I found that expenses doubled in first 12 years of my retirement, that is 6% compounded annually. Plan on 6%< the CP-Lie numbers government provide are false.
The principal will have only around half the original purchasing power when the bond matures, even if actual inflation were only 2%. And it’s a fairy tale that actual inflation will only be 2%.
@@HumbleTrader001move past 1st grade math. You are saying inflation will be 7% a year. But for retirement - what will you buy in 20 years?? A car will be $200k instead of $50k today?
Hmm....She would come out ahead using 500k to buy a Spia then use 250k for the 30 year bond and lastly place the remaining 250k in a 40/60 (stocks/bonds) for growth and hopefully to counter inflation.
I know it’s a hypothetical case, but, if she has $1M, she, probably, has a good SS income. Live, mostly, off the SS, and supplement, with some of the bond “income”, and re-invest the rest. That 4.91% surprises me, though. Fairly high, for 30-year fixed.
Good video. I agree there is inflation risk but that would be the same as a typical pension payment or annuity if no COLA. The plus with the T Bond is that at the end of the term you (or your heirs) get the principal. I just bought a 20 year T Bond with a YTM of 5.02%. That gets me beyond life expectancy risk free.
😂 4.9% money market has been paying that and 8% inflation sounds terrible! S&P index paid over 25% last year! Set aside 4 to 5 years in Cash (money market) and the rest into S&P index pull out money on up years to maintain 2 to 5 years cash and hold stock on even and down years
@@johnristheanswer S&P "might" be down 25% in any given year, but if you DCA over a long period and hold cash reserves, it mitigates that risk. Although it is unlikely to see 20+% returns for 3 consecutive years, a 25% drop is also not a "given" barring some unforeseen event.
That’s the beauty of a dividend paying stock….. You collect the dividends while the stock grows in value….. It’s like owning a business you make a living and have the business to sell in the end….
My issue with a lot of retirement planning ideas is that it treats the retiree as a short term investor when they are in fact a short term, medium term and long term investor all at the same time. A US treasury is a terrible long term plan and not a great medium term plan. My current plan is to separate my retirement funds into different pools based on when that money would be needed and invest them according.
I have been thinking about something like this. The last three years bought a lot of annuities. It would make it hard to manage taxes if I put another chunk in something like this, I suppose. Congrat on over 84,000 subscribers here on RUclips.
I disagree government debt is more risky now than AAA govt debt. I would rather buy government bonds in Microsoft than 30 year Treasury….only buy 3-6 month treasury bills.
That's a very good question and I hope an answer is given. If she went the Spia route that would satisfy the RMD requirement but I have no clue about the Treasury bond route.
I just sold a long bond fund after a 8% loss in just 4 months. 10 year yield up ever since the Fed cut. Does it go to 5 or 6%? Or does it crash? Who knows.. it's all a casino.
If I had 1 million to invest, where would I buy these 30 yr fixed rate bonds? Should I just go to the government site and buy four 250k bonds and they send me the interest?
Definitely use your broker (Fidelity, Vanguard, Schwab). I would only use TreasuryDirect for short term treasury bills (1-yr maturity and under). It took me several months and a lot of red tape to move some 10yr bonds that I had with TreasuryDirect to Fidelity so I could sell them when rates went higher. The government site (like everything else the government controls) is incredibly inefficient and antiquated.
I was a young adult when we had real inflation in the 70s and 80s. What we had a few years ago felt like stuff akin to soneone from florida complaing to someone from new englad about cold. Cant imagine why anyonr woud go longer than a 5 year nore.
Are you talking about buying many 30yr bonds totaling 1 million and selling some each year before they mature? Kinda like a ladder strategy? I don't understand
@@TedWesterfield I get that. But then are we selling these bonds early before they mature as we need income each year to survive? You might have to sell at a loss if interest rates rise above the rate when you bought the bonds
@@TedWesterfield I've been buying Treasuries on the secondary market within my IRA. I guess I did not know that you can take the interest from these bonds prior to maturity without selling them. Still confused
So me and wifey are 55. We are trying to bridge to 70 for SS. If I drop the 1M and get the $49k bridge for the next 15 yrs at 70 SS is on top for another 15 yrs…. As long as I can bridge for the first 15 it looks pretty interesting. Where does one buy these? Schwab? Vanguard? Never bought tbills.
I have 500k in 10 and 20 yr bonds around an avg of 4.5%. this is just a supplement to my retirement. I have a very good pension and get a small amount of ss 4K. I like the guarantee, tough decision if its the only income, but I would probably do it.
