Income stream for 10 years

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JohnSmith123
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Income stream for 10 years

Post by JohnSmith123 » Sun Aug 11, 2019 12:42 pm

I need to invest $20,000 for a steady income stream for my mother-in-law. At the end of the 10 years if it is depleted that is ok. It needs to be relatively safe.
So was thinking of a 20/80 equity/bond fund, taking the yield + monthly withdrawals.

She probably needs about $2000 per year income, and then she will have to use whatever is left for emergency like fixing the roof etc with the children pitching in.

Saw vasix (vanguard) or equivalent fasix (fidelity.
I am currently at fidelity so the fasix does not have any transaction fees.

Any other recommendations of etf and funds? Want to make it very simple.

mcraepat9
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Re: Income stream for 10 years

Post by mcraepat9 » Sun Aug 11, 2019 12:51 pm

1. MIL needs to realize that anything that involves equities will necessarily involve risk. The equity piece can fall as much as 50%.

2. If OK with equities, would consider 30/70 rather than 20/80 - this is Vanguards target income retirement fund allocation and Rick ferri’s “center of gravity” for retirees.

3. Note that if she only needs $2000 each year for 10 years and she has $20000 now, there is no real need to take equity risk - it will be mostly depleted in 10 years but it is guaranteed if you use FDIC insured instruments or Treasury securities.
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Cyclesafe
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Re: Income stream for 10 years

Post by Cyclesafe » Sun Aug 11, 2019 1:01 pm

Suggest a 10 year ladder of $2000 bank (not broker) CD's. Simple, and might mostly keep up with inflation. I think a 10 year fixed term annuity will be expensive and inflexible.
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HEDGEFUNDIE
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Re: Income stream for 10 years

Post by HEDGEFUNDIE » Sun Aug 11, 2019 1:04 pm

Just stick the whole thing in Total Bond.

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arcticpineapplecorp.
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Re: Income stream for 10 years

Post by arcticpineapplecorp. » Sun Aug 11, 2019 1:25 pm

JohnSmith123 wrote:
Sun Aug 11, 2019 12:42 pm
I need to invest $20,000 for a steady income stream for my mother-in-law. At the end of the 10 years if it is depleted that is ok. It needs to be relatively safe.
So was thinking of a 20/80 equity/bond fund, taking the yield + monthly withdrawals.

She probably needs about $2000 per year income, and then she will have to use whatever is left for emergency like fixing the roof etc with the children pitching in.

Saw vasix (vanguard) or equivalent fasix (fidelity.
I am currently at fidelity so the fasix does not have any transaction fees.

Any other recommendations of etf and funds? Want to make it very simple.
at the end of 10 years, it will be depleted because you're taking out 10% of the portfolio per year (.10 X $20,000 = $2000). 10 years of 10% withdrawals should be 100% withdrawal (10 X 10 = 100).

could happen sooner if you invest any in stocks and you see a downturn. Granted mcraepat9 explained if the market were to fall 50% your 20% in equities would fall in half. So if you put 20% in equities your portfolio would be:
$4000 in equities (20% x $20,000 = $4000)
$16,000 in bonds.

a fall of half the equities would see your $4000 drop to $2000. That would be equal to one year of income/withdrawals. So you wouldn't have 10 years, you'd have 9. Is that acceptable? (this assumes a 50% decline, which doesn't happen all that often, but declines of 20%-30% are not uncommon so you should do the math to see what you're prepared to lose.

Also if the portfolio drops because of declines in equities, your withdrawal rate increases beyond 10%.

I don't think she can afford to take much risk with money she needs now. If she didn't need the money until 10 years, that's different, but she's needing it now and every year for the next 10 years. You have to keep it safer. CDs, short term bonds, etc.

only take risk with money you can afford to lose. It doesn't sound like she can afford to lose this because she needs it.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

dbr
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Re: Income stream for 10 years

Post by dbr » Sun Aug 11, 2019 1:39 pm

Given that $20,000/10 years is $2,000 it would seem straightforward to put the money in a savings account and spend it down. The CDs would be fine too. You really should not mess around with stock and bond funds. This is simpler than that.

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Re: Income stream for 10 years

Post by willthrill81 » Sun Aug 11, 2019 1:46 pm

There are several plausible options.

