bee: "Question: How many have turned to annuities or "annuity - like" strategies to increase your income spending?
When I retired 13 years ago, I attempted to project my future spending needs. Over these years I have meet my spending needs with a combination of pension income (with a COLA), an Annuity Income (Savings that I converted to an Annuity), and some part time work. Since retirement, I have continue to contribute to my HSA and my IRA with contributions from part time work income. Recently I began managing one of my properties as a seasonal rental for additional income. I will work part time spending some of that work income and saving some into an IRA until age 73. My RMDs will then become a forced taxable event that may turn into an income source if needed or taxable savings if not needed.
What type of a portfolio would you design as an "Annuity - like" strategy for yourself? Maybe a combinations of Balanced mutual funds/EFTs that distribute periodically? Am I deribing the 4% rule?
Shifting from a mindset of saving for retirement to a mindset of confidently spending in retirement is a huge challenge we all face."
For me, I accumulated a significant amount "defined contribution" assets through my employer, along with some estate inheritance assets inherited by my wife. Those all reside in our property, in our Schwab Brokerage, and in local banks and credit unions. As part of our retirement, my wife and I depend on income from Social Security, a small government pension, which pays enough income for about half of our normal living expenses. We produce additional income through a changing array of asset holdings at our brokerage and our bank and credit unions. The closest thing to an "Annuity-like" strategy, that we use are fixed income instruments such as Money Market accounts, CDs, high yield Savings Accounts, and treasuries, to supplement SS and the small pension of my wife. The fixed income instruments are comfortably producing a 4 to 6% stream of income, so I am able to maintain principal and just live off the income that my "principal assets" throw off annually. I have in previous years used bond oefs, that were very low volatility, low "risk" funds, such as RPHIX and DHEAX, but when the Market went through a severe correction in 2020, I sold all the bond oef funds, put all the sales proceeds into MMs, and then moved money out of MMs into other low risk fixed income instruments, many of which are covered by FDIC and NCUA government insurance protection. That is where I am now, but I always have to maintain enough investing flexibility to make investment decisions necessary to throw off enough income, with the least amount of risk, to meet my 4 to 6% annual earnings.

Since 2022,M* has gone through refinements of MPRS. There was an update in 10/2024. I like this absolute risk system better than old M* within-the-categories risk parameters.
https://pdfhost.io/v/E..d~yHtX_MStar_MPRS_102024
MFO Risks are also absolute
RPHIX 1
CBLDX 1
DHEAX 2
MFO Ranks & Ratings are within the categories.

M* has what looks like an absolute risk scale (1-100) for funds. Unlike its category risk scale (low, below average, ..., high), funds are not measured against their peers.
The methodology talks about target allocation benchmarks, but from what I've seen these "portfolio risk scores" are not rescaled according to fund type. Equity funds are inherently more risky and thus always seem to rate mid to high scores. Ultrashort funds seem to always score in the single digits regardless of their risk relative to peers.
RPHIX - 4
CBLDX - 5
DHEAX - 6
This ordering comports with my understanding of their relative risks. The Dave Sherman funds are managed to have very little volatility.
CBLDX has a longer effective maturity (1.01 years) and higher volatility (1.57) than RPHIX (2.7 - 6.8 months and 0.80 respectively).
DHEAX has a higher standard deviation of 2.38, and an effective duration of 1.47 years. Even without considering that a fund's duration is shorter than its maturity, this is already longer (worse) than CBLDX's 1 year effective maturity. It had a worse drawdown in March 2020 and lost money in 2022 while the other funds have never had a losing calendar year.
Portfolio Visualizer confirms the relative rankings, Feb 2018-Nov 2024, the funds' std deviations are 0.92, 2.76, and 4.27 respectively, while max drawdowns are 1.09%, 5.50%, and 9.74% respectively.

