OT: Retirement accounts, annuity vs. dynamic income fund

[C40_guy]

Originally Posted by Mr. Pink

Well, not sure who you are referring to about self management, but, if you go index funds, it's pretty much the opposite. You're just following the crowd, the market, or, as some refer to it, the benchmark. Collective wisdom. And it's nearly free. And easy.

Collective wisdom of the investing crowd? That's a bit of an oxymoron.

Index funs are relatively safe and easy...but there's no intelligence built in. They just track specific segments, in the same way the wind vane tracks the wind. Again...no intelligence, just physics (or simple math.)

I'm not against index funds...they are a good investing vehicle for most people who are willing to put just a bit of effort in...but they are hold no intelligence.

[Mr. Pink]

Originally Posted by C40_guy

Collective wisdom of the investing crowd? That's a bit of an oxymoron.

Index funs are relatively safe and easy...but there's no intelligence built in. They just track specific segments, in the same way the wind vane tracks the wind. Again...no intelligence, just physics (or simple math.)

I'm not against index funds...they are a good investing vehicle for most people who are willing to put just a bit of effort in...but they are hold no intelligence.

Well, by " intelligence", I assume you're claiming you and others are smarter than the average schmoe, and you've got the key to the highway. Great, but, I doubt it. As I said before, nobody can predict the future, and there are no active managers who beat the market over the long term, unless they cheat, or, er, break the law. Our politicians come to mind. Pelosi didn't get to 100 million net worth by working hard and saving. I mean listen to her and her colleagues. They ain't smart.

Read some Bogle. He proves it over and over with stats. Sure, you may get lucky and get in early on the next Cisco or Apple or Tesla, but then you have to time your exit well. Apple almost vanished, Tesla is shaky as hell, and hey, remember GE, the greatest company ever? I don't care how smart you are, the average schmoe doesn't have the knowledge or time to do all this.

[C40_guy]

Originally Posted by Mr. Pink

Well, by " intelligence", I assume you're claiming you and others are smarter than the average schmoe, and you've got the key to the highway.

Never said that.

As an economist, with an understanding of group psychology, I know why markets (and therefore index funds) move. It has nothing to do with facts.

More importantly there's ZERO reason for you to inject your political biases into this conversation.

That's simply rude and uncalled for.

[Mr. Pink]

Originally Posted by C40_guy

Never said that.

As an economist, with an understanding of group psychology, I know why markets (and therefore index funds) move. It has nothing to do with facts.

More importantly there's ZERO reason for you to inject your political biases into this conversation.

That's simply rude and uncalled for.

Oh my. Sir, it's not a political bias. I believe all politicians are corrupt. Both parties. It's plain to see. Some just more than others.

But, back to the matter at hand. What's the secret sauce to beating the benchmarks? Have you personally done it on a consistent basis, or found somebody who has in your studies?

[veloduffer]

An issue with stock indices is that they are not risk profiles, especially ones that are market-cap based. As well noted, the current market is highly concentrated - 10 stocks comprise 29% of the overall equities market. That's is a high amount of risk and would not be appropriate for investors with a low risk tolerance. Remember, in the 2001 dot com recession, the S&P 500 had negative for three consecutive years (-9% in 2000, -12% in 2001 and -22% in 2002) and lost 37% in 2008. It takes a long time to recover from such a loss if you can't contribute anymore (being retired) to your portfolio.

Picking an appropriate benchmark for your risk tolerance is important. Timing and investment horizon are also important factors. Large institutions like insurance companies and pension funds have custom benchmarks to achieve a risk-adjusted return.

This is where a good investment advisor can help devise and maintainan appropriate plan that will change over time as the investors' needs change.

[Mr. Pink]

Ok, to use post '08 as an example, what's your alternative? Interest rates went to zero, RE was battered, but, in hindsight, was an amazing opportunity, but nobody wanted to dive into that pool besides the bold. You just had to turn off the noise, relax, and take a bike ride or something. It all came back. This happens a lot. At least it wasn't 29 until the fifties. That was bad. But, over time, you're going to see about 6% growth in equities, and that's going to keep you ahead of inflation, with change to spare. But, in the long run, we're all dead, as Keynes said. So, enjoy yourself.

[benb]

We seem to oversimplify everything in these threads.

The reality is almost all of us should have a little bit of everything mentioned.

Nobody should be almost all-in on anything. And the mix is not static over time, it needs to change as your income changes, as your savings change, as your age changes, as the market changes, as the tax laws change, etc..

It is definitely really complicated, that's why there is a market for professionals.

[veloduffer]

Originally Posted by Mr. Pink

Ok, to use post '08 as an example, what's your alternative? Interest rates went to zero, RE was battered, but, in hindsight, was an amazing opportunity, but nobody wanted to dive into that pool besides the bold. You just had to turn off the noise, relax, and take a bike ride or something. It all came back. This happens a lot. At least it wasn't 29 until the fifties. That was bad. But, over time, you're going to see about 6% growth in equities, and that's going to keep you ahead of inflation, with change to spare. But, in the long run, we're all dead, as Keynes said. So, enjoy yourself.

That's fine if you have a long time horizon but not if you're already retired and withdrawing funds to pay expenses. A completely static portfolio would have taken almost 4 years after 2008 to get to breakeven.

