Multi million dollar inheritance where do i start

[rcole33856]

I am recieving approximately 2 mill in realestate about 7 different properties from florida to hawaii all paid off. Also after taxes approximate 15mill in cash. I am 45 currently in med field making a good living but after this I think I want to retire and live off these investments. I believe in passive investing and I just want to preserve what I have nothing fancy. I would like to take about 5% in distributions each year and live off that. Yes I need a financial adviser, cpa ect but what would be the best way to tackle this and be able to have the money last 40 yrs or so. Thanks for everyones advice

[Manbaerpig]

are you looking for love sailor?

[rcole33856]

married sorry lol

[missybon]

I received about 1 million in inheritance, am 46 and a public school teacher.
You will be stuck with lawyers and whatnot through the settlement of the estate, but I don't think you will need help once it is all settled: especially if you intend to invest through index funds. Your numbers will be huge but not complicated.

I put 800 in a few different funds- sp 500, small cap, pacific, emerging mkts, metals mining. 2010 was the first full calender year I had these funds and they produced about $30,000 in dividends/realized gains and... I've forgotten, but plenty in unrealized gains. Left alone from August 2009 to today the 800 has become 1 million.

200 went to individual stocks because it interests me. They produced abt $3,000 in dividends and 40 ? in unrealized cap gains.


I reinvest all my gains an intend to leave well enough alone for the next three years until my kid is out of high school and then see where things stand.

I kept a little pile of cash out to... enjoy and stretch my salary dollar. It has given me great peace of mind and helped me not look too much at how the investments are going. My inclination would be to invest 12 in a mix of funds and forget all about it for five years. Keep 5 to live off and.. enjoy, for five years and then look at how your investments are doing.

[RenoJay]

Not sure how to reply to your specific questions, but just wanted to say that whomever left you this did a really great job at accumulating, and you seem poised to treat this huge gift with the respect it deserves.

[leod]

as my aunt would say "it is a gift and give 10% to charity" i am not sure why it is always 10%

[EyeDee]

. . . I would like to take about 5% in distributions each year and live off that. Yes I need a financial adviser, cpa ect but what would be the best way to tackle this and be able to have the money last 40 yrs or so.

.
RCole,

Spend some time reading posts on this board, read some of the recommended books, and if you want to be reasonably confident that it will last 40 years or more, keep working and saving more until you are happy with a 3% withdrawal rate instead of 5%. After doing some reading, consider something like the following for the money:

20% in Vanguard's Total Stock Market Index Fund
15% in Vanguard's Total International Stock Index Fund
20% in Vanguard's Inflation Protected Securities Fund
20% in Vanguard's Intermediate-Term Tax-Exempt Fund
10-15% in Vanguard's Limited-Term Tax Exempt Fund and/or Vanguard's Short-Term Tax Exempt Fund
2-5% in Vanguard's Tax-Exempt Money Market
2-5% in bank CD's
2-5% in a bank money market Fund

Bank holdings are to have some money available if a temporary problem develops with your access to Vanguard until you get the problem worked out.

Good Luck and remember it is your money and your decision.

[fundtalker123]

When you say you want to take 5% distributions each year, you mean 5% of the 17 million, or 850,000 per year? If so that may end up being a too high withdrawl rate to last 40 years. Safer bet would be invest approximately 50% in a stock index funds, 50% in a bond index fund and withdraw about 2-3% per year.

Read John Bogle's books

[rcole33856]

Do i really need adviser if i just get index funds appropriately ect.I have lurked here for a long time and considering Evanson?

[EyeDee]

.
Fundtalker123's recommendation of 2-3% is probably better than my 3% if you want it to last 40 years or more.

[rcole33856]

All the calculators say I shouldnt have a problem with 5% and yes of total portfolio

[letsgobobby]

then you haven't read trinity or played with firecalc enough.

if it were me, I would put 33% in TSM, 33% TISM, 33% tax-free bond fund, light up a cigar, and live off 2% per year. And yeah, $340,000 per year would be plenty enough for us to live on quite comfortably. Wouldn't need $850,000 or even know what to do with it.

