Hi @msf
We've been down this discussion road before; but I would still opt for Fidelity's annuity offering.
With the offerings available, one should not have a problem with beating inflation; and with fairly low risk, IMHO.
Even with a somewhat aggressive investment choice of Fidelity's VIP Balanced fund, one has very low costs: .57% expense ratio (same as retail offering) and .25% of account balance for the fee. And no surrender charges found in more common annuity types, usually after the first 7 years of the contract; and the normal spousal/non-spousal beneficiary choices.
For those not familiar with this product, check the link and read through everything....investment choices, etc.
Fidelity's Personal Retirement Annuity
Have a good remainder,
Catch

FYI: Recent articles in Advisor Perspectives by David Blanchett and by Zvi Bodie and Dirk Cotton have dealt with single-premium immediate annuities (SPIAs) used to generate lifetime income in retirement. The focus of those articles was the pricing and the risks of going without inflation protection. In addition to SPIAs, insurers also offer variable annuities (VAs) and fixed-indexed annuities (FIAs) with optional riders known as guaranteed lifetime withdrawal benefits (GLWBs). I’ll expand on the recent articles by comparing the income-generating properties of SPIAs versus VAs and FIAs, and place particular emphasis on how inflation risk impacts inflation-adjusted income.
Regards,
Ted
https://www.advisorperspectives.com/articles/2019/06/17/which-annuities-offer-the-best-inflation-protection

Please, for those who know more than I do: why is this NEW fund advertised as an "income" fund? Is that not the raison d'etre of bond funds generally?

There are income funds and there are total return funds. From one of many articles about Bill Gross' retirement:

“His real claim to fame was pioneering total return investing in fixed income,” said Miriam Sjoblom, director of fixed-income ratings at Morningstar. “That means you are not just concerned with collecting income. You are concerned with price appreciation and avoiding losses.
“The fact that he was able to popularize a style of investing that didn’t focus on yield changed the industry,” Sjoblom said.

https://www.seattletimes.com/business/pimco-founder-bill-gross-the-bond-king-calls-it-quits/
DoubleLine confuses matters by calling its fund an income fund while stating that its objective "is to maximize total return". Compare that with, say, DODIX, which says that it "seeks a high and stable rate of current income, consistent with long-term preservation of capital. A secondary objective is to take advantage of opportunities to realize capital appreciation." (Quotes from funds' respective prospectuses.)
Maybe just a matter of degree these days, with everything giving a nod to appreciation.

Thanks @msf for your (typically) well reasoned and precisely detailed analysis. I’d preface my comments by saying things always look rosier late in a decade-long bull market cycle in equities. I’m confident that if this bull lasts another 3 or 4 years the than prevailing “expert” advice will be to pile 100% into aggressive equity funds because fixed income is tantamount to rubbish.
- Easy to overlook is investor risk tolerance. No matter what one’s rationale may be for “loading up” on equities, there’s nothing like a 40-50% drubbing over a couple miserable years to bring us to our knees and shock us back to our Puritan sensibilities. In too many cases those equities piled into during sunnier days get unloaded by investors at discounted prices late in the bear cycle.
- Also overlooked by the article’s underlying assumption is that although investors might well possess a pension, SS, or annuity assets that would allow some level of subsistence, their portfolio of equities, bonds, etc. is not without some immediate purpose. In many cases (speaking from personal experience) those assets are withdrawn regularly for major expenses like travel, new vehicles and upgrades / maintenance on their principal dwelling. It’s also an emergency fund for unexpected medical costs and provides needed “insurance” against having the carpet pulled out from underneath by a reduction in SS or pension benefits (though the assumption is these benefits will remain intact).
- Further, the invested portfolio provides needed growth to compensate for inflation - arguably better than those (somewhat fixed) pension, annuity, SS benefits can. Point being: Treat those invested assets with the same care & due diligence you would if you had none of those added “insurance” products.
The article seems related to an argument advanced by John Bogle around 2013 when he said investors should treat SS as a “bond” in their allocation decisions. It was part of a wider ranging interview, so I’m posting only one commentary from a secondary source. (But the actual full interview is linked within the commentary). I’m also posting a lengthy mfo discussion from around the same time in which a number of members from various tiers shared their (somewhat divergent) thoughts on the question.
Bogle’s position: https://www.businessinsider.com/how-to-save-for-retirement-vanguard-john-bogle-2017-1
MFO discussion (September 2013) : https://mutualfundobserver.com/discuss/discussion/7814/count-social-security-as-part-of-portfolio