@@hklilly4854 I typically do not like to tie up money for that long. Unless there is no penalty for early withdrawal or perhaps a small portion as part of a ladder strategy.
That is a short-term Treasury bond fund. Capital Preservation is its charter. As such its very conservative. It has produced positive returns since 1988 (as far back as the TSP website data goes). The shares of the fund do not make wide swings in price. Funds are different than the actual bonds themselves. Ex. a bond with a 4% coupon will pay that coupon rate exactly each year, no deviation. A fund can fluctuate, and can increase or decrease in value. It has a yield, but it fluctuates as well. You don't want to compare an actual bond to a bond fund.
Another good video Josh. A thought: Fixed income approach but instead using fixed index annuities (and income riders). $580K currently buys the 65 yr old $4100/mo for life. Of course inflation will require additional increasing income, and smaller annuities could be added to solve for those needs. HOWEVER, annuity companies will check your income suitability, i.e, they will not let you buy another annuity if 50%+ of your assets (excluding your home) are already in annuities. The good side of that is that if 50% of your overall investments in annuities covers your expense requirements (at least in the early years of the annuity), then you likely have ample money in the other 50% to handle the increased income requirements via other avenues. If not 50%, one could buy another annuity at the same time as the first, to pay another $500/mo, deferred for 5 years, at a cost of $43,000. Another $500/mo deferred for 10 yrs, at cost of $30k. Another $500/mo deferred for 15 yrs at cost of $25k. Another $500/mo deferred for 20 yrs at cost of $19k.... etc etc.
@@HondaRally300 .... Depends on the type of annuity and its structure. Single Premium Immediate Annuities and Deferred Income Annuities can be bought with a "with cash refund" structure which will pay a beneficiary however much of your premium remains if you pass away before it is all paid back to you. There's also a "period certain" structure, such as "Life & 10 year Certain" which says it will pay YOU for life, but if you die within the first 10 years it will continue to pay your beneficiary the same payment up to 10 years of the annuity's existence. Checkout some Stan the Annuity Man videos.
my wife works at a bank and cashes in old bonds for old people all the time ... some from the 1960's and older ... when she tells me what they paid out after all those years it never even keeps up when i put it in an inflation calculator for todays money ... i guess at least it was better than them blowing the money 50-60 years ago ... and maybe they were gifts given from parents or grandparents way back then and these old people are now spending money that JFK talked their parents/grandparents into investing in the govt. 😂
@@ronmorosey672 well I'm 65, same age as her, have been retired for a long time already and have lived a great lifestyle with a house on a golf course in AZ. I'm invested in VGT, SMH, Broadcom and I buy farmland to rent out with all the profits from my 3 investments. It's called calculated risk investments. And it has made me millions. She could try a calculated risk portfolio herself. Its worked great for me, and it beats inflation. LOL!
I've always been fascinated by investing, but when I tried stock investing early this year, it hasn't been as successful as I expected. However, I keep seeing good news about the stock market. What are the best strategies for less risk and more gains?
@@HumbleTrader001 Depends on the type of annuity and its structure. Single Premium Immediate Annuities and Deferred Income Annuities can be bought with a "with cash refund" structure which will pay a beneficiary however much of your premium remains if you pass away before it is all paid back to you. There's also a "period certain" structure, such as "Life & 10 year Certain" which says it will pay YOU for life, but if you die within the first 10 years it will continue to pay your beneficiary the same payment up to 10 years of the annuity's existence.
You can buy treasuries through any brokerage account or directly from the government via TreasuryDirect with no fees. Personally, a brokerage account is better as you can buy and sell on the secondary market.
I found that expenses doubled in first 12 years of my retirement, that is 6% compounded annually. Plan on 6%< the CP-Lie numbers government provide are false.
Bingo! 2% inflation is a fairly tale.
Technically she would be getting 45,000 as the coupon is 4.5% the yield is 4.92 as of this recording.
A 30 year bond when you are already retired? Optimistic, aren't you.
That was my thought as well.
I just bought 4.93 today.
And this doesn't include social security. She's in great shape!
for present value of money ... if hyper inflation ever occurs, not so much.
@@tomm.8892 If Hyperinflation happens we're all screwed unless you have an 8 figure savings acct
Exactly. SS can partially cover inflation, so no worries. She may be alive in 20 years, but her spending will be lower adjusted for inflation
Inflation will eat that up in 30 years it will be worthless.
