Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Annuities are "guaranteed" by the full faith and credit of the issuing organization.
Number 6 in the above list was on the crash list during the market melt of 2008/2009. Lincoln Financial (a few days before the closing of the TARP program) purchased a small savings and loan in Indiana in order to qualify for a monetary bail out.
#%#* happens, eh?
Everyone has their own needs and plans accordingly.
Here's a read on the subject (2014). To the point of annuities verses bonds:
Opting for guaranteed income comes with downsides. Annuities are inflexible and allow for no liquidity to alter the income stream if circumstances change, if there is an unanticipated need for a lump sum of money, or if the retiree wishes to make bequests. With reason, therefore, some people are uncomfortable using all their assets to purchase a risk-free annuity, especially if they have no additional non-pension savings that can provide them with some flexibility.
and,
The more flexible but still relatively safe alternative to annuities is a portfolio of U.S. Treasury Inflation- Protected Securities (“TIPS”) that offer a periodic payout of inflation-protected income for a fixed time horizon, typically the life expectancy of the participant at retirement. Both the portfolio interest income and principal at each bond’s maturity are used for income payments, so there is no capital residual after the term.There are two advantages to this type of conservative additional income relative to guaranteed income. Because the savings can be held in liquid UST assets, they are available in whole or in part to the participant at anytime...
enter your favorite retirement income fund. I entered VWINX (conservative/moderate) as portfolio 1 and PRWCX (more aggressive) as Portfolio 2. Past performance is not an indicator of future results, but...
Over the last 30 years (1987 - 2018), a $100K initial investment and a 4% withdrawal produced comforting results.
Both funds grew in value even with a 4% yearly withdrawal.
Annual withdrawal grew over time (your income grew with inflation):
Over the past 30 years these two fund had very few negative years. Maybe holding a small "cash-like" income fund to avoid withdrawing from these two funds during these down years would be helpful.
Thanks @bee for a worthwhile thread. Bit rushed right now - but plan to revisit this.
I’ve never been able to come to grips with the possibility annuities might be a wise investment. What I dont’t like: (1) The one’s I’ve looked at seem to pay little if any interest. Over a 15-20 year term you might get all your money back (worth less, of course due to inflation). It is true as some have noted that if you live a lot longer than expected you do come out ahead. So, some see annuities as insurance against the risk of living too long. Just not able to get my head around that. (2) The other thing I don’t like is that they pay a constant amount monthly whether you need the $$ or not. My needs vary greatly. Buying a new car, for example, is but one example of the occasional year when you need extra money. But during most years I suspect I’d find myself having to reinvest some of the monthly income stream.
For my money I’ll go with a widely (some would say wildly) diversified mix of mutual funds designed to have low overall volatility. While volatility is not the same as risk, it can be risky in itself if you are in the withdrawal phase. With cash yielding 0-2% over most of the last decade it hasn’t been hard to stay well ahead of cash with a fairly conservative portfolio. I can envision a day when much higher returns on cash might even make it a desirable investment for someone late into retirement.
Rather than spill my guts on all the funds I own, I’ll provide a couple benchmarks I’ve used (and have kept pace with or outdistanced) ). For the first 15- 20 years retirement I benchmarked against TRRIX, a fund Price once branded as “Retirement Income” - but has now renamed “Retirement Balanced”. It’s a 40/60 fund and a good 5-7% annual bet over long term. At 20 years into retirement I’ve shifted to a “split benchmark”, consisting of 50% TRRIX and 50% RPSIX (Spectrum Income). I’m guessing the longer term return on that benchmark will be in the 4-6% range (considering current inflation rates and interest rates). Those are very modest benchmarks and aspirations. But I feel they meet my needs and still put me out ahead of what an annuity would provide. And, consider the compounding effect over a 15-20 year period as contrasted to an annuity that’s simply repaying your net investment back to you.