#1 Conservative AA and SWR approach
There's no historic benefit for lower than a 30% allocation to stock. ?According to FIRECalc, A 30/70 AA (total stock market/long-term Treasuries) with a 10% SWR (i.e. $2000 annually, inflation-adjusted) historically had a success rate of 77.7%, and none of the failures occurred before 7 years.

#2 10 year TIPS
The real yield on 10 year TIPS is .09%, so while this would essentially guarantee that she could take $2k annually for 10 years, this would exhaust her funds by after 10 years. I say "essentially" because she might have to sell some of those bonds at a real loss, depending on what happens to the yields between the time of purchase and the 10 year maturity.

#3 A ladder of Invesco Bulletshares
These are ETFs comprised of either investment-grade or high-yield (aka 'junk') bonds that mature in a given year. This would involve splitting the $20k between at least 10 ETFs maturing in an appropriate year. Some of the funds could be split between investment-grade and high-yield bonds so as to essentially provide a little 'stock' exposure.

If she wants the possibility of some reserve funds at the end of the 10 year period and is comfortable with some volatility, #1 is the way to go. #2 is probably the safest approach, and #3 may be the easiest and most convenient since the funds in the ETFs will be liquidated and returned to her automatically in each of the 10 years of the ladder. And, of course, a combination of any of these approaches could be undertaken. For instance, #1 and #2 could be combined by putting 70% into TIPs and 30% into stock.
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Goal33
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Re: Income stream for 10 years

Post by Goal33 » Sun Aug 11, 2019 1:49 pm

How about a savings account?
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Re: Income stream for 10 years

Post by Sandtrap » Sun Aug 11, 2019 1:49 pm

Also consider constructing a CD Ladder.
Something like this:
Fidelity:
https://fixedincome.fidelity.com/ftgw/f ... s|treasury
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Dottie57
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Re: Income stream for 10 years

Post by Dottie57 » Sun Aug 11, 2019 2:03 pm

Is there possibly 30k? An SPIA at immediateannuities.com for life with min of 10yrs of payment gives over 2000 a year.

There isn’t an annuity option for 20k.

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JohnSmith123
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Re: Income stream for 10 years

Post by JohnSmith123 » Sun Aug 11, 2019 2:39 pm

Thanks, #1 looks like a simple option. The other options seem ultra conservative and will just get close to inflation returns.
Any particular funds or etf anyone would recommend with a 30/70?

The alternative is a cd ladder.
willthrill81 wrote:
Sun Aug 11, 2019 1:46 pm
There are several plausible options.

#1 Conservative AA and SWR approach
There's no historic benefit for lower than a 30% allocation to stock. ?According to FIRECalc, A 30/70 AA (total stock market/long-term Treasuries) with a 10% SWR (i.e. $2000 annually, inflation-adjusted) historically had a success rate of 77.7%, and none of the failures occurred before 7 years.

#2 10 year TIPS
The real yield on 10 year TIPS is .09%, so while this would essentially guarantee that she could take $2k annually for 10 years, this would exhaust her funds by after 10 years. I say "essentially" because she might have to sell some of those bonds at a real loss, depending on what happens to the yields between the time of purchase and the 10 year maturity.

#3 A ladder of Invesco Bulletshares
These are ETFs comprised of either investment-grade or high-yield (aka 'junk') bonds that mature in a given year. This would involve splitting the $20k between at least 10 ETFs maturing in an appropriate year. Some of the funds could be split between investment-grade and high-yield bonds so as to essentially provide a little 'stock' exposure.

If she wants the possibility of some reserve funds at the end of the 10 year period and is comfortable with some volatility, #1 is the way to go. #2 is probably the safest approach, and #3 may be the easiest and most convenient since the funds in the ETFs will be liquidated and returned to her automatically in each of the 10 years of the ladder. And, of course, a combination of any of these approaches could be undertaken. For instance, #1 and #2 could be combined by putting 70% into TIPs and 30% into stock.
Last edited by JohnSmith123 on Sun Aug 11, 2019 2:53 pm, edited 1 time in total.

usagi
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Re: Income stream for 10 years

Post by usagi » Sun Aug 11, 2019 2:52 pm

I note you said you wanted a simple solution so that rules out optimizing the solution. Personally, in this instance, I would go for a more complicated, and relatively risk free approach that involves some basic math and build my own annuity with savings, cds, etc based on the NPV of the assets and invest the difference in equities.

