Once you've "won the game"

[Deleted User]

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

Audaxer

Langtang said:

As an aside, I notice that my thread has been amalgamated with this one now. I was initially going to post on here, but it seemed to me that it would have been construed as hijacking someone else's post. Thanks to whoever merged them.

I was also a bit puzzled as to how your thread had disappeared and my post to it had appeared in this thread, as my post related to the different title that was in your separate thread. Seems strange if a moderator has amalgamated your thread into this one without advising you.

bostonerimus

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

Ferri and Pfau do a lot of good stuff, but they are stating the obvious here ie if you live long enough annuities win out over bonds because, eventually, mortality credits come into play. Ferri and Pfau will be using US rates as well so be careful when translating this to the UK.

[Deleted User]

bostonerimus said:

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

Ferri and Pfau do a lot of good stuff, but they are stating the obvious here ie if you live long enough annuities win out over bonds because, eventually, mortality credits come into play. Ferri and Pfau will be using US rates as well so be careful when translating this to the UK.

The point that a 20 year annuity would outperform bonds wasn’t obvious to me. A more important point is that right now safe bonds are a bad form of fixed income for individuals.

NedS

Deleted_User said:

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

What is the purpose of this pot at 85? If the purpose is to meet some late-in-life expense (care, maybe), then fair enough. If the purpose is just to have a pot to leave to your children, then given my time horizon combined with their time horizon, everything goes into equities for the very long term growth once I'm sure I'm not going to need it.

[Deleted User]

NedS said:

Deleted_User said:

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

What is the purpose of this pot at 85? If the purpose is to meet some late-in-life expense (care, maybe), then fair enough. If the purpose is just to have a pot to leave to your children, then given my time horizon combined with their time horizon, everything goes into equities for the very long term growth once I'm sure I'm not going to need it.

Depends. One can use this as a FI stop gap and then buy annuity at 85 (to cover the needs bucket).  Alternatively someone effluent (like over $20M) could be concerned capital preservation for family wealth, etc. 

Anyone who needs fixed income as part of his investment strategy has to be looking at alternatives to bonds. 

jimi_man

Deleted_User said:

NedS said:

Deleted_User said:

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

What is the purpose of this pot at 85? If the purpose is to meet some late-in-life expense (care, maybe), then fair enough. If the purpose is just to have a pot to leave to your children, then given my time horizon combined with their time horizon, everything goes into equities for the very long term growth once I'm sure I'm not going to need it.

Depends. One can use this as a FI stop gap and then buy annuity at 85 (to cover the needs bucket).  Alternatively someone effluent (like over $20M) could be concerned capital preservation for family wealth, etc. 

Anyone who needs fixed income as part of his investment strategy has to be looking at alternatives to bonds. 

Ha ha.. I think you might mean 'affluent'!! 'Effluent' is waste, sewage etc! 

[Deleted User]

jimi_man said:

Deleted_User said:

NedS said:

Deleted_User said:

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

What is the purpose of this pot at 85? If the purpose is to meet some late-in-life expense (care, maybe), then fair enough. If the purpose is just to have a pot to leave to your children, then given my time horizon combined with their time horizon, everything goes into equities for the very long term growth once I'm sure I'm not going to need it.

Depends. One can use this as a FI stop gap and then buy annuity at 85 (to cover the needs bucket).  Alternatively someone effluent (like over $20M) could be concerned capital preservation for family wealth, etc. 

Anyone who needs fixed income as part of his investment strategy has to be looking at alternatives to bonds. 

Ha ha.. I think you might mean 'affluent'!! 'Effluent' is waste, sewage etc! 

Congrats for finding a typo. 

jimi_man

Deleted_User said:

jimi_man said:

Deleted_User said:

NedS said:

Deleted_User said:

On a side note, Rick Ferri recently claimed on one of his podcasts that you can buy a fixed term annuity, say 20 years at 65, buy a bond ladder with the annuity payments and end up with a bigger pot at the age of 85 than had you started with bonds.  That’s if the pot is your objective l 

What is the purpose of this pot at 85? If the purpose is to meet some late-in-life expense (care, maybe), then fair enough. If the purpose is just to have a pot to leave to your children, then given my time horizon combined with their time horizon, everything goes into equities for the very long term growth once I'm sure I'm not going to need it.

Depends. One can use this as a FI stop gap and then buy annuity at 85 (to cover the needs bucket).  Alternatively someone effluent (like over $20M) could be concerned capital preservation for family wealth, etc. 

Anyone who needs fixed income as part of his investment strategy has to be looking at alternatives to bonds. 

Ha ha.. I think you might mean 'affluent'!! 'Effluent' is waste, sewage etc! 

Congrats for finding a typo. 

It was just a joke about the stark difference in meaning, hence the 'ha ha' and the smiley face, rather than being pedantic.

Sorry if it offended you.

jamesd

waveydavey48 said:

... why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

The traditional and still effective way to do this is to cover the inflation risk with index-linked annuity purchases.

A well known US retirement researcher, Wade Pfau, advocates substituting annuities for bonds and continuing with equity investing, on the basis that bonds are for risk reduction and annuity purchase is the ultimate in risk reduction.