[Anon1234]

Welcome to bogleheads and Congrats on your windfall! Those are unbelievable numbers.

If I were you I wouldn't quit my day job until you've let it sink in a little and formed a new plan for both your life an your investments. Maybe spring for bagels on Monday though:)

Normally I would tell someone to park cash at the bank until you have explicit goals and a solid plan. But with 15M you're basically not FDIC insured at a bank. There is a product called CDARS available at some banks which allows one to FDIC insure an unlimited amount. I have no personal experience using them.
http://www.cdars.com/

To learn about setting investing goals, planning and writing an Investment policy statement I would start by reading this post. It will give you an overview and direct you to other reading.
http://www.bogleheads.org/forum/viewtopic.php?t=6211

Take your time, better to lose a few basis points to inflation than to jump into anything you might regret.

The 5% withdrawal rate you mentioned seems high for a person with your life expectancy. The wiki on safe withdrawal rate is a good place to start learning about it.
http://www.bogleheads.org/wiki/Safe_Withdrawal_Rates

For the 7 properties you should make sure they have insurance, some kind of security and regular visitations.

Can I ask what your benefactor did for a living?

Best,
Anon

[fundtalker123]

All the calculators say I shouldnt have a problem with 5% and yes of total portfolio

When using such calculators (http://www.bogleheads.org/wiki/Tools_an ... alculators), or getting free advice/projections from places like Vanguard and Fidelity, you probably should insert a "safety factor" or "margin of error", maybe divide by 2. Like an engineer building a bridge, why cut it close unless you really have to.

Alternatively, if doing it yourself at Vanguard or Fidelity don't feel comfortable, Rick Ferri's (Portfolio Solutions) or Larry Swedroe's (Buckingham Asset Management) firms seem honest for implementing index fund approaches and they would do thorough analysis and planning for you. But always compare with Vanguard's fees.

[rcole33856]

We also dont have children so any left over is just going to charity. I dont need to leave millions to anyone.

[rcole33856]

I really appreciate everyones advice. Yes i should be able to get by on 2-3% but like I said why shouldnt I enjoy it (not being selfish but having 10 million in assets or more after I die is useless in my humble opinion) I still want to be consevative being it is a long retirement. More advice is appreciated

[Anon1234]

I really appreciate everyones advice. Yes i should be able to get by on 2-3% but like I said why shouldnt I enjoy it (not being selfish but having 10 million in assets or more after I die is useless in my humble opinion) I still want to be consevative being it is a long retirement. More advice is appreciated

Seems to me you could start at 5% an adjust down if you became uncomfortable with the principle erosion. This would be workable as long as
1) you can mentally handle a decreased budget, and
2) you don't make long term cash flow commitments that require a 5% withdrawal rate.

Did you read the post and wiki I linked above?

[og15F1]

Read the section in Bogleheads Guide to Investing about what to do with a windfall

Sit on it for awhile and don't-spend while you work on a plan. Your plan can include figuring out what you really want to do with your life if you don't need to work.

In my opinion, and that's all it is, you shouldn't form your plan by picking a withdrawal rate that draws down the assets to $0 at age 95 or whatever and then figure out how to spend it. Think about what you want to do with your life, see how much that will cost, and build your plan in that direction.

Maybe unload the real estate, or not, depending on how you think about that situation. You probably don't need the hassle of managing the properties. How does the cash flow from those properties compare to your current expenses?

[Erwin]

Do i really need adviser if i just get index funds appropriately ect.I have lurked here for a long time and considering Evanson?

Evanson is an excellent choice. I dealt with his firm for 1 year and felt that he was very knowledgeable and extremely responsive. He will build a portfolio of index funds, which you could eventually do for yourself, but where he adds value is in not allowing you to make sudden changes which most of the time are stupid mistakes. People panic at the first market swing and sell, others hear/read ideas (most not rational) and want to implement them without much thinking, etc. In essence, he will provide stability to the portfolio.