That aside, whatever allocation you use, I would look at using ishares DVY etf which is designed for income. In theory it should decline less in a down market than the market as a whole and pay you while you wait for recovery, it has a low ER and a great yield. At 100 stocks it spreads it risk some, but it heavily weighted in utilities. I would also look at ITOT. Likely I would split between the two on the equity side giving you a 2.75-3.0 overall yield and allowing to capture a fare chunk of the markets upside and mitigate some its downside. Given where we are in the market, in terms of valuations, I would certainly want dividends. I note for the first time I have seen it Value Line has now repeatedly suggested acquiring solid dividend payers in its general model asset allocation model vs the market as a whole. The apparent theory being the easy money has been made in the is long run and further gains may be harder won so they want to get paid for their patience. It seems prudent given your situation.
Last edited by usagi on Sun Aug 11, 2019 3:07 pm, edited 1 time in total.

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willthrill81
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Re: Income stream for 10 years

Post by willthrill81 » Sun Aug 11, 2019 2:52 pm

JohnSmith123 wrote:
Sun Aug 11, 2019 2:39 pm
Thanks, #1 looks like a simple option.
Any particular funds or etf anyone would recommend with a 30/70?

The alternative is a cd ladder.
willthrill81 wrote:
Sun Aug 11, 2019 1:46 pm
There are several plausible options.

#1 Conservative AA and SWR approach
There's no historic benefit for lower than a 30% allocation to stock. ?According to FIRECalc, A 30/70 AA (total stock market/long-term Treasuries) with a 10% SWR (i.e. $2000 annually, inflation-adjusted) historically had a success rate of 77.7%, and none of the failures occurred before 7 years.

#2 10 year TIPS
The real yield on 10 year TIPS is .09%, so while this would essentially guarantee that she could take $2k annually for 10 years, this would exhaust her funds by after 10 years. I say "essentially" because she might have to sell some of those bonds at a real loss, depending on what happens to the yields between the time of purchase and the 10 year maturity.

#3 A ladder of Invesco Bulletshares
These are ETFs comprised of either investment-grade or high-yield (aka 'junk') bonds that mature in a given year. This would involve splitting the $20k between at least 10 ETFs maturing in an appropriate year. Some of the funds could be split between investment-grade and high-yield bonds so as to essentially provide a little 'stock' exposure.

If she wants the possibility of some reserve funds at the end of the 10 year period and is comfortable with some volatility, #1 is the way to go. #2 is probably the safest approach, and #3 may be the easiest and most convenient since the funds in the ETFs will be liquidated and returned to her automatically in each of the 10 years of the ladder. And, of course, a combination of any of these approaches could be undertaken. For instance, #1 and #2 could be combined by putting 70% into TIPs and 30% into stock.
Vanguard's Wellesley Income fund (VWINX for this amount) has a mostly fixed 35/65 AA; there was a pretty long thread discussing this fund not long ago. I don't believe that there has been a 10 year period where you could not have withdrawn an inflation adjusted $2k from a starting $20k balance and it fail within 10 years for this fund since at least the mid-1970s. Most of the time, you could have done so for at least 13 years and over 20 years many times, although the future could look very different. This would certainly be an easy solution, and there wouldn't even be much potential to 'optimize' it, IMHO. But YMMV.

The only issue with the CD ladder is that it is subject to inflation risk that TIPS or I bonds would not be. However, the yield makes CDs significantly more attractive at the market's expected inflation rate. So if we don't have significant unexpected inflation, CDs will be better. I would urge you to consider putting at least some of the funds into TIPS bought directly from the Treasury. 5 or 10 year TIPS would work.
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Phineas J. Whoopee
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Re: Income stream for 10 years

Post by Phineas J. Whoopee » Sun Aug 11, 2019 3:03 pm

The 20% in equities from the 20/80 fund won't be for ten years the whole way through. For example, after nine years the 20% is for one year, which may be excessive.

I agree with others about using CDs, or if somebody wants to get fancy $2,000 worth of TIPS maturing each year.

PJW

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Re: Income stream for 10 years

Post by welderwannabe » Sun Aug 11, 2019 3:10 pm

I wouldn't use FASIX. The expense ratio is horrendous.

