No. of Recommendations: 2
Jim, thank for the plan,
One more question, what would you in vest in with any excess amount from the annuity "not" used, each year?
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Well, it's always very dangerous to give financial advice. It really is necessary to know a lot more about someone's situation, but I don't want you to tell me that. And besides, I'm just some guy on the internet.
But some general thoughts:
* You're a little older than the average person planning a retirement withdrawal portfolio, which makes a difference, especially for annuities. The older you are, the more they make sense, since longevity risk dominates discussion of internal rate of return.
* The usual assumption is that at some point you simply don't feel like making fresh investment decisions--simple is great.
I won't discuss the issue of the size of your estate you want to leave. Just carve that off separately and the following notions are for the remainder, which is presumably for living expenses.
In your shoes, much as I hate buying something with a negative investment return, I'd certainly lean strongly towards annuities.
Here is a random thought--imagine what the result would feel like.
Pick an amount that you might use for annuitization. Maybe all of it, maybe not.
Put 79% of your annuitization money into an immediate joint annuity with no inflation protection. A random spot check in the US suggests this will pay 10.73%/year (nominal) till the second of you dies.
Put 9.4% into a 3 year TIPS bond. When it matures, put it into an immediate joint annuity. (if only one of you is still alive, a single annuity = higher income)
Put 5.3% into a 6 year TIPS bond. When it matures, put it into an immediate joint annuity. ( " )
Put 3.7% into a 9 year TIPS bond. When it matures, put it into an immediate joint annuity. ( " )
Put 2.6% into a 12 year TIPS bond. When it matures, put it into an immediate joint annuity. ( " )
This will give you a constant real income (variation less than 7% from starting amount--rounding error!) till age 97, and erode with inflation thereafter.
By my estimation, it will give you spending money equal to a real coupon of 8.42%/year on initial funds till you are both gone. (min 7.89%, max 8.78%)