[rcole33856]

There is no cashflow they are just there for our conveinence. I will probably sell them like you said because of the hassle factor. I don't need them. I have had approximately 6months to think about it. It will not be dispersed until July. I am sure my priorties will change in time but my wife and I want to do some extensive traveling then decide what exactly we want to become involved with (charities ect) I am just a little intimidated about managing this money and probably will feel more comfortable with a FA then maybe after a few years and some experience it will be easier but in the meantime Iplan on reading alot of books on the subject.

[porro]

rcole33856,

This is a good situation for you and your family.

Our family of four has accumulated $25 million: $6.5 million in real estate holdings and $18.5 million in investment accounts of various kinds, 88% taxable, 12% retirement accounts (401K, defined benefit, Roth). We went from paying no tax, getting the Earned Income Tax Credit less than ten years ago, to where we are today at a 40% tax rate federal and state combined. We'll be adding another $3-7 million to the pot after taxes this year.

I'm 54, wife is 50, two kids 27 and 25.

We do it all ourselves. We have good advice from our team: estate attorney, accountant, financial planner, insurance folks, books, this forum, and a calm, non-attached manner in the face of writing seven-figure tax payments.

We are conservative in our investment philosophy and take our risk with our business endeavors, where the bulk of our money comes to us.

Coming from having no money, we are seriously averse to paying fees, commission, and assets under management fees. So we go for Vanguard ETFs and mutual funds. We pay our financial planner by the hour and he only helps us with structuring stuff like our irrevocable life insurance trusts (we use them to cover estate taxes), estate planning, succession planning, charitable stuff, and tax optimization.

Heck, I'll float off uncancelled stamps from letters we get and glue them on to letters, when I absolutely have to send snail mail. I can't help it!

I'll pull together our asset allocation and investments for another post. We have hewed pretty solidly to our investment plan for years. The only thing that is making us nervous is having so much money in the US. We have a lot of money municipal bond funds (VWITX and VMLTX) and the short and long-term outlook doesn't look to good to us. I don't trust that our government can get us out of the mess we are in.

[magellan]

I agree with others that 5% is a very optimistic withdrawal rate and 2-3% is probably more realistic.

With such a long retirement, you'll certainly want your withdrawals to keep up with inflation. That means that you'd need to dedicate the first 2-3% of return to preventing your portfolio's value from getting eroded by inflation. Also, at 40 something, you're hopefully looking at a 40-50 year retirement, rather than the normal 30 years that most calculations consider.

As an example, imagine your portfolio generates a steady 6-7% of growth a year. This is a highly optimistic assumption, but stay with me. Out of that growth, maybe 1-2 percentage points will go to taxes, so you'll be down to 5-6% of after tax portfolio return. Next, you'll need to subtract out inflation of 3% or so, which will leave 2-3% real after tax return.

But this is the wildly optimistic case where everything goes perfectly. It doesn't consider the risk of stock market crashes or a 10-20 year stretch of lousy 1-2% returns like Japan's recently seen.

If you plan on a 2-3% withdrawal rate and things go great for 10-20 years and your portfolio grows wildly, you can always adjust your withdrawal rate up to 2-3% of the new higher portfolio value.

Jim

[rcole33856]

I agree with others that 5% is a very optimistic withdrawal rate and 2-3% is probably more realistic.

With such a long retirement, you'll certainly want your withdrawals to keep up with inflation. That means that you'd need to dedicate the first 2-3% of return to preventing your portfolio's value from getting eroded by inflation. Also, at 40 something, you're hopefully looking at a 40-50 year retirement, rather than the normal 30 years that most calculations consider.

As an example, imagine your portfolio generates a steady 6-7% of growth a year. This is a highly optimistic assumption, but stay with me. Out of that growth, maybe 1-2 percentage points will go to taxes, so you'll be down to 5-6% of after tax portfolio return. Next, you'll need to subtract out inflation of 3% or so, which will leave 2-3% real after tax return.