Where do RPHIX, DHEAX, and CBLDX rank on a risk scale?

raq,
That's correct if someone has risky stuff, DT doesn't. I respect DT decisions and his choices.
When I used to own both stocks and bonds, my bond funds were never the "safe" ones. My first bond fund that I bought in 2010 was PIMIX. Then, I prepared for my retirement in 2018. By the end of 2017, PIMIX was over 50% of my portfolio.
All my funds must be top performers ALL the time in their category based on risk-adjusted performance.
RPHIX vs MM. I'm with msf. As I said before, when rates fall, and they will eventually, RPHIX would do better.
But, why stop with RPHIX? Let's look at DHEAX+CLOI. For one year...VMFXX(MM) made 5.3%...DHEAX made 9.1%...CLOI 8.2%. Both volatility max loss was -0.5%. See chart (https://schrts.co/zbSQiQxp).
BTW, I've not been in the TR camp for years now. My portfolio volatility is very low, but performance is still good. I'm not arguing about CDs or not; just offering another option. I understand that this thread started as a CD one, but why not discuss the next step, especially when there is not much to talk about CDs?

Good point, Old Joe, that's why I am putting some of the proceeds of any maturing CDs into bond OEFs like CBLDX, DHEAX, ICMUX and RCTIX.
I am also putting money into two low risk market neutral funds like QQMNX (SD=7.2%) and JMNAX (SD=4.4%), and HELO, a hedged equity fund.
So far, so good. If not, I'll just pull the trigger. At my age, I prefer to err on the side of caution.
But, good luck.

HELO states that it hedges, but only has 0.25% in SPY put options. Is that much of a hedge?

Good point, Old Joe, that's why I am putting some of the proceeds of any maturing CDs into bond OEFs like CBLDX, DHEAX, ICMUX and RCTIX.
I am also putting money into two low risk market neutral funds like QQMNX (SD=7.2%) and JMNAX (SD=4.4%), and HELO, a hedged equity fund.
So far, so good. If not, I'll just pull the trigger. At my age, I prefer to err on the side of caution.
But, good luck.

Hi Fred, looks like you are back to using the same kind of bond oefs that you were using before the most recent market tumble. I am not there yet, but I do have a lot of good feelings about lower risk bond oefs like RPHIX, CBLDX, and DHEAX. I maintain a watchlist of very conservative/low risk bond oefs, but I am expecting those funds to become more volatile, than the past couple of years. But as I have said in the past, I am not a good predictor of the future, and will likely stay more conservative and risk averse, than most posters/investors on this forum

Good point, Old Joe, that's why I am putting some of the proceeds of any maturing CDs into bond OEFs like CBLDX, DHEAX, ICMUX and RCTIX.
I am also putting money into two low risk market neutral funds like QQMNX (SD=7.2%) and JMNAX (SD=4.4%), and HELO, a hedged equity fund.
So far, so good. If not, I'll just pull the trigger. At my age, I prefer to err on the side of caution.
But, good luck.

@Crash, I know you are a big proponent on yield. Myself, it's all about total return. And, I'm a graphic trend person. Here is some total return data for 5 of the funds mentioned here. I'll give total accumulative return starting from 2021, 22, 23 and ytd 24.
from 2021 to present:
DHEAX +14.9%
WCPNX +1.7
RPHIX +16.5%
CSOAX 21.2%
BBBMX 12.8
2022 to present
DHEAX +12.5%
WCPNX +0.3%
RPHIX +14.2%
CSOAX 15.2%
BBBMX 11.7%
2023 to present
DHEAX +16.4%
WCPNX +10.3%
RPHIX +10.t%
CSOAX 22.1%
BBBMX 12.6%
2024 to present
DHEAX +7.5%
WCPNX +3.4%
RPHIX +4.7%
CSOAX 7.4%
BBBMX 5.3%
I'm certainly not a bond expert, nor do I understand categories and duration very well, but I do understand total return as viewed by graphics. I guess my only point here is a fund's total return is more important that a funds yield. You will also see in the picture in the link below which funds had more volatility getting to the end results.
https://stockcharts.com/freecharts/perf.php?DHEAX,WCPNX,RPHIX,CSOIX,BBBMX

