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#31
03-20-2024, 06:22 PM
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Real estate can be a tough business. Who the f would do that? There are apparently those who would. 
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#32
03-20-2024, 06:32 PM
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If I want to continue to work for my income I'd keep my current job, not "retire" then switch to a different one.
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#33
03-20-2024, 07:07 PM
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78 here. Not that old age brings wisdom, but it does force you to make decisions. I had been investing 100% in S&P 500 before I retired. But, I figured that the market knows more than me. After retiring I looked around. I met with a guy I knew from the bike club who worked with Merrill Lynch and told me I should go with him. If I gave them 4% per year to manage our assets, we would be in good shape. That sounded high, so I went to Fidelity to see what they would offer. They told me that they could manage our assets for a fee, depending on what we wanted them to do. For 0%, we could pick our own mix and let it go at that. For 1%, they would recommend a mix for us based on our level of risk and financial goals. For an even higher %, they could basically hold our hands and lead us through all uncertainty. We chose to go with the 1% route. They set up a mix with a money market cash account, two financial annuity accounts, partial S&P investment account and the remainder in fixed income accounts. They would change our mix accordingly going forward, based on performance and our level of risk. So far, so good. I am not recommending that anyone go with Fidelity or not go with Merrill Lynch. But I really believe that most of us do not know how to invest our money when we go into retirement.
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#34
03-20-2024, 07:19 PM
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back to OP Bob...
Once upon a time, annuities may have been a good product but they were a different animal. I was an academic for many years and thus had access to the TIAA annuity which still exists. It's actually not that bad and still available, but not usually among those sold by financial sharks whom you should absolutely avoid. Plus 100 to the advice to go poke around Bogleheads, including their Wiki where you will learn that the basic philosophy is to determine your asset allocation based on risk tolerance and how close you are to moving from the "accumulation" phase into the "protect the gains" phase. You are clearly in the second group. To oversimplify (but the simple nature of the philosophy is its beauty), they recommend investing in a 3 fund portfolio: an index total stock fund, an index total bond fund, and an international index, and gradually decrease the stock percentage in favor of the bonds as you move from phase 1 to 2. Index funds are preferred because they have the lowest expenses and even the best professional fund managers (whose expertise isn't free) can't consistently beat the entire market; plus trying to pick winners and losers has trading costs as well. Now I get that you (we) want something easy and would rather pay someone to take care of it for you, which is a bit what the products you mention do, but at a cost and you have to decide if it is worth the cost to you. John Oliver (HBO) had a good segment on how expenses add up over time. No matter which route you choose, it pays to be informed, so I recommend perusing the Bogle Wiki pages, starting here and poking around: https://www.bogleheads.org/wiki/How_...lazy_portfolio https://www.bogleheads.org/wiki/Main_Page https://www.bogleheads.org/wiki/Main_Page caveat: I am as far from a professional advisor as you can get one more reading link is the pamphlet "if you can" by bill Bernstein, aimed more at millennials starting their journey but a pretty good and easy read that helps put things in perspective. It include the following tidbit: Quote:
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#35
03-20-2024, 07:22 PM
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Live below your means. Carry no short term debt (e.g beyond mortage and possibly auto). Invest constantly in conservative, low cost funds. Don’t get divorced. Get value for your spend. Ride a bike and enjoy life.
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#36
03-20-2024, 07:28 PM
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forgot to mention that the Target Date funds by Vanguard and Fidelity do a pretty good job of shifting to safer as the time horizon moves without you doing any work, and their expenses are pretty low.