I would look at AOK iShares Core Conservative Allocation ETF. It is 30/70, so not exactly what you asked for but close. ER is less than half what FASIX is. AOK trades commission free at Fidelity.
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Re: Income stream for 10 years

Post by staustin » Sun Aug 11, 2019 3:12 pm

Cyclesafe wrote:
Sun Aug 11, 2019 1:01 pm
Suggest a 10 year ladder of $2000 bank (not broker) CD's. Simple, and might mostly keep up with inflation. I think a 10 year fixed term annuity will be expensive and inflexible.
+1

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willthrill81
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Re: Income stream for 10 years

Post by willthrill81 » Sun Aug 11, 2019 3:16 pm

Cyclesafe wrote:
Sun Aug 11, 2019 1:01 pm
Suggest a 10 year ladder of $2000 bank (not broker) CD's. Simple, and might mostly keep up with inflation. I think a 10 year fixed term annuity will be expensive and inflexible.
There is virtually no logical reason I've seen to ever use a 10 year period certain annuity. You can achieve the same returns as the insurance company and probably better if using CDs or get inflation protection via TIPS and/or I bonds, retain liquidity, and change course if/when needed. The only potential advantage that the annuity has is its innate fraud 'protection'; stealing an elderly person's assets is generally much easier than stealing a future annuity payout.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Income stream for 10 years

Post by Wiggums » Sun Aug 11, 2019 7:43 pm

dbr wrote:
Sun Aug 11, 2019 1:39 pm
Given that $20,000/10 years is $2,000 it would seem straightforward to put the money in a savings account and spend it down. The CDs would be fine too. You really should not mess around with stock and bond funds. This is simpler than that.
+1

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Re: Income stream for 10 years

Post by BlueCable » Sun Aug 11, 2019 8:00 pm

From your description, she has no capacity to take risk. She needs $2k/yr for 10 years, and has $20k.

Ten years is not a long enough time horizon for you to include equities to any extent, if that money really need to last ten years. I would hesitate to include a bond fund as well.

I think you need to be absolutely conservative and invest in short-term treasuries and/or CDs. You should be able to just beat inflation. Maybe put money 5 years out into Total Bond, and each year move $2k into CDs.

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Re: Income stream for 10 years

Post by Stinky » Sun Aug 11, 2019 8:04 pm

Wiggums wrote:
Sun Aug 11, 2019 7:43 pm
dbr wrote:
Sun Aug 11, 2019 1:39 pm
Given that $20,000/10 years is $2,000 it would seem straightforward to put the money in a savings account and spend it down. The CDs would be fine too. You really should not mess around with stock and bond funds. This is simpler than that.
+1
+2

Also consider money market funds.
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willthrill81
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Re: Income stream for 10 years

Post by willthrill81 » Sun Aug 11, 2019 8:15 pm

dbr wrote:
Sun Aug 11, 2019 1:39 pm
Given that $20,000/10 years is $2,000 it would seem straightforward to put the money in a savings account and spend it down. The CDs would be fine too. You really should not mess around with stock and bond funds. This is simpler than that.
The problem is that it seems that they want some upside potential. Neither a savings account, money market, nor CDs offer that.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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JohnSmith123
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Re: Income stream for 10 years

Post by JohnSmith123 » Sun Aug 11, 2019 8:24 pm

Op here, she is willing to take some risk, so savings account, cd ladders just basically keep up with inflation or actually less. Note the 10 year period is probably her life span. If she lives longer, we’ll support her.

————-
As an aside, if I were retired and assumed I had 10 more years to live, needed $20,000 a year, had $200,000 sum right now, would my approach still be get a cd or mmf and let inflation eat away at it? To be absolutely safe?

Totally Different scenario:
Or if I am 55 years old, needing $20,000/year, take the whole lump sum $200,000 and set it aside in a cd ladder?
And then my remaining for years 10-30 (say $500,000), I then put in a equity / bond fund? Ie my needs for the first 10 years need to be in a savings account or cd ladder? With no upside?