But this is the wildly optimistic case where everything goes perfectly. It doesn't consider the risk of stock market crashes or a 10-20 year stretch of lousy 1-2% returns like Japan's recently seen.

If you plan on a 2-3% withdrawal rate and things go great for 10-20 years and your portfolio grows wildly, you can always adjust your withdrawal rate up to 2-3% of the new higher portfolio value.

Jim

Yes I can probably start at a lower withdrawl rate and increase it over the years depending on the market.

[bdpb]

5% may be ok with one assumption, that is, you lower expenses as you
get older. Spending 750k per year in your 40s, 50s and 60s may be ok
if you expect to spend only 300k in your 70s and 80s. If one had to
live on 60k per year then it's very possible they would need that same
amount over their remaining lifetime and couldn't lower expenses late
in life. At 750k per year, I would expect you could lower this number
significantly as you age.

[stan1]

I'd say establish a 3% base, then take out 1-2% more if the market is doing well for nice to haves like house remodeling.

If the market is down 10+% in a year, don't take out the additional 1-2% and defer getting the new Ferrari for a year.

Can't say for sure, but after a few years of traveling the world in luxury (which I definitely would do in your situation) I might be happy spending a few years at home living in a beach cottage or mountain cabin where costs would be lower.

Enjoy while you are young and able. No point reaching your 80s with a ton of cash and wishing you had chartered that jet to fly you to Paris for your wife's 60th birthday (or having her remind you that you didn't do it!)

Don't skimp on health insurance. Its peace of mind even if you could self insure.

[natureexplorer]

rcole33856, I recommend you contact Vanguard. For people with that kind of money they offer free advice. For the cash, I would also ask about getting access to institutional shares of funds like Total International and Total Stock Market.

Is the real estate rental property? I would consider liquidating this.

A 5% withdrawal rate is a lot at your age, particularly since you will be in a high tax bracket.

Anyway, you might want to consider a very simple portfolio like:

35% Total Stock Market Index Institutional - VITSX (Minimum $5,000,000, ER 0.06%)
25% Total International Stock Index - VTSNX (Minimum $5,000,000, ER 0.15%)
40% Intermediate-Term Tax-Exempt - VWIUX (Minimum $100,000, ER 0.12%)

Adjust depending on the specifics of your situation The main problem with this is that is results in something quite muni heavy. I would not mess with CDs, I Bonds, or annuities, as they would be very small accounts compared to your overall portfolio size.

Just because you might think your portfolio is big, it doesn't mean you have to make it complciated.

[magellan]

Another thing to consider in your plan is to set an absolute floor on your annual income using some sort of guaranteed or at least safe investment strategy.

Instead of just thinking about an overall portfolio allocation between stocks and bonds and other risky assets, consider your allocation to various "retirement income sources."

Your risky portfolio is one potential income source, but you might consider having a separate TIPS ladder, insured CD Ladder, or US treasury portfolio. These safe and potentially near guaranteed investments can be structured to provide a base of retirement income that's reasonably safe, no matter what happens to risky assets like stocks and bonds.

Most retirees can depend on social security to provide a floor on their retirement income. Even for upper middle class retirees with good savings, social security often guarantees 30-50% of their annual spending. So if their portfolio goes bust, they'll still have a good chunk of their spending covered. Some retirees add in other guaranteed income sources like pensions, TIPS ladders, or immediate annuities (SPIAs) to increase this floor. Then they can top off their guaranteed income stream with income from a risky assets portfolio.

In your case, social security and pensions wouldn't make up more than a percent or two of your spending. You're on your own to create that safety net to protect your from losing a large chunk of your retirement income if something really bad happens to your risky assets portfolio.

Jim

[rcole33856]

I'd say establish a 3% base, then take out 1-2% more if the market is doing well for nice to haves like house remodeling.

If the market is down 10+% in a year, don't take out the additional 1-2% and defer getting the new Ferrari for a year.

Can't say for sure, but after a few years of traveling the world in luxury (which I definitely would do in your situation) I might be happy spending a few years at home living in a beach cottage or mountain cabin where costs would be lower.