No - Haven’t answered your question. My fund world is very limited (5 fund houses) and so I cannot tell you what the very best fund out there for retirement purposes would be. However. if you can put together a diversified portfolio matching the return and volatility characteristics of the two benchmarks I’ve mentioned, than that’s at least a small step in the right direction. And, if younger and / or more aggressive than me, vary that benchmark to meet your own needs.
Just deleted a bunch of garbage. I’ll see if I can be more succinct here. Wanted to get back after having more time to read everyone’s ideas and to reflect.
- I’m not convinced a 30 year historical pattern tells enough of the story. I’d look at at least 100 years to feel a little more confident in whatever numbers I was drawing future assumptions from. FWIW, the Great Depression began about 89 rears ago. You’re fortunate if you knew anyone who lived through that period (roughly 1929 -1945 or thereafter - post WWII really). Most wanted nothing to do with stocks for the remainder of their lives.
- I’m not comfortable with all my eggs in one basket either. As fond as I am of PRWCX (and T. Rowe generally), I don’t want any one investment holding more than 10% of my total investment stash. Things happen.
- I’m not comfortable leaning on any one type of asset too heavily either. Stocks have been in vogue for a long time. Bonds also had a nice run. Some of that stock outperformance has to do with the advent of the defined contribution plans (like 401K and IRA) and the stampede into them by the general public. But there have been lengthy periods when art, collectables, precious metals, real estate and even cash outperformed.
- I’m not comfortable with one investment house (Price, Vanguard, Oakmark or whoever) managing all my investable assets. Spread it around to take advantage of the best minds at several places. If one lets you down, another just might pick you up.
- The suggestion of keeping a separate cash stash on the side to tide you over during market downturns has merit. Most of the brighter investors I know do that, and apparently it has worked for them. Keeps them from having to sell their riskier holdings at the wrong time. I don’t do that. My thought is to be so conservatively positioned and so broadly diversified that pulling out 5, 6 or even 7% annually for a few years during a downturn isn’t going to ding me that much. And I’d rather be fully invested (including cash investments) all of the time. Different strokes I guess.
Comments
---Does one have a beneficiary?
Annuity types are available to be passed along to a beneficiary; but one will pay for that feature (noted in article).
Add: https://www.investopedia.com/ask/answers/122214/what-happens-my-annuity-after-i-die.asp
Bonds/equities in an account may be readily part of a beneficiary inheritance.
---20 largest annuity companies...sales $ in U.S. (2012 data)
https://www.thinkadvisor.com/2012/03/30/top-20-companies-for-annuity-sales/
Annuities are "guaranteed" by the full faith and credit of the issuing organization.
Number 6 in the above list was on the crash list during the market melt of 2008/2009.
Lincoln Financial (a few days before the closing of the TARP program) purchased a small savings and loan in Indiana in order to qualify for a monetary bail out.
#%#* happens, eh?
Everyone has their own needs and plans accordingly.
Catch
Oh, good.Takes care of all my worries!
To the point of annuities verses bonds: and, Source:
The-Crisis-in-Retirement-Planning
A closer look at cash, annuities and mutual funds
Valic Education Center: A-closer-look-at-cash-annuities-and-mutual-funds
Here are two that I believe would work well.
For taxable retirement accounts - VTMFX
For retirement account - VWINX
Source:
https://money.usnews.com/funds/search-allocation-30-to-50-equity
I also like PRWCX for longer holding periods in retirement.
https://portfoliovisualizer.com/backtest-portfolio
enter your favorite retirement income fund. I entered VWINX (conservative/moderate) as portfolio 1 and PRWCX (more aggressive) as Portfolio 2.
Past performance is not an indicator of future results, but...
Over the last 30 years (1987 - 2018), a $100K initial investment and a 4% withdrawal produced comforting results.
Both funds grew in value even with a 4% yearly withdrawal.
Annual withdrawal grew over time (your income grew with inflation):
Over the past 30 years these two fund had very few negative years. Maybe holding a small "cash-like" income fund to avoid withdrawing from these two funds during these down years would be helpful.