"It depends on what types of risks you're concerned with and how long you're willing to wait for recoveries."
+1
Just an observation -
Is it possible that DHEAX has more unrated stuff that can act weird in a quick flight to safety situation? Not suggesting it is otherwise the same risky as the other two. I would not be surprised if DHEAX overall credit rating is lower.
DHEAX has marginally more securitized stuff than FPNIX now.
I did not know about BBBMX and it looks very good (A+ per M*). I personally am inclined not to buy AA or above stuff (FPNIX) because I do not want to over insure. If I am skipping single A, then I tend to go straight to Treasuries or Agencies. MM are a general exception.
Looking at the chart from DHEAX inception also gets my vote for BBBMX.

Nice find. It looks like you hit the sweet (or target) spot - high risk relative to ultra short bond funds (of which it is one based on duration), but low risk relative to short term bond funds.
A fund that's somewhat similar in performance and risk to WEFIX is FPNRX. FPA New Income focuses on preservation and then beating cash. I was happy to see it go no-load several years ago. More recently, it added this investor class so that it could be sold NTF. Unlike many NTF funds, New Income retail class adds only 10 basis points of expenses to its institutional class FPNIX. That may make it worth the cost if you buy frequently and/or in small amounts.
You'll find several funds with short durations and higher yields that invest primarily in ABSs. These look good on paper but come with risks that don't manifest too often. But sometimes they do. Check March 2020.
Almost everyone lost money then, but ABS funds tended to lose more. DHEAX is such a fund. Great three year volatility. Less great five year figure. Max drawdown (March-April 2020) was 9.74%. BBBMX was 4.07%, FPNRX was 4.24%, RPHIX was 1.09%. (All from M*)
It depends on what types of risks you're concerned with and how long you're willing to wait for recoveries.

I currently have RPHIX, but since it is not NTF/Schwab and a rather high ER, I am looking for another short-term bond fund that I can add to periodically without incurring a fee. Do you have any suggestions? I have been looking at WEFIX.

You may want to check out DHEAX, a short term bond fund with with an excellent risk/reward profile (SD=2.39%). It's NTF at Fidelity, don't know about Schwab.
Good luck.

In short duration like SEMIX , DHEAX and HOSIX. I have used them as cash substitutes this year. Albeit with DHEAX they will be quick to ban you if you move in and out too frequently with size.

Interesting. I may have helped doom LSST (which I realize is a tradable etf) by moving in & out frequently - treating it more like a mm fund than what it was intended for.
There always was a longer term place for it within the retirement accounts after I’d depleted a sizable non-retirement stake in PRIHX. The latter has rebounded pretty well from a disastrous 2022. Any major cash needs will come out of it until it is fully exhausted - hopefully before it nose-dives again.
Thanks for the suggestions @Junkster

In short duration like SEMIX , DHEAX and HOSIX. I have used them as cash substitutes this year. Albeit with DHEAX they will be quick to ban you if you move in and out too frequently with size.

Hi @hank. I hadn't heard of WEA before so I took a look. That looks like one wild ride when added to the trend chart along-side my usual suspects.
On JMBS, I took some advice from something Junkster noted in another thread. Floating rate and mortgage backed securities may not be the best place to be going forward. Same with HY. The suggestion, as I remember, was high quality corporates and munis (I think). I believe an article in Barrons had the same drift. I'm far from a bond expert so take that with a grain of salt.

@MikeM. It was JBBB that l was worried about - CLO fund. For now at least that worry has been proven wrong as many in that market are back to new highs and I have returned to some CLOs. Still leery though about the floating rate bank loan category. I actually like the MBS market especially the legacy non agency RMBS and hold a fund there. Also hold DHEAX due to its persistency of trend as well as CBYYX among a few others. With CBYYX though, this time of year you are one catastrophic hurricane away from disaster so don’t hold a large position.
But as economist Jim Bianco worries, there seems to be a record number of both the smart money and dumb money bullish on bonds. That seldom ends well.

Is this the last post from Junkster? More than 3 wks ago. Hope he is fine.