I generally agree with this article (about counting annuities as part of the "safe" portion of your portfolio allocation). It does gloss over a couple of points that merit further thought.
One is how to reduce to present value, i.e. how does one calculate the present value of an income stream in order to know how much one has in "safe" investments? It suggests using the commercial rate for an immediate annuity today that would be comparable to one's pension (if one is lucky enough to have one).
This approach could also be applied to an annuity that one annuitied some time in the past. One might have paid $100K for an immediate annuity in 2014, while that same annuity might cost only $70K today. In part because one has fewer years of life left, but also in part because interest rates have risen slightly. In that sense, an income stream is very much like a bond portfolio - its day to day mark to market value fluctuates.
Notice also that the value of social security isn't discounted to present value. That's because it is inflation adjusted. The value of $20K/year in 2020 is the same as the value of $20K/year in 2030. No need to discount. In the article, it appears that the writer assumed a 22 year life expectancy; $20K x 22 years = $440K shown for Client B.
The other point to think about is why own bonds at all, if your guaranteed income stream (pension, annuities) is large enough to cover essential expenses. The article suggests that the reason is to let people sleep at night ("risk tolerance").
This consideration is real but emotional (since by hypothesis the risk is minimal). If people have trouble addressing this, they will also likely continue ignoring the present value of their income stream for asset allocation. Because all one sees on one's monthly brokerage statements are the assets in the portfolio.
Of course any form of insurance (social security, pensions, annuities) has a cost (overhead). This cost can be reclaimed via the flexibility to be more aggressive with the rest of one's portfolio. Similarly, keeping a cash reserve (see thread on how much cash to keep in retirement) allows one to be more aggressive with the remaining assets.

https://www.cnbc.com/2019/06/12/heres-why-advisors-may-urge-retirees-to-load-up-on-equities.html
Here’s why advisors may urge retirees to load up on equities
Key Points
With guaranteed income — pension, Social Security or income annuities — your client might have enough safety to step up his stock allocation in retirement, said Michael Finke, professor of wealth management at The American College.
Consider guaranteed income sources as being similar as bonds, Finke said. That means you can increase your stock allocation elsewhere.

- “My issue is related to ... RISK TOLERANCE ... Investing is so emotional for many of us. Its hard to sit by and watch your Account Balance go down the tubes.”
- “I've (incorrectly) gone to cash more often than I want to admit over the years. Though I am shy of my 50s, I am personally still all about preservation of capital.”
- “Combine this president, with his "Tariff policies", alongside a very, very long bull market...... and I am once again (cautious).” I am mostly in CASH. “