The principal will have only around half the original purchasing power when the bond matures, even if actual inflation were only 2%. And it’s a fairy tale that actual inflation will only be 2%.
@@HumbleTrader001move past 1st grade math.
You are saying inflation will be 7% a year.
But for retirement - what will you buy in 20 years?? A car will be $200k instead of $50k today?
You failed math class lol
It won’t be worthless but it will likely be worth 25 percent of what it is now and that is my optimistic prediction. Might be 5 percent.
Hmm....She would come out ahead using 500k to buy a Spia then use 250k for the 30 year bond and lastly place the remaining 250k in a 40/60 (stocks/bonds) for growth and hopefully to counter inflation.
More balanced for sure.
I know it’s a hypothetical case, but, if she has $1M, she, probably, has a good SS income. Live, mostly, off the SS, and supplement, with some of the bond “income”, and re-invest the rest. That 4.91% surprises me, though. Fairly high, for 30-year fixed.
He's right...4.9..BTW the 20 year is 5%
I'm waiting until the 30 year hits 15% again. That will be my last investment decision of my life....all in, baby!
Good video. I agree there is inflation risk but that would be the same as a typical pension payment or annuity if no COLA. The plus with the T Bond is that at the end of the term you (or your heirs) get the principal. I just bought a 20 year T Bond with a YTM of 5.02%. That gets me beyond life expectancy risk free.
A 575k spia will guarantee you the same 49k for life ,the remaining 475k can be used for future inflation needs /hiers.
With more risk
😂 4.9% money market has been paying that and 8% inflation sounds terrible! S&P index paid over 25% last year! Set aside 4 to 5 years in Cash (money market) and the rest into S&P index pull out money on up years to maintain 2 to 5 years cash and hold stock on even and down years
can u put cash on high yield accounts?
S and P might " pay " -25% this year.
@johnristheanswer that's why you bank 4 to 5 years to protect from an unpredictable market. Over 30 years S&P index has averaged 11+% a year
@@johnristheanswer S&P "might" be down 25% in any given year, but if you DCA over a long period and hold cash reserves, it mitigates that risk. Although it is unlikely to see 20+% returns for 3 consecutive years, a 25% drop is also not a "given" barring some unforeseen event.
The risk free is what she was liking here. She's locked in no matter what.
That’s the beauty of a dividend paying stock….. You collect the dividends while the stock grows in value….. It’s like owning a business you make a living and have the business to sell in the end….
Until of course the dividends get cut and surely you realize that does happen.
Look for dividends vs total returns investing. It is an education you will not regret getting.
@@myvenusheeler Focus on the dividend aristocrats and dividend kings to mitigate that risk, or use ETFs such as VIG and SCHD.
@@wisullivI like getting dividends but my focus is the total return, not on the dividends.
@@KayFabe87 Meh,,, I'm more focused on total return. Give me VFIAX or VTSAX.
My issue with a lot of retirement planning ideas is that it treats the retiree as a short term investor when they are in fact a short term, medium term and long term investor all at the same time.
A US treasury is a terrible long term plan and not a great medium term plan. My current plan is to separate my retirement funds into different pools based on when that money would be needed and invest them according.
I wouldn't have all my money invested in any one country's stock or bond market, especially a country with more debt than gdp.
Agree but realize no business can have a credit rating higher than its country.
I think she would do even better buying a SPIA with cash refund. She would get $71,280 a year for that same $1M.
At the end of term, do you get the principal? No for annuities, correct?
what would happen if she sold the million dollars of bonds at say 85 years old and then just lived off that the remaining years?
No way am i holding a bond for 30 years!
My employer's 401k offers a risk-free, zero-cost, guaranteed 4% investment choice.
Getting more than 6% from a tax free mutual bond fund. Not sweating it. Doing much better with high yield ETF'S. Still not scared.
Why not TIPs? Laddered so that 49k a year comes due each year adjusted for infkation.
I have been thinking about something like this. The last three years bought a lot of annuities. It would make it hard to manage taxes if I put another chunk in something like this, I suppose. Congrat on over 84,000 subscribers here on RUclips.
Very Interesting. Looking forward to your additional thoughts on this.
I disagree government debt is more risky now than AAA govt debt. I would rather buy government bonds in Microsoft than 30 year Treasury….only buy 3-6 month treasury bills.
I meant to Aaa corporate bonds are safer than longer term government bonds….
So how does one deal with RMD with such a strategy if done in a 401(k)/IRA?