Enjoy while you are young and able. No point reaching your 80s with a ton of cash and wishing you had chartered that jet to fly you to Paris for your wife's 60th birthday (or having her remind you that you didn't do it!)

Don't skimp on health insurance. Its peace of mind even if you could self insure.

I agree with this. Im sure my expenses will go down as I get older except healthcare. I currently earn $400k+ per year and so I know how easy you can spend the money. I dont want to spend extravgantly only keep my current lifestyle with maybe a little bump. The real estate is not rental it is just there and completely paid off but the maintenance, condo fees, HOA fees And property taxes seem to be a hassle when I probably wont use them that much and I have no desire to rent them out.

[HomerJ]

I really appreciate everyones advice. Yes i should be able to get by on 2-3% but like I said why shouldnt I enjoy it (not being selfish but having 10 million in assets or more after I die is useless in my humble opinion) I still want to be consevative being it is a long retirement. More advice is appreciated

Seems to me you could start at 5% an adjust down if you became uncomfortable with the principle erosion. This would be workable as long as
1) you can mentally handle a decreased budget, and
2) you don't make long term cash flow commitments that require a 5% withdrawal rate.

Did you read the post and wiki I linked above?

5% is pretty agressive for 40 years... But as long as you're willing to scale back if your principal starts to drop, you can try it...

Like Anon1234 says, don't buy 4 houses around the world that require a ton of money to keep up... because that will keep you from cutting back if you need to...

You don't want to die with 10 million, but you don't want only have 1 million left at 70 either, do you?

I think it would be smarter to gradually increase your lifestyle, not jump from whatever you make now to $800k a year... Plus that gives you time to feel comfortable with your investments...

Try to read the books on this wiki...

And consider charity... That's a ton of money to just spend on yourself.

[KyleAAA]

I could be mistaken, but I believe Trinity assumes you'll START with a certain withdrawal rate (i.e. 4% ) and then increase your withdrawals by inflation every year regardless of market performance. If you are willing to endure your income dropping by 20% if your portfolio does, 5% is probably doable. Your inflation-adjusted income probably won't rise over time with a withdrawal rate that high, but I don't think there's a huge risk of it dropping too much either, assuming you invest intelligently and conservatively. I would personally still feel far more comfortable limiting myself to 3-4% of my portfolio, but I think comparing OP's 5% plan to Trinity is apples-to-oranges.

[Grt2bOutdoors]

I am recieving approximately 2 mill in realestate about 7 different properties from florida to hawaii all paid off. Also after taxes approximate 15mill in cash. I am 45 currently in med field making a good living but after this I think I want to retire and live off these investments. I believe in passive investing and I just want to preserve what I have nothing fancy. I would like to take about 5% in distributions each year and live off that. Yes I need a financial adviser, cpa ect but what would be the best way to tackle this and be able to have the money last 40 yrs or so. Thanks for everyones advice

You are seeking 850K annually in distributions from your investment portfolio. Is that a gross number or a net in your pocket number? Let's assume that is gross to you. You do not have to My advice is to establish a laddered portfolio of high grade tax exempt bonds that let's say throw off 350K, probably equivalent to 66% of cash - that should be taxable equivalent of say 500K, remainder can be earned through a mix of index funds.

As an aside, it sounds like you are seeking to upgrade your lifestyle, if so, taking 5% annual withdrawals has a reasonable likelihood of creating noticeable portfolio erosion. If you are seeking to not pass on inheritance or trust to future generations, then by all means go ahead.

[Grt2bOutdoors]

I'd say establish a 3% base, then take out 1-2% more if the market is doing well for nice to haves like house remodeling.

If the market is down 10+% in a year, don't take out the additional 1-2% and defer getting the new Ferrari for a year.

Can't say for sure, but after a few years of traveling the world in luxury (which I definitely would do in your situation) I might be happy spending a few years at home living in a beach cottage or mountain cabin where costs would be lower.

Enjoy while you are young and able. No point reaching your 80s with a ton of cash and wishing you had chartered that jet to fly you to Paris for your wife's 60th birthday (or having her remind you that you didn't do it!)