Hi @JoeD, You raise a lot of interesting points. Nothing much I can say, but some vague thoughts might help ...
Re risk tolerance - Everybody’s different based on their own life experiences and personality. You remind me of one time in the ‘80s when I had secured a good paying job and wished to do something nice for my aging parents. Knowing they weren’t very astute in money matters, I opened an account in their name in a reputable money market fund that was yielding something like a crazy 15-20% in those days. Gifted them $1,000 which was the minimum to open an account. I hoped they would let it grow into their retirement years, perhaps add to it, and that it might benefit them years later. While grateful, they were suspicious of this new-fangled type of account in a big city somewhere and almost immediately cashed-out and moved the money to their passbook account at a local bank yielding something like 3%. So for them (both products of the Depression), even a money market fund was way beyond their risk tolerance!
Going to cash can be risky from an investment standpoint. Sure, if you will need the money within a few years, it’s a smart move. But if you are doing it with the intent of reinvesting later on, it’s tough to pull-off. I’d rather invest in something like TRRIX (a lame 40/60 fund) if I was really worried about the markets. If your guess is right and the market tanks you will lose something - maybe 20% of your money. But over the very long-term the fund should allow you to sleep better and keep you at least ahead of inflation. FWIW - My gut tells me equities are overpriced. But I’m not going to bet the ranch on that gut feeling.
Missing is reference to the purpose for which you are investing. I’d assume it’s for retirement in another 10-15 years. With retirement that near, I’d be reluctant to go overboard with aggressive equity funds myself. However, I wouldn’t exclude equities completely. I started moving out of the really aggressive stuff at about age 50 (but retired in my early 50s). Again, there are many great conservative funds that will keep you out of deep trouble during a big sell off and still help you accumulate more for retirement than cash would. Furthermore; most of us dollar cost average into our equity positions during our working years. I’d think that during those years the temptation (or need) to “sell all” and move to cash would be lessened.
re: “Bizarro” politics. I may share your foreboding. But I think we do a disservice to @Junkster who devoted considerable time and thought into creating a pretty valuable thread if we move it into the political arena. So I won’t go there and hope others don’t. What I tell myself every day is that regardless of who is President or what type of government we become, great companies like Amazon, Boeing, Apple, Microsoft aren’t going to go away - at least any time soon. So we may be appalled by some of the politics taking place, but that shouldn’t deter us from investing in great capitalist companies and sharing in the wealth they create.
There’s no right answer to any of this. And nothing I said should be construed as investment advice.
Regards

If I had traded based on my opinions or personal biases over the years I would be looking at a very bleak retirement now. More often than not the market has run counter to my expectations. But I learned long ago not to trade based on my opinions and expectations but based on the action of the market itself. A good example was this past December. I was as bearish as anyone and expecting the long awaited corporate credit crisis to hit full force in 2019. I was ready to sit out the year drawing 2.50% in one of Fidelity’s money market market funds. But then out of the blue came a couple of huge and rare momentum days. So as bearish aa I was at the time, I had no choice but to get back into the grind. Trading is a hard game because a good trader has to admit they are often wrong. I think the above would also apply to investors unless one is a strict buy and holder.

FYI: Steven S. in Sylvania, Ohio, just hit one of his lifetime savings goals, and now he’s freaking out.
You’d think it would be a big celebration, reaching a big round savings number ahead of the rule-of-thumb schedules for being able to retire comfortably.
Instead, Steven’s freak-out is that he’s worried about breaking the benchmark — which in his case was amassing $500,000 in retirement savings — in the wrong direction the next time the market heads south.
“I’m excited to have reached $500,000, and before I reached age 50,” Steven said in an email, “but I’m terrified that if we have a bear market I’ll be way behind again. So I’m thinking of protecting what I’ve got by taking most of it out of the market.”
Regards,
Ted
https://www.seattletimes.com/business/investors-next-challenge-is-holding-on/

>> [@msf] Buffett's [mix] implicitly suggests 2.5 years of "near cash". I'd be inclined to go a bit higher and/or use bonds as a second tier resource between cash and equity investments.
Yeah, this to me is key to withstanding (= usually ignoring) all of these manufactured advice articles:
How many years of safe cashflow are you comfortable with projecting you need, meaning earning very little, and how many years of unlikely-to-dip bondy things after that? Not percentages of your total, only years' worth. 1, 2, 3, 4, what?
I just did major (for me) retirement rebalancing, trying this time to apportion more prudently b/w Roth and taxable, and wound up with 21% bondy-cash. More than 5y, gah.
A year and change is in MINT and non-earning dead cash (BoA savings). Better, 2y or more is in PCI, which can dip, but best of all it matches equity funds over certain stretches. The remainder is in PONAX and FRIFX.
I can live with this, or so I say now, and will move amounts into MINT every few months to keep it at perhaps a year's worth.