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Re: Income stream for 10 years

Post by Tyler Aspect » Sun Aug 11, 2019 8:35 pm

Interest Only Strips can produce an income stream that ends with no values left. Not sure if your in-law is going to be happy about it though.
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Re: Income stream for 10 years

Post by willthrill81 » Sun Aug 11, 2019 8:38 pm

JohnSmith123 wrote:
Sun Aug 11, 2019 8:24 pm
Totally Different scenario:
Or if I am 55 years old, needing $20,000/year, take the whole lump sum $200,000 and set it aside in a cd ladder?
And then my remaining for years 10-30 (say $500,000), I then put in a equity / bond fund? Ie my needs for the first 10 years need to be in a savings account or cd ladder? With no upside?
It depends a lot on your risk tolerance. Would you absolutely need $20k/year, or could you reduce that if needed and, if so, for how long?

You'll find that for many Bogleheads, a historic 95% likelihood of being 'safe' is not good enough them. That's neither good nor bad, but your risk tolerance may be significantly higher than that.

Rather than discussing hypotheticals, if this is a real situation, it would be far better for you to post the specifics of the situation using the format described at the top of this section of the forum, "asking portfolio questions."
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retiredflyboy
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Re: Income stream for 10 years

Post by retiredflyboy » Mon Aug 12, 2019 11:29 am

Vanguard prime money market and direct $2,000 per month to her checking account.
Facts are stubborn things. Everything works until it doesn’t.

dbr
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Re: Income stream for 10 years

Post by dbr » Mon Aug 12, 2019 11:35 am

retiredflyboy wrote:
Mon Aug 12, 2019 11:29 am
Vanguard prime money market and direct $2,000 per month to her checking account.
I thought so too, but he stated in a reply above that they would like more return than deposits that barely keep up with inflation.

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JohnSmith123
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Re: Income stream for 10 years

Post by JohnSmith123 » Mon Aug 12, 2019 11:42 am

Thanks for all your responses.
Yes, I would like a return that is greater than just inflation, so willing to take some risk that is nominal.
Putting it into a money market account or something similiar is not enough of a return.

Maybe I put 50% in TIPS with 5 years, and then remaining 50% in AOK, and then yearly move 1 years worth to TIPs?

retiredflyboy
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Re: Income stream for 10 years

Post by retiredflyboy » Mon Aug 12, 2019 8:29 pm

JohnSmith123 wrote:
Mon Aug 12, 2019 11:42 am
Thanks for all your responses.
Yes, I would like a return that is greater than just inflation, so willing to take some risk that is nominal.
Putting it into a money market account or something similiar is not enough of a return.

Maybe I put 50% in TIPS with 5 years, and then remaining 50% in AOK, and then yearly move 1 years worth to TIPs?
If $2,000 steady income is the number as you lead with, then keep it simple and spend down a a stable amount of assets. I don’t think you are going to improve on that unless you take a lot of risk. Best wishes!
Facts are stubborn things. Everything works until it doesn’t.

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Re: Income stream for 10 years

Post by willthrill81 » Mon Aug 12, 2019 8:35 pm

JohnSmith123 wrote:
Mon Aug 12, 2019 11:42 am
Thanks for all your responses.
Yes, I would like a return that is greater than just inflation, so willing to take some risk that is nominal.
Putting it into a money market account or something similiar is not enough of a return.

Maybe I put 50% in TIPS with 5 years, and then remaining 50% in AOK, and then yearly move 1 years worth to TIPs?
Sounds reasonable.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Income stream for 10 years

Post by smectym » Mon Aug 12, 2019 11:05 pm

willthrill81 wrote:
Sun Aug 11, 2019 3:16 pm
Cyclesafe wrote:
Sun Aug 11, 2019 1:01 pm
Suggest a 10 year ladder of $2000 bank (not broker) CD's. Simple, and might mostly keep up with inflation. I think a 10 year fixed term annuity will be expensive and inflexible.
>>>There is virtually no logical reason I've seen to ever use a 10 year period certain annuity.<<<

You can achieve the same returns as the insurance company and probably better if using CDs or get inflation protection via TIPS and/or I bonds, retain liquidity, and change course if/when needed. The only potential advantage that the annuity has is its innate fraud 'protection'; stealing an elderly person's assets is generally much easier than stealing a future annuity payout.
Can’t agree. We own plenty of I bonds and CD’s. But we also have taken out a term annuity using Vanguard’s [now dissolved relationship with] Hueler’s comparative annuity quote service, for a specific “bridging the gap” purpose. The internal rate of return on the fixed term annuity was comparable to or better than CD or I-bond alternatives at the time of the transaction (2011), and the “check a month” modality more convenient than messing with CD ladders and so on. Of course Vanguard’s annuity department back then was able to swing relatively good pricing; and now Vanguard is exiting annuities altogether. But our fixed term annuity, which has a few years to run, still seems pretty “logical.”