while I'm at it, here's the segment I mentioned by John Oliver. Did not re-watch to see how it has aged, but I recall it being pretty good, like most of his work. https://www.youtube.com/watch?v=gvZSpET11ZY
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#37
03-20-2024, 07:41 PM
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OP here. Thanks everybody for all the suggestions and contributions to this thread...but it's kinda gone off the rails a bit, so let me offer a little more context in case that helps bring it back to my original question: I am not looking for general investing advice per se. The missus and I have had a fairly straightforward strategy (involving mostly patience and high risk-tolerance) that we've been able to execute through several different firms, as well as through our employers' 401k programs. We are not retired ...yet. However, due to that auspicious milestone being just around the corner, combined with some minor dissatisfaction with one of the firms that's been handling our assets, we recently decided to see what some other companies would offer in terms of asset management, with a specific eye towards a recurring protected income stream to take the place of our current paychecks. Those two scenarios I described (vaguely) in post #1 are just the Income-Generating portion of a multi-tiered investment strategy offered by two different firms. In addition to an Income-Generating portion, both firms are also offering a Growth portion that adheres to a more tradional stocks/bonds/money markets/yadda-yadda portfolio. The whole idea is to divide our assets into at least two buckets: One to live on day-to-day (a substitute for the paychecks we receive for working) but until our end of days, and the other to continue growing just like our current IRA/401k et al accounts have been for the last several decades so that we can continue to amass wealth ...that we'll eventually spend on ourselves. Two other points that may be germane: - we have no kids, no heirs, no desire to bestow our amassed wealth on some school or institution or charity upon our demise; our intention is to draw down our assets to as close to $0 as possible by the time we die so that our check to the undertaker bounces. - the missus and I hate thinking, talking, or doing anything that remotely resembles working, about financial management...hence we have absolutely no interest in Doing It Ourselves. Paying a professional to provide financial advice and to manage our assets is a luxury we not only are lucky enough to be able to afford, but that is also a mandatory component of the type of retirement we envision. What else? Um... oh yeah, both companies (the two offering scenario #1 and scenario #2) are charging a percentage of AUM only; the annuity and the dynamic income fund are both simply considered one portion of our total assets under management. I forget if I mentioned this, but the dynamic income fund is a "covered call options" fund. That little tidbit scared the crap out of one professional I spoke to, so I'm curious if that makes any of the Never Say Annuities! folks change their tune? So...given all ^^^that, does anyone's answer to OP change, or could it become more focussed on the actual question (please?) Thanks. ======= Reminder, original question was: Scenario #1: Put $X into an annuity fund, which (I believe) freezes the amount of the initial investment but guarantees an annual income of $N in perpetuity. Scenario #2: Put $X into an dynamic income fund, which grows or shrinks as per the market but still promises (but does not "guarantee") an annual dividend of $N in perpetuity. For the sake of argument, the values of X and N are identical in both scenarios. Can anyone see any glaring reasons to choose one strategy over the other? Last edited by Bob Ross; 03-20-2024 at 07:48 PM.
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#38
03-20-2024, 07:53 PM
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2) Whatever you do, be sure you understand the unstated (concealed?) risks behind each of your alternatives. Edit: Volatility is real, and can be measured over time. (e.g. alpha, beta, Sharpe ratio, etc.) Last edited by Louis; 03-20-2024 at 07:56 PM.
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#39
03-20-2024, 08:00 PM
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To answer the specific question -- there's no need to worry about a covered call fund specifically (in my mind).
It's taking stock that the fund owns, selling calls to generate additional income to any dividend income that the underlying stock generates, and returning both of those streams to the fund. The dynamic part is due to the market, if the underlying dips in price then they (generally) can't generate much money from selling the calls (if they sold calls below the basis price and they got caught they'd lose the shares). The big thing to look at is the expense fee, it's a lot of trades on a consistent basis so the fees will go up typically. In index fund land it's the difference between looking at QYLD and other Nasdaq QQ* variants. The big difference is that in a covered call fund the max return (over time) is typically lower because the fund gets caught when the underlying share price increases too quickly and they have to relinquish the underlying shares at less than current market value.
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#40
03-20-2024, 08:32 PM
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There's a classic book written about all this: Where Are the Customers' Yachts?: or A Good Hard Look at Wall Street https://a.co/d/1pFNBxu
__________________
It's not a new bike, it's another bike.