“Many asset managers’ websites don’t nudge retirement savers into favoring a Roth 401(k), however. The calculators they offer to compare the advantages of Roth and traditional 401(k)s often make Roths look second-rate.”
Think about it. Why encourage people to pay taxes before investing or do a conversion later in life which may result in their not having as much left over to invest? Your fiduciaries stand to get a higher “cut” from your higher pre-tax balance than after you’ve paid taxes on it. They’re charging their management fees on money which you’ll eventually need to cede back to Uncle Sam. Double-dipping in a sense.
I can’t speak to the wisdom (or lack thereof) of contributing to a Roth in the early years. May or may not make sense. But if you can afford to pay those taxes at some later point and convert, I think it makes a lot of sense - especially if you can do it with some depreciated asset that stands to rebound.
The thing to remember: All the money you earn on that Roth going forward (potentially for many years) is fully tax exempt. The gift that keeps on giving ...

I can only answer why I don't use it: I maximize my 401k PRE-tax contributions to the extent allowed by law, rather than opting for the Roth.
Very simply, I am in my peak earning years and my marginal tax rate during this time will likely be much higher than when I retire --- primarily as my income in retirement will be much lower.

”Nothing magical about 3 years, though I think that is about the average recovery time for a bear market.”

I borrowed @MikeM’s remark for illustration here, but my question applies to many others who have discussed their withdrawal plan (as relates to cash) in event of a bear market during the distribution phase of retirement.
If your equity heavy portfolio falls by 35% during a 3-year bear market while you draw from your cash reserves, do you really want to start selling your equitiy heavy portion as soon as the bear ends? Say your equity portion is still down 20-25% 3 years later after the bear market has “officially” ended. Having to withdraw funds (even though it’s now a bull market ) could still be problematic.
Looks like the average duration (from peak - to bottom - and back up to that level again) is about 5 years. Since that’s just an average, some of these periods during which you would have to either (1) sell depreciated equities & funds or (2) rely on your cash reserves might last considerably longer than 5 years.
https://www.dividendgrowthinvestor.com/2008/07/average-durations-of-previous-bear.html

FYI: Imagine a savings vehicle that allows you, in retirement, to withdraw as much or as little as you wish—tax-free.
This vehicle, the Roth 401(k), is a great tool for many savers, as my colleague Laura Saunders has pointed out. Why don’t more people take advantage of it?
Regards,
Ted
https://www.wsj.com/articles/the-deal-hidden-in-your-401-k-11559917801?mod=searchresults&page=1&pos=1

