@AttorneyMother, you missed my point. You might not have a pension, but you will have a parallel decision to make. At some point, you will decide whether to annuitize some portion of your nest egg. That analysis doesn’t differ materially from the pension vs lump sum decision.
No, you and H won’t miraculously get a pension. But, you will have a nest egg 
@SOSConcern Between 3/31/15 and 6/30/15 the yield on the US Treasury long bond went from 2.54% to 3.10%, a fairly large change of 56 basis points. Looking at a very long maturity treasury bond, 3% 5/15/2045 that move in rates would change the price from 109.57 to 98.06, or a drop in price of 10.5% !! If you own a total bond market type fund, shorter maturities declined much less in price over that period, but the bond market story for that quarter is simply higher yields = lower prices. Puerto Rico should be a miniscule (insignificant) part of a broad market index.
If you are wondering why interest rates went up during that quarter, well… let the song and dance begin! Our bond rates followed Europe lower into year end 2014. When European rates were negative, our rates seemed attractive in comparison even if historically low. When European rates moved back towards reality ours followed. And of course, there is the highly anticipated upcoming increase in the Fed Funds rate, from 0 to .25%, which may or may not happen in September.
I agree, but I worry about the yield chasers, who might have lost sight of the relative safety of a broad index.
@IxnayBob, I get your point now. I hope to escape having to read any article with the word “pension” so prominently featured in the title.
BTW, I hate the term “nest egg.” Just do. I picture a nest with eggs; I don’t think of investment securities.
On a more serious note: I don’t analogize “targeted spending down of accounts” (not a term of art, obviously) as an annuitization of the retirement portfolio. I’m planning on figuring out how to liquidate accounts – probably granularly or selectively (by first spending down the accounts that I would not invest in today), then doing some sort of “sell high” approach across the asset class up for the year. The question that remains is how to target MFs within such asset class.
Though in all honesty, my present preference is my good friend’s approach, which is: just tell me how much my net income is this year so that my wife can spend it. Works for him.
Our 401k just offers so much diversification. Will see what our financial guy says when we see him. Think this particular bond fund is more twitchy right now that some of the stock market funds.
@NJRes , so should we go longer or shorter if looking at bond funds, under the circumstances. Or should we split the different and go with intermediate. Or should we still just stick with the Total Bond Fund approach.
@IxnayBob - I see your vote.
I have had more than a couple of people say that they have a harder time dealing with the interest rate risk inherent in bond funds when evaluating an investment in them.
IxnayBob, do you have a specific annuity in mind?
@AttorneyMother, nest egg is what salespeople call it when they’re reluctant to call it “the money I want to transfer from your pocket to mine.”
I meant a literal annuity as in, I go to Vanguard and say “I will give you $x in a lump sum, and you’ll give me $y every month until you hear that I’ve died.” I’ve considered doing this, with a smallish portion of our assets (10%?), as longevity insurance, especially for my wife, whose family tends to live longer than average. If interest rates were higher, I’d consider it more strongly.
It might not suit you, but deciding not to do it is a decision also 
@dstark, not a particular one, because it’s premature for my wife, but Vanguard or Fidelity have low cost ones. SPIA or longevity insurance only, no hybrids, indexed whatevers, etc.
I was wondering what the returns are these days for spia so I can compare them with other asset classes like munis.
For example, a 65 yo male can purchase $582/month for $100,000 (or 6.984%, but as you know, it’s more complicated than that when comparing to munis).
Yes.
Just to make it more complicated…
What if a 65 year old male buys an annuity but doesn’t start taking fixed payments until he is 70?
@dstark, that seems to raise it to around 8.1% for NJ residents. It gets very specific.
Ok. Thanks.
@IxnayBob, you are getting closer to 65. I don’t know the muni market in New Jersey because I don’t live in New Jersey.
I think 25 year munis in Cal… Not rated munid because the issues are too small but very good bonds, are yielding 4 to 4.15 percent.
I would love to be corrected if I am wrong. @NJres, I am looking at you. You are the bond guy.
I don’t do complicated things. Complicated things are not worth my time.
An example… Different rates can be used…
I have a choice between a muni that yields 4 percent and an annuity that yields 6 percent after taxes.
I would break up the annuity into 2 parts. I would subtract 4 percent from 6 percent. That leaves 2 percent… The difference in yields.
The 2 percent difference is the part that counts in comparing these products. The other 4 percent is similar no matter which product you are using.
With the munis, you get your principal back. The annuity, you don’t. With a 2 percent yield, it takes 36 years to get your money back. That tells me the annuity is not as good as the muni unless you live more than 36 years or passed 101.
NJres, you like to float in and out of here. If you are floating in here, do you disagree?
We don’t make investments in isolation. We have a basket of investments. And some people may need that 2 percent to live. If you need the higher yield to live, that changes things.
Also, the SPIA / annuitization tactic makes sense if one has to make discrete spending decisions. But it seems less necessary if one already has an employer pension + delayed-maxed SS which, IIRC, you and your W have along with other spendable assets.
I’ll add the question of an SPIA to my list. But I feel uncomfortable having to make contractual investment decisions based on longevity guesses and for which I have to fork over a big chunk of money.
Ok… I am thinking here…I guess if the extra 2 percent is invested at a higher return, the payback is quicker.
I might not like post 7013. It’s a mess.
I am leaving the post up. I am going to play with it.
Why do we like SPIA if they are essentially reverse life insurance policies?
They are an insurance product. They include a profit portion for the insurer, but they insure against living too long. They might not be worth it for anyone’s particular situation. I’m most interested in something similar to dstark’s question: a deferred annuity that pays nothing until DW turns, say, 80 and then pays out pretty nicely, until she dies.
Ok…my earlier post wasn’t really a mess but I was distracted.
It would take 36 years for the annuity to be as good as the muni, if the income stream had 2 percent compounded returns. About 31 years for 3 percent compounded returns. 27.5 to 28 years for 4 percent compounded returns.
So at age 65… Person who buys the annuity , and makes a 4 percent compounded after tax, does as well as the muni around age 93. That is a heck of a bet.
IxnayBob, Your wife buys an annuity spending $100,000 at age 65. Starts receiving payments at age 80. What are the payments?
@dstark, I don’t know. It’s purely hypothetical now.