Over 50 years old? If there was a guaranteed investment that paid 6% would you bail out of the stock market? (annuity, bonds)

[dividend]

I am in my late fifties and preparing for retirement. I just have to wait four more years and I will start the wonderful world of retirement. With Social Security, stocks, bonds, ETF/s and my 401K, and mutual funds, I almost have enough money to retire. I just need 25% more money in my accounts at retirement and-- it's a go.

I wish there was an investment that paid a guaranteed 6% a year and I would sell all my stocks and put all my money in there. I would sleep a lot better.

How about you, if you are older, like me, would you sell all your stocks, bonds, mutual funds, ETF's, etc. IF there was a guaranteed way to get 6% on your money? If not, how much would this investment, or bank account, have to pay to make it worth it?

[mathjak107]

i would not since we have no idea if inflation will hit 12% again over the next 20 or 30 years .

i would committ perhaps 25% to that investment . in fact if we just have average returns and market sequences you could draw 6% instead of 4% as a withdrawal rate .

of course we can't guarantee that we willhave average so we go with worst case which is 4% , but there is nothing to say you can't ramp up your withdrawals as time goes on if you are up .

if you find you have 2x what you started with at any point in retirement from gains take a 10% increase on top of your normal inflation raise. if 3 years later you are still above 2x then take another 10% raise .

[flyonpa]

Do you Need / Want any of the principal after your dead? (To go on to others),

You might be able to get a deferred annuity that pays a effective 6% rate. (With options like , Life or X years guaranteed.)

[mathjak107]

single immediate annuity's are up at 5.70 draw rates but that is at 65 years old .

[dividend]

For this discussion I am talking about increasing my money 6% a year for the next four years. Not buying an annuity at this time.

[mathjak107]

Do you remember when we used to laugh at christmas clubs at only 5% when the banks had them ?

Rates have to considered with inflation . Without knowing inflaton i would never get rid of my investments to lock in 6% especially if i was retiring since it is inflation and not returns that killed those retirees off in 1966 in the trinity study.

[evilnewbie]

I don't believe in guarantees...

[Yippeekayay]

It depends on the base value.

[mathjak107]

the 4% safe withdrawal rate is actually based on the group of retirees that retired in 1966. they were the worst group in history , worse than even if you retired in 1929.

why ? because while 30 year market returns were not bad inflation tripled from 1965 to 1985.

In the years after 1965, the perfect storm of retirement killing conditions took place. Inflation grew rapidly over the following decade, exceeding 10% in several years in the 1970’s and averaging 6% a year from 1965 to 1985. Interest rates rose rapidly, from ~4% in 1965 to ~8% in 1970, up to 15% in 1982, causing bonds prices to plummet. The combo of fast rising high inflation and rising interest rates destroyed bonds.


6% may be no where near enough down the road. remember you need to inflation adjust .

[dividend]

I just wanted to know at what guaranteed amount of interest or return people would accept to not worry if their stocks will crash and their portfolio is now so little that they won't be able to retire.

Yes, an annual return of 6% is not a lot if there is inflation but it is better than being 25% down 4-5 years from today because of a long bear market and not having enough to retire. I may prefer to have a million in four years with my six percent return instead of having the option of having anything from 500K or 1.5 million at age sixty two four years from now. Sometimes it is better to play it safe at my age.

If not 6%, then what would it take for you to say, forget the stock market, I will go with a smaller but secure guaranteed amount.