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tony

Annuities As An Alternative To Shaky Markets? Not So Fast

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Funny, Steve S. passed on an immediate annuity recommendation in a very recent post based on A Boglehead recommendation. Soon after I ran into this article.

 

 

CHECKED your retirement savings plan lately? January’s global stock market plunge is one of those moments that stoke fear among baby boomers that they might run out of money before they run out of years.

 

The fear is understandable: Older Americans are living longer. A man who reached his 65th birthday in 2015 has an average remaining life expectancy of 18.6 years, according to James M. Poterba, an economist at the Massachusetts Institute of Technology. A typical 65-year-old male also has a 20 percent chance of living an additional 25 years or more. For women in the same age group, average remaining life expectancy is 20.3 years; one in five will live to age 93.

http://www.nytimes.com/2016/01/30/your-money/annuities-as-an-alternative-to-shaky-markets-not-so-fast.html?&moduleDetail=section-news-2&action=click&contentCollection=Your%20Money&region=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article

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Hi Tony,

I was just responding to you fear with Ken's stock market forecast and your 60-40 stock bond split and that I would be scare too, but you don't want more bonds because you feel it won't keep up with inflation. Even though you have a pension, it appears that your pension is not enough to make you feel more comfortable. You experienced not one, but two, massive stock market crashes that devastated your portfolio. The 2008 crash tested my 30/70 split and it worked out for me. That's why I am comfortable with another crash.

 

It will be interesting to many readers here how you deal with your dilemma. Stay with 60-40 split and go with the fear or increase your bond holdings another 10% and feel more comfortable now, BUT then you will be concerned about running out of money because the return will not keep up with inflation. These are real issues that a lot of investors deal with. You have come a long ways going from 100% stocks for both 2000-2002 and 2008 and still retiring this year! Perhaps you can deal with another loss with the 60-40 split. I don't know how you recovered from two crashes, because I know the ONE 2000-2002 crash set me back for years. If the 2008 crash crushed my portfolio again, I would be still working, and I might be so angry that I would have gotten out of the market and never went back in. Many people feel that way, including some people who frequented this site.

 

Going for more money by increasing stock market risk is a strategy that I will never do. If you need more money, work longer or save more. I have what I have because of a boring low cost portfolio with an appropriate stock bond split appropriate for my age. Its not what the stock market did its what I did with my portfolio, by saving for years, investing in very low cost funds and living frugal. But also having fun too. Its a delicate balance, as life is a delicate balance.

 

2 cents,

Steve

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Steve

 

I get what you are saying. Its got me thinking and thats good. I also have to trust my intuition because I did a lot of things wrong in the past with investments but still came out pretty good. I am down about $100,000 right now. Years ago I would have freaked out. Now I see it as a part of the process.

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