Just scrolled past this article about annuities, where the author talks about how a lot of people feel a bit mixed about annuities ...

(There was a link in the article to another article too: http://time.com/money/4551384/guaran...ons-annuities/)


Am pretty new to investing products ... with these annuities, guess if a $100k annuity for a 65 year old will pay out $560/month for life for males, are the insurance companies just counting on the majority not living to 80 to make their profit? Would there be any there extra fees?

In some, maybe most cases, what you give up by becoming more conservative as you near retirement is far less important then what you stand to lose by being too aggressive. Most professional models I see show a bit of a roller coaster for your AA, with it being most conservative right as you retire. After some period of retirement, with a shorter period that your portfolio needs to last, you can add back some equities.

?

http://fortune.com/2016/03/26/more-stocks-retirement/

"Working with the American Institute for Economic Research, Luke Delorme conducted a study to determine the ideal asset-allocation strategy for retirees, assuming a 4% withdrawal rate. The best strategy, he found, was to begin with a 20% allocation of stocks as you enter retirement at age 65, and then increase that allocation gradually every year, over 30 years, until you have a 70% equity exposure at age 95."

This book advocates the same approach:
https://www.amazon.com/Spend-Til-End...nd+til+the+end

To clarify, I doubt I will get as conservative as 20 /80/ I do see 50 /50 in my future. Currently 78 /22.

You can play with this Monte Carlo simulator for a range of expected outcomes:
https://www.portfoliovisualizer.com/...nalysisResults

Ones that end in 0 are bad.

I am not anywhere near retirement yet but I have planned for a 50/50 allocation at age 65+, supporting a 3-4% withdrawal rate. The 50% that is not equities certainly should be only the most stable and defensive products. Bond's are not always the best choice and if you are DIY, looking beyond Vanguard Retirement funds/bond indexes and researching what products are available to you pays off imo.

Hey guys,

A friend has asked me for help with investing, who is just starting out a career in the US as a nurse. She sent me a list of funds available to her through her company.

The only ones I see that have low fees are the Fidelity retirement funds (FFEGX, FFIZX, FFOPX, and FFLEX). She also has the Vanguard Total Stock Market, and Vanguard Total International Stock Market, but only the Vanguard Long Term Bond fund.

Would her best choice be to just choose one of the Fidelity funds? They are pretty aggressive and all start out at 90/10 and stay there for quite a few years.

The stock market returns 8% over the long run. The risk free rate is usually around 4% or so. They make their money by investing it in the stock market and paying you less than the stock market returns.

I'd probably have her go 100% Vanguard Total SM for a year or two with the idea of adding in some international later. The Fidelity all in one fund isn't a bad choice, just slightly more expensive.

Yep, do the Fidelity fund for her projected retirement date.

Most models don't recommend that. It is an interesting approach. I am pretty sure it is incorrect. The money you will be spending in 30 years needs to be primarily in stocks but you won't have a 30-year time horizon at age 95.

I'd like to see the white paper, if you can find it.

I can't find the white paper. I may have overstated by saying "most" models advocate what I suggested, but if you google "sequence of returns risk" you will find much on the subject.
I'm pretty sure it is correct to have a U shaped asset allocation, with your lowest equity exposure in the period immediately before and after your planned retirement date. It is most important for people who have just enough to get by on in retirement. If you have plenty, and a 50% drop in your portfolio won't affect your living standard, then stay 100% equities. Also, if you are way under, you probably need to take more risk and keep a high equity allocation. But if you are right at your number, then a bad market event right at the time you need to start drawing down can have a large impact on your living standard.

If I had enough at retirement that a 50% drop won't affect my standard of living, most likely I would go conservative. I would rather end up with less to pass on than take a tiny chance of getting completely ****ed.

LOL no wtf. Not even close to correct.

If you don't understand simple financial concepts then maybe skip on giving advice for a while.

more like if 50% drop won't affect your living standards, live better! unless you're already so rich that this thread is irrelevant

All the models I have seen either use a simplistic % allocation based on age, or just keep money that will be needed in the next x years in safe assets and the remainder in risky assets.

When I am 65, I want the money earmarked for when I turn 95 in risky assets. When I turn 90, I want to start moving them into safer assets.

For index funds, is the small cap (and value) premium already sort of priced into the market, or is it really as simple as: Buy small/mid cap indexes instead of large cap and expect to make an extra 1-2% a year with some added volatility?

Maybe. I'll let you know 10 years from now.

I'll stack my knowledge against yours any day.

Heads up for brokerage accounts?

A+

Noob question:

Does a person loss less to tax if they earn 100k in Capital Gains versus if they earn 100k via a W-2?

It depends. The oversimplified answer is generally, taxes on long term capital gains (held > 1 year) will be less than W-2 income.

Any thoughts on EquityZen.com?

They provide a way to invest in pre-IPO unicorns like Spotify, BuzzFeed, Lyft etc.

Spotify is interesting to me with a current valuation of 8.6B.