https://www.google.com/search?q=what+we've+learned+about+target-date+funds+10+years+later&ie=utf-8&oe=utf-8&client=firefox-b-1-m
Enter News, Quotes, Companies or Videos
Target-date funds have emerged strongly from the damage of 10 years ago, but some advisers say their one-size-fits-all approach to investing isn’t suitable for every investor. Nicolas Ortega
Journal Reports: Funds/ETFs
What We’ve Learned About Target-Date Funds, 10 Years Later
A decade after target-date funds were damaged during the financial crisis, they have re-emerged bigger than ever as retirement investments. But they still have vulnerabilities.
By Jeff Brown
May 5, 2019 10:09 p.m. ET
Back in 2008, many investors looking ahead to retirement in two years had a shock when “target-date funds” designed for them plummeted in value. Many had assumed those funds, targeted to a 2010 retirement, were safe from large moves that late in the game.
Despite the jolt to investor confidence, target-date funds have flourished in the decade since, becoming a staple in workplace retirement plans such as 401(k)s, as a net $532 billion in investor money poured in during that time, according to data from the Investment Company Institute trade group.
Journal Report
Insights from The Experts
Read more at WSJ.com/FundsETFs
More in Investing in Funds & ETFs
Fund Fees Still Vary Too Much
How Much Cash in Retirement?
U.S.-Stock Funds Rose 3.6% in April
529s or Coverdells for College?
ETFs Dial In to 5G
Whether that is a good thing remains a matter of debate. Some financial experts question the value of target-date funds, saying their one-size-fits-all approach to investing isn’t suitable for every investor. Others say the funds can be a good way to save for both retirement and college—as long as investors pay attention to the products’ risk profile, fees and performance, especially as market conditions change.
Of course, the idea behind target-date funds, or TDFs, is to make investing as simple as possible by gradually adjusting to a more conservative investment mix as a target date approaches. As the default option in many workplace retirement plans, TDFs attract investors who don't want to choose and rebalance their own investments and may not be aware that the funds can still own lots of risky stocks close to and even after the target date arrives.
“There is a common misconception among many target-date holders that the portfolio is completely de-risked at retirement, and that simply isn’t true,” says Robert R. Johnson, professor of finance at Creighton University’s Heider College of Business in Omaha, Neb.
A big factor in that growth was Obama-era legislation that encouraged employers to automatically enroll new employees in retirement plans and use target-date funds as the default for those who don’t choose their own investments. Previously, investors who were inattentive—a notorious problem with workplace retirement plans—simply accumulated cash, which doesn’t provide enough growth to build a nest egg that will last for decades.
“It’s certainly a good thing” to use TDFs as the default, says Dennis Shirshikov, financial analyst at FitSmallBusiness.com, an advice service for small-business owners and managers. “This has brought a great deal of consistency to a retirement portfolio, especially since most investors with a 401(k) do not manage their investment actively.”
Another factor in TDF growth, Morningstar says, is the growing popularity of index investing as most TDFs invest in index funds, rather than actively managed funds. In 2017, 95% of new employee contributions to TDFs went to one relying on index funds, according to Morningstar.
Investors can buy target-date funds for their individual retirement accounts and taxable accounts, as well, and most big fund companies offer them. The biggest player is Vanguard Group with about $381 billion in TDF assets in 2017, 34% of the market, Morningstar says. Fidelity Investments had a 20.5% share, and the third-biggest player, T. Rowe Price , TROW 1.89% had a 14.9% share.
The downsides
Retirement experts have mixed views about TDFs’ value in a portfolio. Most say TDFs are better than not investing at all, or putting retirement savings in cash, but the funds can’t take into account each investor’s unique situation. Two investors the same age would get the same fund, even if they have different needs due to dependents, availability of other assets, life expectancy and risk tolerance.
“In an attempt to simplify planning and saving for retirement—certainly a noble endeavor—the entire concept of target-date funds likely is a bridge too far,” Prof. Johnson says. “Individuals are unique, and one parameter, the anticipated retirement date, cannot and should not dictate the appropriate asset-allocation mix and the change in that mix over time.”
Another concern: The automatic investing strategy ignores changing conditions. Patrick R. McDowell, investment analyst at Arbor Wealth Management in Miramar Beach, Fla., says low bond yields in recent years have reduced TDF income after the target date, and increased the risk of losses on bondholdings if rates rise. (Higher rates hurt bond values because investors favor newer bonds that pay more.)
What’s more, he says, stocks and bonds have often moved in tandem in recent years, reducing the benefit from diversification, which assumes one asset goes up when the other falls.
Know your rights
Retirement savers who are automatically put into TDFs have the right to switch to other funds in their retirement plan as they learn more or conditions change, and Mr. McDowell recommends that investors get more involved as retirement nears. He says he often recommends investors nearing retirement leave the target-date fund and buy a mix of stock and stable-value funds—which contain bonds insured against loss and are designed to preserve capital while generating returns similar to a fixed-income investment—to reduce danger from a potential market plunge.
Advisers urge investors to examine the TDF’s ‘glide path’—its investing policy for shifting from stocks to bonds over time. Photo: iStock
“In that strategy, a big drop in equity and fixed-income prices won’t hurt a soon-to-be retiree in the same way it would in a TDF strategy,” he says. “It also helps investors defend against a rising interest-rate scenario” harmful to bonds.
Experts say TDF investors should keep abreast of performance and not just assume they are on track to a comfortable retirement. Morningstar provides data on average performance by target date, as well as details on individual funds.