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Re: Income stream for 10 years

Post by willthrill81 » Tue Aug 13, 2019 10:11 am

smectym wrote:
Mon Aug 12, 2019 11:05 pm
willthrill81 wrote:
Sun Aug 11, 2019 3:16 pm
Cyclesafe wrote:
Sun Aug 11, 2019 1:01 pm
Suggest a 10 year ladder of $2000 bank (not broker) CD's. Simple, and might mostly keep up with inflation. I think a 10 year fixed term annuity will be expensive and inflexible.
>>>There is virtually no logical reason I've seen to ever use a 10 year period certain annuity.<<<

You can achieve the same returns as the insurance company and probably better if using CDs or get inflation protection via TIPS and/or I bonds, retain liquidity, and change course if/when needed. The only potential advantage that the annuity has is its innate fraud 'protection'; stealing an elderly person's assets is generally much easier than stealing a future annuity payout.
Can’t agree. We own plenty of I bonds and CD’s. But we also have taken out a term annuity using Vanguard’s [now dissolved relationship with] Hueler’s comparative annuity quote service, for a specific “bridging the gap” purpose. The internal rate of return on the fixed term annuity was comparable to or better than CD or I-bond alternatives at the time of the transaction (2011), and the “check a month” modality more convenient than messing with CD ladders and so on. Of course Vanguard’s annuity department back then was able to swing relatively good pricing; and now Vanguard is exiting annuities altogether. But our fixed term annuity, which has a few years to run, still seems pretty “logical.”
Not having to do anything to receive the payments is a benefit, granted. But the insurance company is very unlikely to be able to earn any more interest than you (probably less, due to the frequent advantage in yield of CDs over bonds of similar maturity) and has to pay for administrative expenses to boot. There are threads discussing period certain annuities, this being one of them. Here are two relevant quotes from that thread.
Cyclesafe wrote:
Sun Apr 28, 2019 9:39 am
A period certain current-market-based annuity is a costly way to get a "guaranteed" income stream for a fixed number of years. As mentioned, it needs to be thought of as insurance rather than as a purely financial investment alternative.
MathIsMyWayr wrote:
Sun Apr 28, 2019 4:54 pm
I ran numbers at https://www.immediateannuities.com/. In the OP's example, the monthly payment came out as $461. It is a return of about 2.05% which is below the current treasury rates.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Income stream for 10 years

Post by dbr » Tue Aug 13, 2019 11:01 am

Since the conversation has changed from the title and original statement of providing an income stream for ten years to finding ways to get more return than current cash yields, it might be a suggestion that the money be given to the OP to invest 100% in stocks and the OP give back better than cash yield by whatever amount they agree to. The idea is to shift the opportunity and the risk to the OP, who can justify taking risk for return, while providing the MIL with risk free income greater than cash yield. This is a case where asymmetric incentives create a bargain for both parties. I admit the whole bargain turns on what incentives the MIL has regarding risk and return. The OP is assumed to have no risk issues as he is prepared to make up shortfalls in the MIL budget no matter what.

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willthrill81
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Re: Income stream for 10 years

Post by willthrill81 » Tue Aug 13, 2019 11:54 am

dbr wrote:
Tue Aug 13, 2019 11:01 am
Since the conversation has changed from the title and original statement of providing an income stream for ten years to finding ways to get more return than current cash yields, it might be a suggestion that the money be given to the OP to invest 100% in stocks and the OP give back better than cash yield by whatever amount they agree to. The idea is to shift the opportunity and the risk to the OP, who can justify taking risk for return, while providing the MIL with risk free income greater than cash yield. This is a case where asymmetric incentives create a bargain for both parties. I admit the whole bargain turns on what incentives the MIL has regarding risk and return. The OP is assumed to have no risk issues as he is prepared to make up shortfalls in the MIL budget no matter what.
That's a good idea. I would certainly do this for a family member. And the OP obviously wouldn't have to invest the funds 100% in stock. But if the OP is in a higher tax bracket than his MIL, which is almost certainly true, introducing tax-inefficient fixed income might complicate matters a bit.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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