That's a very good question and I hope an answer is given.
If she went the Spia route that would satisfy the RMD requirement but I have no clue about the Treasury bond route.
The money is out of her account so there is no RMD for those funds.
No Social Security? What if she waits 1 additional year to retire and has an additional $50,000 treasury bill generating $2,450 more added to her 49K?
Seriously, I just took a position in long-term bonds 2 days ago! Totally agree with your thoughts
I just sold a long bond fund after a 8% loss in just 4 months. 10 year yield up ever since the Fed cut. Does it go to 5 or 6%? Or does it crash? Who knows.. it's all a casino.
If I had 1 million to invest, where would I buy these 30 yr fixed rate bonds? Should I just go to the government site and buy four 250k bonds and they send me the interest?
Charles Schuwab or Fidelity
@liv9534 Thank you
Definitely use your broker (Fidelity, Vanguard, Schwab). I would only use TreasuryDirect for short term treasury bills (1-yr maturity and under). It took me several months and a lot of red tape to move some 10yr bonds that I had with TreasuryDirect to Fidelity so I could sell them when rates went higher. The government site (like everything else the government controls) is incredibly inefficient and antiquated.
Or Vanguard...been using them for years to purchase Government T-Bills and Bonds.
Looking forward to another year watching your videos sir. Happy New Year!
The risk is inflation increases to > 4.92%.
Historical no. Maybe 1 year sure but not over time
@ With our deficit spending and current debt it is all but assured.
I was a young adult when we had real inflation in the 70s and 80s. What we had a few years ago felt like stuff akin to soneone from florida complaing to someone from new englad about cold. Cant imagine why anyonr woud go longer than a 5 year nore.
Teaser ending..."I'll tell you about the equity markets tomorrow". 🙂 Look forward to that!
Are you accounting for the interest paid going down each year due to reduced principal from dipping into her principal?
Did you even watch a minute of the video
if she needs 49K a year she should have like 1.2M and keep the base growing to keep up with inflation and pass most of money to kids
Are you talking about buying many 30yr bonds totaling 1 million and selling some each year before they mature? Kinda like a ladder strategy? I don't understand
If you’re buying US Treasuries, you have to buy multiple $10K bonds. The treasury doesn’t issue $1M bonds.
@@TedWesterfield I get that. But then are we selling these bonds early before they mature as we need income each year to survive? You might have to sell at a loss if interest rates rise above the rate when you bought the bonds
@ if you buy individual bonds you’re holding till maturity and living off the interest they pay each year.
@@TedWesterfield I've been buying Treasuries on the secondary market within my IRA. I guess I did not know that you can take the interest from these bonds prior to maturity without selling them. Still confused
1,000,000 x .0492% = $49,200
Per year
@@rejectionistmanifesto8836 yes
And at the end of term, do you get the principal?
@@hklilly4854 Yes
If your 77 years old like I am 5% doesn’t sound like much to me.
So me and wifey are 55. We are trying to bridge to 70 for SS. If I drop the 1M and get the $49k bridge for the next 15 yrs at 70 SS is on top for another 15 yrs…. As long as I can bridge for the first 15 it looks pretty interesting. Where does one buy these? Schwab? Vanguard? Never bought tbills.
Vanguard, Schwab or Fidelity
There are other ways to take advantage of the increase in long bond rates to structure income streams
@jozzio720 Could you please expand on this?...you've got my attention. Thanks in advance.
I have 500k in 10 and 20 yr bonds around an avg of 4.5%. this is just a supplement to my retirement. I have a very good pension and get a small amount of ss 4K. I like the guarantee, tough decision if its the only income, but I would probably do it.
I’ll take 5% for 5 years.
If it’s good for 5, is it good for 10? Wouldn’t it be good for longer?
@@hklilly4854 I typically do not like to tie up money for that long. Unless there is no penalty for early withdrawal or perhaps a small portion as part of a ladder strategy.
And she never got to spend the million. The End. 💁🏻♀️
She can live off it and leave the principal to help her kids when she passes. ❤
@@dejavu0101 I suspect many of us will never spend all our wealth.
didnt mention social security? save that
In 30 years a million bucks will buy an f150
Could the tsp G fund do the same? Has it beat inflation since inception? If so it would work as well
That interest rate changes each month. Cant lock a high rate in.
