Quote:
Originally Posted by Mazjaz
My wife just retired and won’t take Social Security for 5 years. I am considering replacing her income with a Fixed Indexed Annuity with West Financial Group. Has anyone used them or have a fixed indexed annuity they would recommend for immediate income? I am 66.
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I have always been very careful around those guys who want to buy you dinner first.........
That being said, I get that you want to fill in the income gap between your wife's retirement and her Social Security. Depending on how much income you need to generate, there is a chance that maybe it could be done with solid dividend paying stocks. By solid, I mean that their dividend is highly likely to remain sustainable, and not only that, but the dividend has a long history of increasing annually.
For a start, you could look up
Dividend Aristocrats and
Dividend Kings. The
Aristocrats have increased their dividend annually for at least 25 consecutive years. The
Kings have a record of at least 50 consecutive years of dividend increases.
You will recognize a lot of the companies on these lists. Very few of them will take you on a rocket ride, but if you can pick them up at a good price, you might find that holding them can give you a steady stream of income (with annual raises) while the stock price goes up and down -- but the whole time, the stock is paying you to wait. The percentage of the dividend increase will depend on how the year has gone, but these companies do not want to lose their status as dividend stocks, so you will probably always get some kind of raise. And hold them long enough and the stock price will likely go up a bunch. (Of course, any company, no matter how big and supposedly solid, can end up cutting the dividend. GE is an example of what can happen.)
You would need to understand things like payout ratio and ex div dates, and date of record -- but that's not hard. Of course, you must keep an eye on the companies, all by yourself. Some people think that is fun. (Such people are often considered freaks if they are women of a certain age. (sigh))
Bigger is not always better with dividends, but if you can catch a good stock that has been pounded some, that can be a really good thing to do. The other thing to keep in mind is as the dividend increases, the percentage of your initial investment starts looking like an even better return.
But making up one's own "mutual" fund is not for everybody. There are lots of mutual funds and ETFs that will do it for you.
(Reinvesting dividends can be a good thing to do, if income is not needed. That is what Warren Buffett does with Berk.)
Another bonus of being a boring, old-fashioned, buy-and-hold, dividend investor is that in taxable accounts, dividend income gets friendlier treatment.
This is not for everybody. It is creating your own little stock fund, over which you have total control and pay no fees. This means you are responsible for all the decisions to buy or sell and not just if, but when. Some people do not like that. But they do like buying into a big fund, so they do that. And some do both.
This might not be for you, but I do have a suggestion that could help. There is a half-hour show called WealthTrack with Conseulo Mack. Each week on PBS, she interviews a big deal financial person. (I record the show and then decide if I am interested in the topic.) But it is also on the internet.
Give wealthtrack.com a Google, scroll, and find the April 7th interview with Christine Benz, who is the Director of Personal Finance for Morningstar. The title of the episode is "Retirement Blind Spots and How to Fix Them." (It is Part 2 of 2. I did not watch the first one yet. But that could help you, too.) She quickly mentions annuities and does not totally slam them -- but does not seem to be a fan of them either. You will find lots of good info in the interview.
There is a lot to know about annuities. I think they are too complicated and seem to grow surprising arms and legs. But some annuities seem to work for some people.
Don't leap too soon. Do a little homework. Find your options. You might be really glad you decided against an annuity.
One more thing: Take a good look at CDs, FDIC-insured and call protected, available through Fidelity and other big houses. They are paying over 5% now for the first time in many years.
Do your homework -- and Good Luck.
Boomer