Thanks @Junkster. I really appreciate your input. Out of all the options you mentioned, DHEAX strikes my fancy. I have to say, you sure do find the smooth trending funds, but I know that is your forte. I invested in CSOAX a few months ago. I know it is labeled HY by M*, but it has strategic in its name, so I'm guessing, hoping, it adjusts to changing conditions. I also started buying IGIB to get some intermediate corporate bond exposure, but that trend, though positive lately, is pretty bumpy. I've held the more conservative RPHYX, RSIVX and FLRN in my conservative withdrawal bucket for a while now.
I haven't closed a post with this in a while, but it is getting to that time... GO BILLS.

Hi @hank. I hadn't heard of WEA before so I took a look. That looks like one wild ride when added to the trend chart along-side my usual suspects.
On JMBS, I took some advice from something Junkster noted in another thread. Floating rate and mortgage backed securities may not be the best place to be going forward. Same with HY. The suggestion, as I remember, was high quality corporates and munis (I think). I believe an article in Barrons had the same drift. I'm far from a bond expert so take that with a grain of salt.

@MikeM. It was JBBB that l was worried about - CLO fund. For now at least that worry has been proven wrong as many in that market are back to new highs and I have returned to some CLOs. Still leery though about the floating rate bank loan category. I actually like the MBS market especially the legacy non agency RMBS and hold a fund there. Also hold DHEAX due to its persistency of trend as well as CBYYX among a few others. With CBYYX though, this time of year you are one catastrophic hurricane away from disaster so don’t hold a large position.
But as economist Jim Bianco worries, there seems to be a record number of both the smart money and dumb money bullish on bonds. That seldom ends well.

RSIIX fell in March 2020 because it was a black swan, even RPHIX with much lower volatility fell. Investing based on a black swan is a bad idea long term.
When rates are not stable, especially when they go up/down more stable funds are recommended such as RPHIX, CBUDX, CBLDX, RSIIX, DHEAX,OSTIX.
RPHIX is the closest to a MM, the next step is CBUDX and the rest.
I'm invested at 99+% in 2 very low SD bond funds + high yield + good performance in 2023 and YTD.

@dtconroe, thanks for the compliment. Wish it were true but it’s not. If I were to believe that I would become full of myself and that has doomed many a trader. All the good traders I knew had particular traits and one was humility. So I try to adhere to that.
You do a great job staying in your lane. I realize many like you are camped out in money market funds, CDs, and Treasuries and I see absolutely nothing wrong with that. The returns there this year for many not only pay the bills but for some have added to their nest eggs,
@yogibearbull, yes, three negative years in a row for Treasuries is unheard of. Where go Treasuries goes impacts so many bond categories. So trying to figure out the direction of Treasuries short term (an almost impossible task) is always on my mind. Last year rising short term and long term rates negatively impacted everything in Bondland. That hasn’t been the case in 2023” Just look at the performance of bond funds such as HOBIX, DHEAX, BDKAX, to name just a very few. Even junk corporates have more than hung in there especially @Crash favorite TUHYX and one of my favorites CSOAX.
Edit. The good traders are the ones who can adeptly trade stocks. While I have more than successfully daytraded stock index futures, equity mutual funds in days gone by and bond funds, my particular trading style doesn’t work for individual stocks. In other words, I can’t trade stocks. I realize my limitations there. It is a risk tolerance thing. Any successful trader or investor needs to find their particular niche and stocks aren’t my niche, That has always frustrated me because many of the thrust indicators I monitor have been spot on calling major bottoms over the past many years.

PMZIX -6 cents
DODIX -11 cents
CLMAX -6 cents
PIMIX -4 cents
OSTIX -7 cents
PDIIX -7 cents
MWIGX -7 cents
MWFEX -5 cents
BHK -12 cents
DMO -29 cents
Better ...
RCTIX -1 cent
CBLDX -1 cent
DLDFX -2 cents
SEMMX -1 cent
ICMUX -1 cent
ZEOIX -3 cents
DHEAX -2 cents
RHHIX -1 cent
But, look here:
IOFIX even
DPFNX even
BDKAX even