WCI #243: Annuities, Securities, and The Three Fund Portfolio

Dec 30, 2021

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INSIGHT

Annuities As Longevity Insurance

Annuities are contracts that convert a lump sum into a life-long income stream backed by an insurer and state guaranty associations.
Deferred annuities act as longevity insurance, paying more if started later because many purchasers die before payouts begin.

ADVICE

Lock Basic Expenses With Guarantees

Cover your basic fixed living expenses with guaranteed income sources like Social Security, pensions, and annuities.
Use the rest of your portfolio for variable spending so market swings don't threaten essentials.

ADVICE

Use Low-Cost Variable Annuities Carefully

Variable annuities can work for long horizons because tax-deferred growth can overcome higher fees over decades.
Prefer low-cost variable annuities and compare them to Roth options when the beneficiary has earned income.

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This episode we discuss annuities, securities, and the three-fund portfolio. But we are also reaching the end of the year, which means it's time to take an assessment of how you did this year. Check out the End of Year Financial Checklist for 2021 https://www.whitecoatinvestor.com/end-of-year-financial-checklist/. This checklist will help you make sure you did everything you need to do at the end of the year. It's got everything on there from completing your 2021 Backdoor Roth IRA, plus a Mega Backdoor Roth IRA and Roth conversions. It covers making sure you maxed out your 401(k)s and HSAs and 529s ABLE accounts if you have a disabled kid as well as using up your flexible spending account and making sure you have insurance in place and giving to charity before the end of the year, if that's something you're interested in doing. There are a number of other things on that list to make sure you do once a year.

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