alltheway wrote:Am I nuts to continue this way; all I want to do is sustain myself till I 'bite the bullet', lol.
I don't believe I would set things up this way, but I also don't believe it is nuts either.
With a duration of 5.35% in your New York muni bond, if interest rates go up 1%, the value of your muni bond fund may go down about 5.35%. So $1 million would drop to $946,500, but the munis (after a lag time) will start paying you higher interest. If the interest rates increase another 1%, it all happens again (drop in value, but higher incoming interest rate). So the income from your munis may not change all that much, even if interest rates go up.
As you know, interest rates don't jump 1% at at time - it happens gradually. So even if interest rates do go up, it will be a gradual change - not the rug being pulled out from under you. There should be plenty of time to consider and purchase a SPIA if you decide to guarantee your income that way. And the SPIA, bought later, would pay more (because interest rates would be higher and you would be older).
I think you'll be fine if you leave things much as they are. But if you ever need to do something significant, a SPIA is a good solution. You might want to learn about them now rather than trying to learn when you are under stress. For example, I heard that it may be difficult to buy a SPIA after a certain age, but don't know that to be true myself - maybe you should learn things like that now rather than later. Shop around. And maybe someone will be kind enough to post the link to the website where you can compare different fixed annuities.
A couple of other things came up that I think you should consider.
1) Is it wise to have all your money in 1 state muni bond fund?
This causes me a little concern since the risk is concentrated in one place. I might have bought a state muni fund and a federal muni fund (conglomeration of funds from a lot of states) instead. I don't know the tax cost of "fixing" this. Do you have a very large unrealized gain in this fund? It appears you are in a very low tax bracket - even if there is a gain, you may pay not any tax on some of the gain (up to the top of the 15% tax bracket). You might systematically exchange some of this one fund into something else just to lower your risk some.
2) Should you be using a taxable bond fund instead of a muni?
I have no
idea what the answer to this one is. Your SS is taxed according to how much other income you get. If you have no other income, very little of your SS is taxed. If you have a lot of other income, 85% of your SS is taxed. So adding income can mean less money to spend.
I don't know if the "income" from your muni counts here. It is income, but not taxed.
Also, if you switch to a taxable bond fund (for some of your money) that income will be taxed by the state of NY. So switching to a taxable bond fund (often a good choice in other circumstances) may not be the best choice for you.
Lastly, the NY muni bond fund is paying nicely - better than most taxable bond funds, so there is certainly no reason to switch for more yield at the present time.
So, no, your investments are certainly not a plan for disaster in my opinion. The thing that could drain your $1.25 million in savings would be long term care and you have already taken care of that (to the extent possible). I would think with Medicare (and a the appropriate supplements) and long term care insurance that your nest egg would be a very comfortable buffer. There are other ways it could
be invested, but I'm not sure that would be any improvement over what you are currently doing.