That is a short-term Treasury bond fund. Capital Preservation is its charter. As such its very conservative. It has produced positive returns since 1988 (as far back as the TSP website data goes). The shares of the fund do not make wide swings in price. Funds are different than the actual bonds themselves. Ex. a bond with a 4% coupon will pay that coupon rate exactly each year, no deviation. A fund can fluctuate, and can increase or decrease in value. It has a yield, but it fluctuates as well. You don't want to compare an actual bond to a bond fund.
What about RMDs? And taxes?
Another good video Josh.
A thought: Fixed income approach but instead using fixed index annuities (and income riders). $580K currently buys the 65 yr old $4100/mo for life. Of course inflation will require additional increasing income, and smaller annuities could be added to solve for those needs. HOWEVER, annuity companies will check your income suitability, i.e, they will not let you buy another annuity if 50%+ of your assets (excluding your home) are already in annuities. The good side of that is that if 50% of your overall investments in annuities covers your expense requirements (at least in the early years of the annuity), then you likely have ample money in the other 50% to handle the increased income requirements via other avenues.
If not 50%, one could buy another annuity at the same time as the first, to pay another $500/mo, deferred for 5 years, at a cost of $43,000. Another $500/mo deferred for 10 yrs, at cost of $30k. Another $500/mo deferred for 15 yrs at cost of $25k. Another $500/mo deferred for 20 yrs at cost of $19k.... etc etc.
Is it true that with an annuity when you pass away there is nothing left to give to your children?
@@HondaRally300 .... Depends on the type of annuity and its structure. Single Premium Immediate Annuities and Deferred Income Annuities can be bought with a "with cash refund" structure which will pay a beneficiary however much of your premium remains if you pass away before it is all paid back to you. There's also a "period certain" structure, such as "Life & 10 year Certain" which says it will pay YOU for life, but if you die within the first 10 years it will continue to pay your beneficiary the same payment up to 10 years of the annuity's existence. Checkout some Stan the Annuity Man videos.
my wife works at a bank and cashes in old bonds for old people all the time ... some from the 1960's and older ... when she tells me what they paid out after all those years it never even keeps up when i put it in an inflation calculator for todays money ... i guess at least it was better than them blowing the money 50-60 years ago ... and maybe they were gifts given from parents or grandparents way back then and these old people are now spending money that JFK talked their parents/grandparents into investing in the govt. 😂
Really enjoyed think through with you. Could treasury rates go higher and what is the percentage rate this will work for $1M?
Josh making sense , again! Getting ready to dump my 401K with MINIMUM tax torpedo🤑🤑🚀
4.92% throughout your retirement? That sucks, you will be going backwards in 5 years. Don't do it!
really? so where does she put her money?
@@ronmorosey672 Where? certainly not in something like a bond that does not keep up with real inflation. LOL!
@@billcarlson1730 i'll ask again///then where does a 65 year old invest her money if not in a safe treasury?
@@billcarlson1730 i'll ask again..where does a 65 year old invest her money, if a treasury isnt good enough?
@@ronmorosey672 well I'm 65, same age as her, have been retired for a long time already and have lived a great lifestyle with a house on a golf course in AZ. I'm invested in VGT, SMH, Broadcom and I buy farmland to rent out with all the profits from my 3 investments. It's called calculated risk investments. And it has made me millions. She could try a calculated risk portfolio herself. Its worked great for me, and it beats inflation. LOL!
I've always been fascinated by investing, but when I tried stock investing early this year, it hasn't been as successful as I expected. However, I keep seeing good news about the stock market. What are the best strategies for less risk and more gains?
I just purchased an annuity paying close to 7% for life, so the 4.92% is okay but nothing to rave about.
But do your heirs inherit any of the principal?
@@HumbleTrader001 Depends on the type of annuity and its structure. Single Premium Immediate Annuities and Deferred Income Annuities can be bought with a "with cash refund" structure which will pay a beneficiary however much of your premium remains if you pass away before it is all paid back to you. There's also a "period certain" structure, such as "Life & 10 year Certain" which says it will pay YOU for life, but if you die within the first 10 years it will continue to pay your beneficiary the same payment up to 10 years of the annuity's existence.
I have looked at SPIAs I haven't seen that rate. what company??
Great rate if you live another 30 years. Just don't die early, or you will lose your principal.
@@tk4c415 he didnt
Not compounded interest, useless.
TIPS
I've been wanting to dabble with us treasury. I think it's even setup an account! I need to double check.
Thx!
You can buy treasuries through any brokerage account or directly from the government via TreasuryDirect with no fees. Personally, a brokerage account is better as you can buy and sell on the secondary market.