Don't skimp on health insurance. Its peace of mind even if you could self insure.

I agree with this. Im sure my expenses will go down as I get older except healthcare. I currently earn $400k+ per year and so I know how easy you can spend the money. I dont want to spend extravgantly only keep my current lifestyle with maybe a little bump. The real estate is not rental it is just there and completely paid off but the maintenance, condo fees, HOA fees And property taxes seem to be a hassle when I probably wont use them that much and I have no desire to rent them out.

Yes, but do you make 400K net or gross? If gross then you are really coming home with 250-275K assuming max out of retirement options and 33%+ AMT la-la land and quite possibly high state taxes.

[dr_g]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

[rocket]

I recommend keep working until you get the money in your hands, since people may come out making a claim on this inheritance. I would invest is something very simple like Target Retirement 2050, tax efficient funds, or a 4-fund portfolio. Also, work on asset protection.

[rcole33856]

I'd say establish a 3% base, then take out 1-2% more if the market is doing well for nice to haves like house remodeling.

If the market is down 10+% in a year, don't take out the additional 1-2% and defer getting the new Ferrari for a year.

Can't say for sure, but after a few years of traveling the world in luxury (which I definitely would do in your situation) I might be happy spending a few years at home living in a beach cottage or mountain cabin where costs would be lower.

Enjoy while you are young and able. No point reaching your 80s with a ton of cash and wishing you had chartered that jet to fly you to Paris for your wife's 60th birthday (or having her remind you that you didn't do it!)

Don't skimp on health insurance. Its peace of mind even if you could self insure.

I agree with this. Im sure my expenses will go down as I get older except healthcare. I currently earn $400k+ per year and so I know how easy you can spend the money. I dont want to spend extravgantly only keep my current lifestyle with maybe a little bump. The real estate is not rental it is just there and completely paid off but the maintenance, condo fees, HOA fees And property taxes seem to be a hassle when I probably wont use them that much and I have no desire to rent them out.

Yes, but do you make 400K net or gross? If gross then you are really coming home with 250-275K assuming max out of retirement options and 33%+ AMT la-la land and quite possibly high state taxes.

That is gross income last year I only paid about 7% to federal taxes and I live in Texas which has no state taxes.

[rcole33856]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

I have not looked into annuities that much but I am sure there is a place for them in my portfolio that would be beneficial. I need a FA to advise me on how much would be prudent.

[HomerJ]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

I agree with using a Single Payment Immediate Annuity to create a base-line cash flow... I plan to do that when I retire...

It would probably be a good idea for the OP as well, but he'd have to look at the promised return. It might not be very high since he is so young.

[Chuck]

as my aunt would say "it is a gift and give 10% to charity" i am not sure why it is always 10%

Deuteronomy 14:22.

[HomerJ]

I'd say establish a 3% base, then take out 1-2% more if the market is doing well for nice to haves like house remodeling.

If the market is down 10+% in a year, don't take out the additional 1-2% and defer getting the new Ferrari for a year.

Can't say for sure, but after a few years of traveling the world in luxury (which I definitely would do in your situation) I might be happy spending a few years at home living in a beach cottage or mountain cabin where costs would be lower.

Enjoy while you are young and able. No point reaching your 80s with a ton of cash and wishing you had chartered that jet to fly you to Paris for your wife's 60th birthday (or having her remind you that you didn't do it!)

Don't skimp on health insurance. Its peace of mind even if you could self insure.

I agree with this. Im sure my expenses will go down as I get older except healthcare. I currently earn $400k+ per year and so I know how easy you can spend the money. I dont want to spend extravgantly only keep my current lifestyle with maybe a little bump. The real estate is not rental it is just there and completely paid off but the maintenance, condo fees, HOA fees And property taxes seem to be a hassle when I probably wont use them that much and I have no desire to rent them out.

Yes, but do you make 400K net or gross? If gross then you are really coming home with 250-275K assuming max out of retirement options and 33%+ AMT la-la land and quite possibly high state taxes.

