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So he advises 30% equities, maybe a little more, in retirement, and the rest earning 2% except for that 15% in a deferred annuity. So half earning 2%. All righty, then: AOM here we come. Not the strongest article I have read in this area.
Doesn't this article ("Retirement Planning..." by Larry Siegel) scream that anyone with access to a TIAA qualified account should put all or at least most of his or her fixed income allocation in the TIAA (guaranteed) Traditional Retirement account? Larry Siegel: (With interest rates this low), "you would be locking in capital losses" (by investing in bonds). The TIAA Traditional guarantees a minimum return of 3% annually and is currently paying 4% on new money. At age 70 and semi-retired, I'd rather lock in positive annual returns than capital losses. Agree or disagree?
My understanding of Traditional is that there are only two ways to get your money out - interest only, and 10 year annuitization. So you have to be careful with your cash management planning - that you'll be able to draw more cash on demand elsewhere (in case of an unforeseen need), or you'll have some place to put the excess cash (if you need less than the amount generated). That said, I think Traditional is fantastic.
Also, "access to a TIAA qualified account" doesn't necessarily mean 3%+. It depends on your type of access. I have access for IRA accounts, but that would only buy me 1%. For that return I'd be better off with a fully liquid, FDIC-insured bank account yielding at least that much. (On the other hand, I do keep thinking about TREA for a part of my IRA).
msf: My understanding of Traditional is that there are only two ways to get your money out - interest only, and 10 year annuitization. So you have to be careful with your cash management planning - that you'll be able to draw more cash on demand elsewhere (in case of an unforeseen need), or you'll have some place to put the excess cash (if you need less than the amount generated). That said, I think Traditional is fantastic.
It is my understanding that if the TIAA Traditional is the only investment held in the account, a retiree can receive RMDs. I have liquidity elsewhere.
msf: Also, "access to a TIAA qualified account" doesn't necessarily mean 3%+. It depends on your type of access. I have access for IRA accounts, but that would only buy me 1%. For that return I'd be better off with a fully liquid, FDIC-insured bank account yielding at least that much. (On the other hand, I do keep thinking about TREA for a part of my IRA).
You're right; I should have clarified that I am a university retiree and thus have the 3%+ TIAA Traditional. Your points are on target. Thanks.
I believe there are three ways to get money out of the Traditional TIAA account (not the IRA, the one teachers and staff get). 1. 10 essentially equal yearly installments. 2. Required Minimum Distributions. 3. A single preium annuity. Not a liquid investment, but options 2 and 3 provide a solid anchor for the fixed income part of an asset allocation portfolio.
Hmmmmm. Yes, to the aging brain thing. Do think about this at this house and have a plan. Recalling a few discussions with a 90 year old several years ago regarding items that had been structured into a "living will" and a trust that was set in place with an attorney. The discussion was an after the fact. I performed my normal "why and what if" with this person; not unlike we do at our house regarding investments. The first discussion resulted in anger towards me; as I was told that I'm not an attorney, and what did I know. Although the questions I asked were standard reasonable questions as to why was such and such established in this fashion. After several months and a few more discussions, there was an admission by the 90 year that they should have included their daughters in the whole thought process before any papers had been signed by her for the "trust" account. Only one daughter was involved with the process, with the other three being notified about what had taken place after finalization. The living will portion was altered two times within the next two years to reflect a more proper thought process; versus a "let's get this done today" approach. The 90 year old is a very sharp thinker and can recall more of their life than I every will be able to do for my own life. But, they thought more along the line of I know what I am doing and didn't feel a need to place their thinking to a "devils advocate" circumstance of bouncing their decisions for a Q&A with the daughters.
Aging isn't the only potential problem with the brain and investing. I'm sure we all know those who are quite sure they know everything and don't need to discuss their investment choices with anyone else regardless of age.
I've never been in that "place". I at least understand my limits of knowledge. But, my stupid day may/will arrive at some future date, eh?
Comments
My understanding of Traditional is that there are only two ways to get your money out - interest only, and 10 year annuitization. So you have to be careful with your cash management planning - that you'll be able to draw more cash on demand elsewhere (in case of an unforeseen need), or you'll have some place to put the excess cash (if you need less than the amount generated). That said, I think Traditional is fantastic.
Also, "access to a TIAA qualified account" doesn't necessarily mean 3%+. It depends on your type of access. I have access for IRA accounts, but that would only buy me 1%. For that return I'd be better off with a fully liquid, FDIC-insured bank account yielding at least that much. (On the other hand, I do keep thinking about TREA for a part of my IRA).
My understanding of Traditional is that there are only two ways to get your money out - interest only, and 10 year annuitization. So you have to be careful with your cash management planning - that you'll be able to draw more cash on demand elsewhere (in case of an unforeseen need), or you'll have some place to put the excess cash (if you need less than the amount generated). That said, I think Traditional is fantastic.
It is my understanding that if the TIAA Traditional is the only investment held in the account, a retiree can receive RMDs. I have liquidity elsewhere.
msf:
Also, "access to a TIAA qualified account" doesn't necessarily mean 3%+. It depends on your type of access. I have access for IRA accounts, but that would only buy me 1%. For that return I'd be better off with a fully liquid, FDIC-insured bank account yielding at least that much. (On the other hand, I do keep thinking about TREA for a part of my IRA).
You're right; I should have clarified that I am a university retiree and thus have the 3%+ TIAA Traditional. Your points are on target. Thanks.
http://www.thinkadvisor.com/2012/07/26/investing-and-the-aging-brain-what-do-i-do-when-i
Hmmmmm. Yes, to the aging brain thing. Do think about this at this house and have a plan.
Recalling a few discussions with a 90 year old several years ago regarding items that had been structured into a "living will" and a trust that was set in place with an attorney. The discussion was an after the fact. I performed my normal "why and what if" with this person; not unlike we do at our house regarding investments.
The first discussion resulted in anger towards me; as I was told that I'm not an attorney, and what did I know. Although the questions I asked were standard reasonable questions as to why was such and such established in this fashion.
After several months and a few more discussions, there was an admission by the 90 year that they should have included their daughters in the whole thought process before any papers had been signed by her for the "trust" account. Only one daughter was involved with the process, with the other three being notified about what had taken place after finalization. The living will portion was altered two times within the next two years to reflect a more proper thought process; versus a "let's get this done today" approach.
The 90 year old is a very sharp thinker and can recall more of their life than I every will be able to do for my own life. But, they thought more along the line of I know what I am doing and didn't feel a need to place their thinking to a "devils advocate" circumstance of bouncing their decisions for a Q&A with the daughters.
Aging isn't the only potential problem with the brain and investing. I'm sure we all know those who are quite sure they know everything and don't need to discuss their investment choices with anyone else regardless of age.
I've never been in that "place". I at least understand my limits of knowledge. But, my stupid day may/will arrive at some future date, eh?
Thanks for the article link.
Take care,
Catch