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Wade Pfau is a very recognized authority in investing circles—usually given credit for accurate insight
This article is an analysis of a recent paper Pfau has presented that advocates using fixed income annuities vs bonds in investment accounts
The author of the linked article takes issue with Pfau’s analysis
Just don't do annuities. The money becomes THEIRS, no longer your own. I suppose a case could be made for a term-annuity. But not one of those that guarantees you money in retirement forever. Annuities are complicated, convoluted, and come with high fees. And what if you keel-over tomorrow? A charitable annuity makes some sense, if you have your mind made up to donate the money, anyhow.
Just don't do annuities. The money becomes THEIRS, no longer your own. I suppose a case could be made for a term-annuity. But not one of those that guarantees you money in retirement forever. Annuities are complicated, convoluted, and come with high fees. And what if you keel-over tomorrow? A charitable annuity makes some sense, if you have your mind made up to donate the money, anyhow.
Don't think you can make a blanket statement - "don't do annuities". SPIAs can play a role in a portfolio. For example, we have used SPIAs (paying 7% for the rest of our lives) for part of our fixed income allocation. With that said, we have enough in equities to offset inflation. Further, we will have enough other assets for our heirs. SPIAs are not complicated and have relatively low fees. However, I don't recommend other types of annuities, especially index annuities.
There are several groups in our area that offer a variety of private lending / equity opportunities. (private 'bonds' if you will)
One group of retired friends pool equity for various local projects. (risk is involved, this team is very seasoned with a strong cadre of attorneys, investment bankers, retired CEO's... a fun and informative and creative group.)
I'm sure there are plenty of these throughout the world. (some more creative than you would care to be involved!)
Last edited by StealthRabbit; 09-10-2023 at 09:46 AM..
i would consider most of that list not bond proxies .
they are all joined at the hip to equities.
dividends or not , they are stocks .
reits are not going to react like treasuries in a recession or depression , same with real estate crow funding .
same with preferred stocks . they are tied to how a company is doing
ask your self if the investment will soar and protect you in a recession or depression.
if the answer is no, then you are not really diversified.
you just have different versions of assets that respond to the same economic outcomes .
even high yield and corporate bonds offer no protection like treasuries do . they are more coupled to stocks.
2008 saw corporate bonds fall or barely rise while long term treasuries soared.
if anything equities and gold tend to offer more diversification…in fact equities and gold have beaten equities and bonds over most time frames for more then 2 decades.
most on your list are either the same risk and volatility as equities or a slightly less proxie but they have none of the protection and diversification that treasuries hold when it’s their day in the sun. as that part of the business cycle comes around
there really are only 4 assets that offer true diversification and react directly to
prosperity
recession
depression
very high inflation / weak dollar
they are equities , gold , long term treasuries, cash instruments and to a partial extent intermediate term treasuries
Last edited by mathjak107; 09-10-2023 at 11:03 AM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,113 posts, read 7,580,788 times
Reputation: 9850
Quote:
Originally Posted by mathjak107
for those who want to know how it’s done by either them or you , here you go :
these are older numbers so don’t go by the prices at the time this was worked up . i have no interest in updating the prices and redoing it
so here is how the sausage is made , but unlike sausage which taste great , the taste here is MEH at best .
{.... SNIP}
.
I like sausage. The easiest to make is, "head cheese," IMO, Other types of sausages need equipment and getting the ratios correct. We no longer have the space or equipment to make sausage, Thus I am on the lookout for prepackaged.
Likewise, I investigated options and spreads prior to discovering GLWB (Variable & Fixed-Indexed) annuities. A packaged product was an easier choice and had some specific advantages, at the time.
I think that Annuities in general can be used as an asset class. (purchased GLWB ~20% of our Income . No idea what % of our wealth but certainly declining).
I think RE is an asset class. (~40% of Income. Variable % of our wealth).
CD's are an increasing component, moving discretionary cash to longer holding periods. Currently non-Income.
YMMV
Last edited by leastprime; 09-10-2023 at 12:10 PM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,113 posts, read 7,580,788 times
Reputation: 9850
I think that Annuities in general can be used as an asset class. (purchased GLWB ~20% of our Income . No idea what % of our wealth but certainly declining).
I think RE is an asset class. (~40% of Income. Variable % of our wealth).
Our CD's are an increasing asset, moving discretionary cash to longer holding periods. Currently non-Income.
Our spendable Income should be increasing over the next 4-6 years (~80 yo) as we take more Income from the GWLB annuities, PLUS loan is paid off, and taking "$ome dough" from discretionary stock-cash accounts
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. 
85% of my bond allocation is in alternatives