That is gross income last year I only paid about 7% to federal taxes and I live in Texas which has no state taxes.

Only 7% on a $400k income? I need to get a new accountant.

(No wonder this country is running trillion dollar deficits)

[Chuck]

We also dont have children so any left over is just going to charity. I dont need to leave millions to anyone.

I'll be happy to send you my account number at the Vanguard Charitable Endowment Program.

[KyleAAA]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

OP is only 45. For somebody that young, I think straight-up bonds are easier and more efficient than annuities. Plus, you'd have to own a bunch of different annuities to stay under the state annuity insurance limits, which would be a hassle.

[magellan]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

This is a fair point, but annuities have credit ratings similar to corporate bonds. They can't provide truly risk-free income. That doesn't mean they shouldn't be considered, but IMO they should only be one part of a well diversified retirement income stream.

Also, I'd suggest waiting a couple years before choosing any investment that will tie your hands for a long time. There are many unscrupulous advisers out there pushing truly rotten annuity products (mostly variable annuities). You really have to do your own homework on this subject to avoid the risk of getting caught in a very expensive trap.

Jim

[rcole33856]

I'd say establish a 3% base, then take out 1-2% more if the market is doing well for nice to haves like house remodeling.

If the market is down 10+% in a year, don't take out the additional 1-2% and defer getting the new Ferrari for a year.

Can't say for sure, but after a few years of traveling the world in luxury (which I definitely would do in your situation) I might be happy spending a few years at home living in a beach cottage or mountain cabin where costs would be lower.

Enjoy while you are young and able. No point reaching your 80s with a ton of cash and wishing you had chartered that jet to fly you to Paris for your wife's 60th birthday (or having her remind you that you didn't do it!)

Don't skimp on health insurance. Its peace of mind even if you could self insure.

I agree with this. Im sure my expenses will go down as I get older except healthcare. I currently earn $400k+ per year and so I know how easy you can spend the money. I dont want to spend extravgantly only keep my current lifestyle with maybe a little bump. The real estate is not rental it is just there and completely paid off but the maintenance, condo fees, HOA fees And property taxes seem to be a hassle when I probably wont use them that much and I have no desire to rent them out.

Yes, but do you make 400K net or gross? If gross then you are really coming home with 250-275K assuming max out of retirement options and 33%+ AMT la-la land and quite possibly high state taxes.

That is gross income last year I only paid about 7% to federal taxes and I live in Texas which has no state taxes.

Only 7% on a $400k income? I need to get a new accountant.

(No wonder this country is running trillion dollar deficits)

Well there is more ( I know it continues to get complicated but I own 2 franchised hair salons that is why I pay only 7% federal tax) and I intend on selling those also once I retire.

[dr_g]

SPIAS pay about 2% if you choose to die at your actuarially determined date. They go up to 5% if you elect to die at 100.

The currently very low rates are totally correlated to 10 year treasuries.

Fixed Indexed annuities with income riders are my choice to beat SPIAs.

[Grt2bOutdoors]

I'd say establish a 3% base, then take out 1-2% more if the market is doing well for nice to haves like house remodeling.

If the market is down 10+% in a year, don't take out the additional 1-2% and defer getting the new Ferrari for a year.

Can't say for sure, but after a few years of traveling the world in luxury (which I definitely would do in your situation) I might be happy spending a few years at home living in a beach cottage or mountain cabin where costs would be lower.

Enjoy while you are young and able. No point reaching your 80s with a ton of cash and wishing you had chartered that jet to fly you to Paris for your wife's 60th birthday (or having her remind you that you didn't do it!)

Don't skimp on health insurance. Its peace of mind even if you could self insure.

I agree with this. Im sure my expenses will go down as I get older except healthcare. I currently earn $400k+ per year and so I know how easy you can spend the money. I dont want to spend extravgantly only keep my current lifestyle with maybe a little bump. The real estate is not rental it is just there and completely paid off but the maintenance, condo fees, HOA fees And property taxes seem to be a hassle when I probably wont use them that much and I have no desire to rent them out.

