my "FRA" benefit, yet we work together and file as self-employed. Reporting more income in her name would have (and will) increase her benefit. That's okay, I'm not perfect, but thanks for mentioning this, Adam. I wish I had heard it sooner.
Post: Financial Choices
Link to comment from September 12, 2026
I'm interested as to how you do the direct debit from checking. Can you explain? I've done it online, but not scheduled in advance. Is it just a matter of setting the scheduled date in the future? For my part, I both pay the safe harbor amount, or more if I anticipate a bigger bill, and advise others to do so--right when we file the 1040 for the previous year. That eliminates withholding and forgetting both. On the other hand, I also like and have used IRA withdrawals dedicated to taxes, often when I'm doing tax planning around November.
Post: If Retirement is Getting Close
Link to comment from August 22, 2026
On the one hand, you are moving toward the margins, less relevant and more peripheral. On the other hand, you have discretion and choices in a wider measure. It will be interesting to see how these competing trends settle with you. May you find both meaning and contentment.
Post: Fear of the Unknown…
Link to comment from July 25, 2026
So sweet! Thanks for writing about this experience. Loving others through presence and awareness of their burdens. At 17 my father was in intensive care for three weeks and we thought he would die. It was overwhelming to all of us, but especially for me as the oldest child and only son and most of all for my mom. It left lasting scars.
Post: A Letter 40 Years Later: What Mrs. Dolezal Remembered
Link to comment from July 5, 2026
This is one of those things that many tax advisors love to site for reasons why you shouldn't handle things yourself. I'm good at math and handle things myself, so I was quite conscious of and concerned about this as I went through these years. However, as I ran scenarios I realized this was a bit of a false flag for me. Why? In the short term I was concerned about keeping my marginal tax rate at 12%, but I realized in the long term I would sooner or later be happy to keep it at 24% (using today's married tax brackets). That meant that worrying about these cliffs was insignificant long term compared to getting those tax-deferred dollars out sooner. At the same time, I do always wait to decide how much to place in traditional IRAs vs Roth IRAs until I'm ready to file. That gives me a $17,200 cushion (in 2026) to dance around the edges of any cliffs when I actually file. Of course those traditional contributions are just going to be converted to Roth "next year."
Post: A $30,000 Mistake
Link to comment from July 5, 2026
I suspect you probably do know how to value an annuity in your asset allocation, but if you want to convert it to a lump sum for the purposes of portfolio management, an easy approximation is to value it as the amount of money that would be throwing off that income with an equivalent level of risk. For instance, a traditional annuity might have about the level of risk of a home mortgage, now paying perhaps 5% depending on origination date, so 10,000 in annual cash represents about $200000. Of course it's not precise, but I think it works pretty well for allocation purposes.
Post: What’s in your portfolio ?
Link to comment from June 21, 2026
"That’s just basic financial planning: managing risk to a comfortable level instead of spending a fortune to eliminate it completely."
Post: Close to Everything I Need
Link to comment from June 21, 2026
Sweet, Mike. I love hearing your story and find points of resonance with my own journey. As a Doctor of Ministry in Marriage and Family and LMFT, I have thought about providing more financial coaching to people in ministry. I agree with a recurring theme in this discussion--it's only fun coaching people who have ears to hear! But as I approach 70, that's okay because I don't need the money and I like to do a lot of other things, like "coach" grandkids about whatever they have ears to hear at the moment.
Post: The Quiet Failure of Good Advice
Link to comment from June 6, 2026
As a Rice grad I'm always interested in things including the words "Rice U" so I've noticed that a number of courses related to finance offered at Rice are also available via Coursera--they may even be free if you don't need a certificate, I haven't explored further. I thoroughly enjoyed Robert Schiller's "Financial Markets" which I found on Coursera a while back. It sounded like one of those courses that becomes famous on a given campus, inviting many diverse majors to find room for it in their schedules. I do have a classmate (chemical engineer in his case) who did a CFP in his 40s. He ended up contenting himself with managing the family funds without taking on the everpressing and complex client relationships which are the heart of any service profession. Congratulations, Javier, in not only educating yourself but also completing the demands of both a graduate education and a certification process!
Post: The Quiet Failure of Good Advice
Link to comment from June 6, 2026