In retirement, my plan is a 3 year "withdrawal" bucket which would be mostly MM and CD's and possibly a short term bond fund. Replenish each year if the markets up. Wait to replenish if the market takes a nosedive. Nothing magical about 3 years, though I think that is about the average recovery time for a bear market.

@MFO Members: I have always recommended an emergency funds of six months worth of living expenses.

From the article:
"Most people are familiar with the idea of having an 'emergency fund' during one's working years—a pot of money (typically, equal to three to six months of living expenses) that can help with unexpected bills or, perhaps most important, tide you over if you lose your job."
If a function of emergency cash is to tide you over until you get your next job, how long until your next job in retirement?
Many people seem to conflate two questions: how much cash should I keep for an unexpected emergency, and how much cash should I keep in retirement to protect against sequence of returns risk?.
For example, I was reading an old WSJ column where a couple with adequate pension income asked about putting all their IRA money into an S&P 500 fund. The response was that given the situation, that would not be unreasonable.
The column didn't address what size emergency fund they might also want to keep. ISTM that they would have the same need as working people - a reserve for some unexpected expense that their cash flow (here, pensions) didn't cover.
For people without steady income streams that cover all expenses (i.e. typical retirees), it's a different question as to how much cash to keep. Buffett's 10% short term treasury/90% S&P 500 implicitly suggests 2.5 years of "near cash" (10% @ 4% drawdown/year). I'd be inclined to go a bit higher and/or use bonds as a second tier resource between cash and equity investments.

So Hank....just close your eyes and hold on. The market will always be ok long term. Steady as she goes. Tune out the noise. We can't predict the short-term, so why bother.

@JoeD, I wasn’t giving investment advice. Just trying to share a few personal observations and reflections re markets and investor sentiment gleaned over the years - since that’s where @Junkster appeared to want to go with this. (Closing your eyes when moving is probably never a good idea. Might run into an immovable object.)
But here’s my take on risk exposure / market timing:
- Depends on what you’re buying or holding. Treat your equity or high yield stake as one part of a wider investment universe. Don’t overlook investing in a home, maintaining a cash reserve, having a pension or annuity for steady income, investing in your own business or education, etc.
- Depends on your time horizon. For a 25 year-old who won’t need the money for 40 years I think putting 100% in a good global growth fund makes a lot of sense. He / she has time to ride out several market cycles. For a retiree I’d suggest a more conservative approach.
- Depends on your skill set and past experience. Some people have a knack for timing various types of markets. If you’re good at that (only you would know) go for it. However, for most of us, market timing is a somewhat flawed endeavor. The reason may be that markets can remain irrational longer than most of us can remain solvent. Another reason might be that it’s pretty hard to sort out the really pertinent facts from all the noise coming at us from many different directions.
- Depends on your own tolerance for risk. That’s not just your emotional make-up, but also how soon you may need the money and what you intend to do with it. For some of retirement age, an all bonds and cash approach might make sense. It should protect against large or unexpected losses. But it might not protect against rising costs of living or afford the life style one might prefer.

FYI: A decade after target-date funds were damaged during the financial crisis, they have re-emerged bigger than ever as retirement investments. But they still have vulnerabilities.
Regards,
Ted

FYI: Should I hold a cash reserve in retirement? If so, how much? And, if you’re willing to share, do you have a cash reserve as part of your retirement savings?
Regards,
Ted
https://www.wsj.com/articles/how-much-cash-should-you-hold-in-retirement-11556805424?mod=article_inline