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.
Meanwhile, every firm in my survey is expecting higher returns from non-US stocks than domestic over the next 10 years, and some firms’ 10-year bond market forecasts are higher than their return expectations for US stocks.
on 12/11/24 Morningstar published the following article:
….we estimate that a new retiree planning for a 30-year time horizon can safely withdraw 3.7% of a portfolio with an equity weighting of between 20% and 50%
At the time I went from my plan of a balanced portfolio to 45% equities, so just a small tweak. My current portfolio is 32 US Equities, 13% International Equities, 45% fixed income (mostly short term), and 10% cash. Yesterday the US Morningstar index went down 1.9%, my portfolio decreased 0.63%.
I pay about $250 a year for a premium membership to Morningstar (my only portfolio cost) and it’s worth every penny.
I am currently performing monthly (to sort of dollar cost average) Roth conversions in my wife’s IRA (the smaller of our two retirement accounts). I am trying to covert all before I turn 70 and we both start collecting Social Security in a few years. This way when we turn 73 we will only have to take RMDs from my account which is currently twice as large as her balance. I’m targeting converting at least 60K this year (to maximize the 12% tax bracket), so converting 5K monthly. If the Morningstar US Market Index drops to correction level (10%) will triple up the monthly conversion that day so I can convert more shares.
Dick, regardless of the crazy prices we’ll hear from moody Mr. Market over the coming months, you’ll still get your pension check, your SS check, and the dividends and interest from stock and bond savings. This too shall pass.
Looks like the S&P 500 is just 7% below its all-time high. Not terribly upsetting, I’d say. When it hits 25% or 30% down, and folks start freaking out, maybe there will be the chance to do some buying and make some serious money.
Meanwhile, how about those foreign stocks? Got to love diversification.
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.
On 1/14/2025 I posted this article from Morningstar:
https://www.morningstar.com/portfolios/experts-forecast-stock-bond-returns-2025-edition
with these findings:
Meanwhile, every firm in my survey is expecting higher returns from non-US stocks than domestic over the next 10 years, and some firms’ 10-year bond market forecasts are higher than their return expectations for US stocks.
on 12/11/24 Morningstar published the following article:
https://www.morningstar.com/retirement/whats-safe-retirement-spending-rate-2025
with the following findings:
….we estimate that a new retiree planning for a 30-year time horizon can safely withdraw 3.7% of a portfolio with an equity weighting of between 20% and 50%
At the time I went from my plan of a balanced portfolio to 45% equities, so just a small tweak.
My current portfolio is 32 US Equities, 13% International Equities, 45% fixed income (mostly short term), and 10% cash.
Yesterday the US Morningstar index went down 1.9%, my portfolio decreased 0.63%.
I pay about $250 a year for a premium membership to Morningstar (my only portfolio cost) and it’s worth every penny.
I am currently performing monthly (to sort of dollar cost average) Roth conversions in my wife’s IRA (the smaller of our two retirement accounts). I am trying to covert all before I turn 70 and we both start collecting Social Security in a few years. This way when we turn 73 we will only have to take RMDs from my account which is currently twice as large as her balance. I’m targeting converting at least 60K this year (to maximize the 12% tax bracket), so converting 5K monthly. If the Morningstar US Market Index drops to correction level (10%) will triple up the monthly conversion that day so I can convert more shares.
There’s a silver lining in every market cloud.
Smart to do the conversions before starting Social Security.
“You gotta be tough!” – J.L. Collins “The Simple Path to Wealth”
Dick, regardless of the crazy prices we’ll hear from moody Mr. Market over the coming months, you’ll still get your pension check, your SS check, and the dividends and interest from stock and bond savings. This too shall pass.
What part of don’t just do something, stand there, is proving difficult?
Actually, I did something. I turned off the tv….. It has the advantage of staying the course, as well as keeping blood pressure in check!
🙂 I have been watching “Escape to the Country” on Britbox instead of news….
One of my favorite shows
I’m moving 90% of my investments into Iraq Dinars and state lotteries. The other 10% I’m just going to waste.
😂
Looks like the S&P 500 is just 7% below its all-time high. Not terribly upsetting, I’d say. When it hits 25% or 30% down, and folks start freaking out, maybe there will be the chance to do some buying and make some serious money.
Meanwhile, how about those foreign stocks? Got to love diversification.
I wondered if someone might point out that ray of sunshine.
https://humbledollar.com/forum/how-quickly-we-forget-by-jonathan-clements/
I was wondering why my investments were not falling as much. Then I realized foreign stocks were up. Nice to see!
I know what to do! Ignore all of Jonathan’s past advice and sell everything. That will make him feel really great after all he’s done for us.