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#41
03-20-2024, 08:51 PM
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Sure, someday someone could fool me, so what? If one of them pours concrete down my drain, I have surprises for them too they're not going to like. Yeah, I may be 70, but don't play with me! I can get really ugly...wait, I am ugly, what I'm talking about get really ugly!!! I don't have to get mean if they don't want to pay the rent, just have them evicted by the court, but if they want to damage my property, then I'm going to do something about it. The vast majority of landlords never have that kind of severe problems, I doubt you knew a landlord who had a tenant pour cement down their drain, that is an old story that's been around for many years. The people I evicted I told them that I'm running a business, I can't afford not to be paid the rent they owe, but if they leave the place in good shape I will give them a good referral. My renters are so good, that even during the Covid shut down, some of my tenants lost their jobs, I had no problem working with them, but only one person paid late, and I worked with the family, I couldn't kick them out due to the law the Feds put into place for that event, but I wouldn't have anyways in that event. I worked with them and they paid the entire rent. The couple of other families called me and told me what happened but wanted to make sure their rent was paid, and they were never even late. None of them wanted a free handout. There are some states I would not want to be a landlord in. I managed apartments in California back in the very early 80s and the laws were in favor of the tenants way back then, today it's even worse, there is no way I would be a landlord in California. I'm in a pro-business state, I can have an eviction from the court within 15 days after the rent is due if I need to. But I always give people chances, to a certain point, but I will try to work with them. And I don't have the level of rent increases with current renters that other apartments give their renters every year, so the longer a person is renting from me the cheaper it is, making it very unlikely they would want to move. I have one lady who has been in her apartment since 1976, long before I became the owner, she pays $100 a month less than anyone else, and I even renewed her entire interior because I couldn't stand the worn-out condition of everything, none of the previous owners ever did anything to that apartment in over 40 years, and the place wasn't painted, nor the carpet replaced when she moved in! This lady is disabled, and a nice lady, she didn't need to be living like that, so 2 years after we bought the place I restored her unit, it was expensive but people need to be treated like people, she is a much happier person these days, even gives me hugs whenever I see her, something she didn't do before I renewed her place, even her son was ecstatic when he saw the place afterward. I understand being a landlord isn't for everyone, if you're not a business owner type you probably won't do well being a landlord, but I absolutely love it, and I'm making a lot more money off the rents than I would have from any other type of investment.
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#42
03-20-2024, 10:16 PM
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Neither product described sounds like a SPIA, which is the simplest way to go should one want a guaranteed income stream. And there is nothing "only" about an AUM. Even an 1% AUM on an average return of 7% is 20% difference in asset value after 20 years. Which is why @Mr. Pink above mentions the famous book about yachts of financial middlemen. Do you know the fee charged? I know someone who bought a product similar to scenario #2 you described, and it comes with a 3.5% AUM fee... If you don't want to mess with this yourself, get a fee only advisor who serves as a fiduciary and have this person draft up a plan for executing the growth part. Or alternatively, even 1% AUM fee charged by Fidelity would still be better than what these two firms would presumably charge. Quote:
Quote:
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#43
03-21-2024, 03:59 AM
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As a rule, you have two levers you can toggle which really impact your returns- taxes and fees (friction) I always divide the assets into my taxable and tax deferred accounts. I often find that tax deferred accounts tend to have more fund layers embedded. On one of the previous pages, someone owns target date funds (2035) which can be great, but the fund manager layers additional fee paying funds into the date fund. Even though large fund/etf advisors fees are low now, you do not what 2x or 3x fees layered into your product. Markets are extremely efficient long term, and at the margins, all this allocation finagling advisors do just disappears in fees and costs. What you really need to do is boil down your current risk allocation into the risk buckets you have. Then you can try to reallocate in the same risk buckets in the simplest portfolio your advisor can create. This will reduce your costs and will also make understanding your portfolio easier. Next think about which portion of your risk should be in tax deferred to maximize overall portfolio gains long term. At the end of the day, you probably find you are in a 60/40 allocation, or 70/30 once you look through the handwaving gobblygook financial speak. Once you know the bucket, just reallocate with less funds and less layers. The other irony is when you look at all the little niches the advisor slices your portfolio into, large gap, income, defensives, emerging etc etc, your composite risk just looks like the SP500 with more fees. Same for bonds. Simplicity is your friend, complexity is friction. We have all seen the old IRA/401(k) return tables comparing taxable vs tax-deferred over long periods of time. Fees are just another tax. As an investor, you are a warehouse. Your advisor is a moving company. Every time the mover touches you, something gets lost in transit. I'm still looking for my ski wardrobe. Last edited by verticaldoug; 03-21-2024 at 04:12 AM.
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#44
03-21-2024, 04:56 AM
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Well done. Give yourself more credit than you did originally.
__________________
Colnagi Seven Sampson Hot Tubes LiteSpeed SpeshFatboy
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#45
03-21-2024, 07:52 AM
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IMHO, the more sophisticated the investment, the more money it makes for the salesperson/advisor and less ends up in your pocket. Salespeople/Advisors hate simple products/strategies because those often come with less fees and/or generate less on-going fees. Last edited by NYCfixie; 03-21-2024 at 08:28 AM.
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