Yes, but do you make 400K net or gross? If gross then you are really coming home with 250-275K assuming max out of retirement options and 33%+ AMT la-la land and quite possibly high state taxes.

That is gross income last year I only paid about 7% to federal taxes and I live in Texas which has no state taxes.

How do you only pay 7% in Federal income tax with gross income of 400K+? Is it a business with high overhead or reinvestment of equity - therefore no real realized income? I think I may need a new tax accountant......hmmmm

[HomerJ]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

I have not looked into annuities that much but I am sure there is a place for them in my portfolio that would be beneficial. I need a FA to advise me on how much would be prudent.

Be careful.. there are annuities and there are annuities...

The only kind we like on these boards is the SPIA... You pay them so much cash, they pay you income for the rest of your life... Say you give them $1 million... they'll pay $60k a year for the rest of your life. The older you are, the more they pay, because the money is gone. If you die early, they keep the profit.

It's a good product because they can spread the death risk across millions of people... Some will die early, some will die late...

Normally, you can't take too much out of your porfolio because you need to save enough just in case you live to 95... They can pay more than normal rates because they spread the death risk across so many people.

It's good for you because you don't have to worry how long you will live, and it's a nice income flow that's handled for you. No thinking about investments, and withdrawal rates and asset allocation (especially nice when you're 90 and senile). You just get a big check every month for the rest of your life.

In general, Stay away from other type of annuities... Those are the kind more like investments, where you "invest" some money, and then they grow (but they grow a lot slower than the market because of all the fees)

[HomerJ]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

OP is only 45. For somebody that young, I think straight-up bonds are easier and more efficient than annuities. Plus, you'd have to own a bunch of different annuities to stay under the state annuity insurance limits, which would be a hassle.

Good point.... Annuities don't pay out well for younger people, and of course, if the insurance company goes bankrupt, you don't get paid... States guarantee annuities up to a certain limit, so the trick to buy multiple annuities from different insurance companies, with each being under the state limit.

[BigFoot48]

While you've made an excellent decision seeking advice on this forum, and setting a reasonable withdrawal rate, I would suggest you do some reading on what befalls many lottery winners, and try to avoid their behavior that leads many to the eventual loss of windfall wealth.

Good luck!

[HomerJ]

SPIAS pay about 2% if you choose to die at your actuarially determined date. They go up to 5% if you elect to die at 100.

The currently very low rates are totally correlated to 10 year treasuries.

Fixed Indexed annuities with income riders are my choice to beat SPIAs.

SPIAs pay a lot more than 2%...

[rcole33856]

As much as I respect this forum, I'm always amazed why annuities don't come up in this context. With the right product, you can create a predictable pension stream with little overhead to create an income foundation.

Why not create a basic cash income stream with a portion of the portfolio, rather than depending on Monte Carlo simulations to predict draw down rates for the entire portfolio?

I have not looked into annuities that much but I am sure there is a place for them in my portfolio that would be beneficial. I need a FA to advise me on how much would be prudent.

Be careful.. there are annuities and there are annuities...

The only kind we like on these boards is the SPIA... You pay them so much cash, they pay you income for the rest of your life... Say you give them $1 million... they'll pay $60k a year for the rest of your life. The older you are, the more they pay, because the money is gone. If you die early, they keep the profit.

It's a good product because they can spread the death risk across millions of people... Some will die early, some will die late...

Normally, you can't take too much out of your porfolio because you need to save enough just in case you live to 95... They can pay more than normal rates because they spread the death risk across so many people.

It's good for you because you don't have to worry how long you will live, and it's a nice income flow that's handled for you. No thinking about investments, and withdrawal rates and asset allocation (especially nice when you're 90 and senile). You just get a big check every month for the rest of your life.

In general, Stay away from other type of annuities... Those are the kind more like investments, where you "invest" some money, and then they grow (but they grow a lot slower than the market because of all the fees)

I give them 1mill and they give me 60k thats not a bad return.