I’ve never been able to come to grips with the possibility annuities might be a wise investment. What I dont’t like: (1) The one’s I’ve looked at seem to pay little if any interest. Over a 15-20 year term you might get all your money back (worth less, of course due to inflation). It is true as some have noted that if you live a lot longer than expected you do come out ahead. So, some see annuities as insurance against the risk of living too long. Just not able to get my head around that. (2) The other thing I don’t like is that they pay a constant amount monthly whether you need the $$ or not. My needs vary greatly. Buying a new car, for example, is but one example of the occasional year when you need extra money. But during most years I suspect I’d find myself having to reinvest some of the monthly income stream.
For my money I’ll go with a widely (some would say wildly) diversified mix of mutual funds designed to have low overall volatility. While volatility is not the same as risk, it can be risky in itself if you are in the withdrawal phase. With cash yielding 0-2% over most of the last decade it hasn’t been hard to stay well ahead of cash with a fairly conservative portfolio. I can envision a day when much higher returns on cash might even make it a desirable investment for someone late into retirement.
Rather than spill my guts on all the funds I own, I’ll provide a couple benchmarks I’ve used (and have kept pace with or outdistanced) ). For the first 15- 20 years retirement I benchmarked against TRRIX, a fund Price once branded as “Retirement Income” - but has now renamed “Retirement Balanced”. It’s a 40/60 fund and a good 5-7% annual bet over long term. At 20 years into retirement I’ve shifted to a “split benchmark”, consisting of 50% TRRIX and 50% RPSIX (Spectrum Income). I’m guessing the longer term return on that benchmark will be in the 4-6% range (considering current inflation rates and interest rates). Those are very modest benchmarks and aspirations. But I feel they meet my needs and still put me out ahead of what an annuity would provide. And, consider the compounding effect over a 15-20 year period as contrasted to an annuity that’s simply repaying your net investment back to you.
No - Haven’t answered your question. My fund world is very limited (5 fund houses) and so I cannot tell you what the very best fund out there for retirement purposes would be. However. if you can put together a diversified portfolio matching the return and volatility characteristics of the two benchmarks I’ve mentioned, than that’s at least a small step in the right direction. And, if younger and / or more aggressive than me, vary that benchmark to meet your own needs.
- I’m not convinced a 30 year historical pattern tells enough of the story. I’d look at at least 100 years to feel a little more confident in whatever numbers I was drawing future assumptions from. FWIW, the Great Depression began about 89 rears ago. You’re fortunate if you knew anyone who lived through that period (roughly 1929 -1945 or thereafter - post WWII really). Most wanted nothing to do with stocks for the remainder of their lives.
- I’m not comfortable with all my eggs in one basket either. As fond as I am of PRWCX (and T. Rowe generally), I don’t want any one investment holding more than 10% of my total investment stash. Things happen.
- I’m not comfortable leaning on any one type of asset too heavily either. Stocks have been in vogue for a long time. Bonds also had a nice run. Some of that stock outperformance has to do with the advent of the defined contribution plans (like 401K and IRA) and the stampede into them by the general public. But there have been lengthy periods when art, collectables, precious metals, real estate and even cash outperformed.
- I’m not comfortable with one investment house (Price, Vanguard, Oakmark or whoever) managing all my investable assets. Spread it around to take advantage of the best minds at several places. If one lets you down, another just might pick you up.
- The suggestion of keeping a separate cash stash on the side to tide you over during market downturns has merit. Most of the brighter investors I know do that, and apparently it has worked for them. Keeps them from having to sell their riskier holdings at the wrong time. I don’t do that. My thought is to be so conservatively positioned and so broadly diversified that pulling out 5, 6 or even 7% annually for a few years during a downturn isn’t going to ding me that much. And I’d rather be fully invested (including cash investments) all of the time. Different strokes I guess.
Just some thoughts.