The words of wisdom from the person most responsible for the wealth MOST HD readers enjoy today:
STAY THE COURSE
I can’t time the market. I don’t know anyone who can time the market. I don’t know anyone who knows anyone that can time the market.
John “Jack” Bogle
When I retired last year, our SS Benefits provided @$72,192 and our Annuities provided $36,582.92. This year SS provided $73,340…so we have @$109,922.92 in income. The annuities are 72% income tax free, since they were bought with Roth Dollars. Total Retirement expenses, not including Travel, are $62,000 including 10% charitable giving.
RMDs for this year are an additional $15,430.97, but most of that will be QCDs.
For the first time in many years, we got a refund from the IRS and State of NC. Total $7,344.00.
From the market high of 2-19-25, our portfolio has “lost” $29,660.80. However, since we are not withdrawing from those funds, market volitility doesn’t affect our income. This was the exact reason I bought the Indexed Annuities with income riders, the year before I retired. Since the greatest danger for new retirees is sequence of returns risk and the 2nd greatest risk is longevity risk, I solved both of those issues right up front.
I put 45% of our portfolio in Annuities, guaranteeing our income, with 2/3rds of our total income it enjoying a COLA through the SS Benefits. Since our other income is 72% income tax free, this also lowered the amount of our SS Benefits subject to income taxes.
The balance is in VTI and VXUS. Vanguard has forecasted greater returns for Non-domestic over the next 10 years as well, so I may do some rebalancing to increase my non-domestic exposure. Currently I am @85/15 US/Non-US.
Market volatility “sucks, ” but someone once said, “Volatility is the price you pay for market returns.”
Kevin, thanks for the detailed comment. I have no practical experience with income annuities. If you were so inclined I’d be interested in a “nuts and bolts” post of how you chose your annuities, how did you purchase them, why you chose specific types, did you use a broker, does it make sense to ladder deferred annuities, or maybe mix and match SPIA with deferred for a pseudo-COLA? Thanks.
Since I wrote my piece a few years back about the DIA I bought then, we bought a second, immediate annuity and I’ve learned a bit:
Annuity payout rates seem to correlate well with the Moody’s Seasoned Baa corporate bond yield metric on FRED: https://fred.stlouisfed.org/series/DBAA. Age at purchase also makes a big difference, of course. Our first one, bought in 2020 when yields were on the floor, will pay less over its lifetime than the newer one, bought when yields were closer to long-term averages.I knew going into the first one that inflation was the biggest threat to annuity value and buying power (assuming you buy from highly-rated issuers), hence the 3% COLA. But the recent little burst of inflation we experienced helped me see that annuities are best purchased as immediate, not deferred.The amount of income that’s taxable varies according to the funding source, the age at which income starts, and the size of expected returns over the lifetime of the annuity. You’ll get a planned schedule of payouts for each year which also shows how much of the income will be taxable.ImmediateAnnuities.com (based in NJ but sells nation-wide) has been good to work with.
I would hope that most that frequent this forum are somewhat seasoned investors that realize there will be times when the market declines. It is a time to ignore all of the drama including R Quinn’s post and re-balance when necessary. The idea of dealing with the stock market conjures up a vision of gambling which is not what true investors believe.
The words of wisdom from the person most responsible for the wealth MOST HD readers enjoy today:
John “Jack” Bogle
When I retired last year, our SS Benefits provided @$72,192 and our Annuities provided $36,582.92. This year SS provided $73,340…so we have @$109,922.92 in income. The annuities are 72% income tax free, since they were bought with Roth Dollars. Total Retirement expenses, not including Travel, are $62,000 including 10% charitable giving.
RMDs for this year are an additional $15,430.97, but most of that will be QCDs.
For the first time in many years, we got a refund from the IRS and State of NC. Total $7,344.00.
From the market high of 2-19-25, our portfolio has “lost” $29,660.80. However, since we are not withdrawing from those funds, market volitility doesn’t affect our income. This was the exact reason I bought the Indexed Annuities with income riders, the year before I retired. Since the greatest danger for new retirees is sequence of returns risk and the 2nd greatest risk is longevity risk, I solved both of those issues right up front.
I put 45% of our portfolio in Annuities, guaranteeing our income, with 2/3rds of our total income it enjoying a COLA through the SS Benefits. Since our other income is 72% income tax free, this also lowered the amount of our SS Benefits subject to income taxes.
The balance is in VTI and VXUS. Vanguard has forecasted greater returns for Non-domestic over the next 10 years as well, so I may do some rebalancing to increase my non-domestic exposure. Currently I am @85/15 US/Non-US.
Market volatility “sucks, ” but someone once said, “Volatility is the price you pay for market returns.”
Happy Retirement Folks!
Kevin, thanks for the detailed comment. I have no practical experience with income annuities. If you were so inclined I’d be interested in a “nuts and bolts” post of how you chose your annuities, how did you purchase them, why you chose specific types, did you use a broker, does it make sense to ladder deferred annuities, or maybe mix and match SPIA with deferred for a pseudo-COLA? Thanks.
Hey Rick, there’s a bit about income annuities in the Guide, with links to past pieces on both immediate (SPIA) and deferred:
https://humbledollar.com/money-guide/income-annuities/
https://humbledollar.com/money-guide/longevity-insurance/
Since I wrote my piece a few years back about the DIA I bought then, we bought a second, immediate annuity and I’ve learned a bit:
Annuity payout rates seem to correlate well with the Moody’s Seasoned Baa corporate bond yield metric on FRED: https://fred.stlouisfed.org/series/DBAA. Age at purchase also makes a big difference, of course. Our first one, bought in 2020 when yields were on the floor, will pay less over its lifetime than the newer one, bought when yields were closer to long-term averages.I knew going into the first one that inflation was the biggest threat to annuity value and buying power (assuming you buy from highly-rated issuers), hence the 3% COLA. But the recent little burst of inflation we experienced helped me see that annuities are best purchased as immediate, not deferred.The amount of income that’s taxable varies according to the funding source, the age at which income starts, and the size of expected returns over the lifetime of the annuity. You’ll get a planned schedule of payouts for each year which also shows how much of the income will be taxable.ImmediateAnnuities.com (based in NJ but sells nation-wide) has been good to work with.
I would hope that most that frequent this forum are somewhat seasoned investors that realize there will be times when the market declines. It is a time to ignore all of the drama including R Quinn’s post and re-balance when necessary. The idea of dealing with the stock market conjures up a vision of gambling which is not what true investors believe.