Consider an Annuity for AA When Rebalancing?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
nszzya
Posts: 52
Joined: Wed Feb 22, 2012 2:19 pm

Consider an Annuity for AA When Rebalancing?

Post by nszzya » Thu Jul 12, 2018 4:25 pm

Rebalancing my mother's portfolio into a Bogleheads three fund portfolio. She has a non-qualified fixed indexed annuity that is about 60% of her net worth. Maximum annual return is 4.5%. Also, she is withdrawing a guaranteed lifetime benefit of 50,000/yr from the annuity. Should I consider the annuity when doing the AA? If so, how? Thanks for advice.

Silk McCue
Posts: 1335
Joined: Thu Feb 25, 2016 7:11 pm

Re: Consider an Annuity for AA When Rebalancing?

Post by Silk McCue » Thu Jul 12, 2018 5:22 pm

My recommendation would be to consider the $50k Annuity as a base of income along with Social Security (assuming she receives that) and then determine an appropriate AA based on need, willingness and ability to take risk in order to satisfy any current and future needs above that base.

Cheers

User avatar
Sandtrap
Posts: 5369
Joined: Sat Nov 26, 2016 6:32 pm
Location: HawaiišŸ˜€ Northern AZ.šŸ˜³ Retired.

Re: Consider an Annuity for AA When Rebalancing?

Post by Sandtrap » Thu Jul 12, 2018 5:30 pm

No. I would not.
An annuity is part of one's income stream. AA includes investment assets.
Apples and Cabbage.

j :D

User avatar
friar1610
Posts: 1296
Joined: Sat Nov 29, 2008 9:52 pm
Location: MA South Shore

Re: Consider an Annuity for AA When Rebalancing?

Post by friar1610 » Thu Jul 12, 2018 5:46 pm

I agree with the above posters.

Not the same situation, but I have a Vanguard VA which I have not yet annuitized. I intend that my wife, as the beneficiary, will take it over and annuitize it if I'm the first to go (to replace the portion of my pension which will go to the grave with me.) The VA is allocated quite conservatively with capital preservation/pacing inflation as the goals. I mentally set it off to the side and do not consider it when I'm checking the AA of the remainder of my portfolio. (The remainder is conservative as well but not as conservative of the VA).
Friar1610

nszzya
Posts: 52
Joined: Wed Feb 22, 2012 2:19 pm

Re: Consider an Annuity for AA When Rebalancing?

Post by nszzya » Thu Jul 12, 2018 6:03 pm

Thanks for all the advice!

Post Reply