Also, most of the US has woefully under-saved. The median retirement savings for 55-64 is $185K and for 65-74 is $200k. And many still have mortgages. An all equity portfolio in 2008 is a killer.

But if you had bonds prior to 2008 recession, the price of the bonds went up and could have been sold at a gain. Plus bonds don't change price in double digits unless there is a significant increase in default risk and Treasuries almost always gain due to the flight to safety.

[NHAero]

What is a good online retirement calculator?

[Mr. Pink]

Originally Posted by veloduffer

That's fine if you have a long time horizon but not if you're already retired and withdrawing funds to pay expenses. A completely static portfolio would have taken almost 4 years after 2008 to get to breakeven.

Also, most of the US has woefully under-saved. The median retirement savings for 55-64 is $185K and for 65-74 is $200k. And many still have mortgages. An all equity portfolio in 2008 is a killer.

But if you had bonds prior to 2008 recession, the price of the bonds went up and could have been sold at a gain. Plus bonds don't change price in double digits unless there is a significant increase in default risk and Treasuries almost always gain due to the flight to safety.

Agreed that America is horribly under saved. I have read more than once that half of Boomers will only have SS to live on, which makes the present political climate of actually cutting that government controlled annuity program even more harsh and cruel. But, poor people have no voice, because they have no money. I have to stop and remind myself that most pop financial advice is for about 20-30% of the population. Even Dave Ramsey viewers are at least trying.
I got nailed a few years ago with too many bonds in my bag, when interest rates jumped. That was a rare event, and there were some people warning about that before hand. I'm older and a 60-40 guy (actually 70-30), so, don't feel too bad. I mean, it's not as though I was in Bitcoin. But, now we are back to a time when you can get government backed 5% on a bond or CD, and that's actually much healthier than ZIRP, if you ask me.

[Louis]

Originally Posted by NHAero

What is a good online retirement calculator?

Not to be snarky, but a calculator that calculates what?

[rogerspam]

she said: "You will never beat the market because you do not have access to the information I do so put your money in Vanguard Index Funds [retirement and taxable investment accounts] and never sell until you retire. Do not trade. Just buy and keep buying until you retire and need the money".

This is the money line here. Low expense, low complication system. The people who do keep "beating the market" are getting an edge somewhere (legally or illegally...). You basically pay to get part of that edge (and then you have to know whose edge is consistently right) or are a boat on the rising tide which unfortunately does require time to ride out the troughs in returns.

There is no free lunch. We have some real estate investments with good cash flow but my wife actually has to work to make it perform. You can read the recent NYT article but how an initially lucrative passive RE option (high dividend stream, luxury college student housing) blew up due to pandemic or maybe operator issues (the guy managing the RE).
https://www.nytimes.com/2024/03/18/b...investors.html

Originally Posted by NYCfixie

1. Educate yourself before you trust anyone else with your money.
2. Annuities are the devil. They only make money for the person selling them to you. Yes, in very niche circumstances an Annuity may make sense for a person or couple but rarely does that happen.
3. Don't take financial advice form a financial advisor who is not a fiduciary and even then be weary of what they tell you and try to sell you.
4. Don't take financial advice from people on internet forums...
5. See rules 1-4


I have never used an advisor.
I have never purchased an annuity.
I read my first book about investing more than 30 years ago.


From 2003-2023 (percentages are annual returns):
- My parents advisor at Citibank barely made them 5% and sold them annuities
- My older brother's Wells Fargo advisor made him 8% (almost as good as the S&P 500 index before fees so worse than the index)
- My younger brother's Fidelity Advisor made him 9% (about the same as the S&P 500 index but with more risk)
- My wife and I made 12% without any "professional" advisors.

The only "advice" we ever received was one time from my wife's aunt who was an independent personal wealth manager for high net worth clients, she said: "You will never beat the market because you do not have access to the information I do so put your money in Vanguard Index Funds [retirement and taxable investment accounts] and never sell until you retire. Do not trade. Just buy and keep buying until you retire and need the money".

[Ken Robb]

The Charles Schwab Magazine Spring Issue has a good article on charitable annuity plans as some of us discussed above.

[NHAero]

Originally Posted by Louis

Not to be snarky, but a calculator that calculates what?

I've built an excel spreadsheet with income streams and expense streams and need to integrate taxes into it, to calculate cash flow and net assets. But it won't be as sophisticated as one that one of the financial services companies use, so I'd like to see if there is one online for free I can use, if only to see if the one I built is giving robust results. I can vary inflation, Social Security COLA, ROI on my assets to see the results.

[MikeD]

Originally Posted by Mr. Pink

Well, not sure who you are referring to about self management, but, if you go index funds, it's pretty much the opposite. You're just following the crowd, the market, or, as some refer to it, the benchmark. Collective wisdom. And it's nearly free. And easy.

Not all index funds are good. It depends on the index. S&P 500 and Total Stock Market funds are good (probably the best as far as index funds go). Others not so much. I had a lot of money in a Vanguard Value Index Fund (VVIAX) because my Fidelity Rep said to put money in value funds vs. growth funds. the 1 yr return was S&P 500 24%, VVIAX 9.5%. I don't think the Russell fund indices are very good for returns either. Bond index funds were disappointing for me as well. Basically, long term, you can't beat the S&P. I think I could have doubled my money over decades of investing if I just invested in an S&P 500 fund vs. spreading my money out over others which did not return as well. YMMV