Dividends

[Jim1mack]

We bought an Annunity when we retired at age 60. Liked the perpetual guaranteed income that would continue till we expire. We now can take the remaining amount without penalty and add it to our brokerage account. Was tallying the dividends earned in that account which are reinvested. Saw that adding the Annunity amount to those holdings would result in dividends that more than replace the Annunity payments if I took them instead of reinvesting them. Principle would be untouched along with those holdings appreciating long term.

Opinions? What may I be missing?

[JRcorvette]

Your money is safe in an annuity but not so in the Stock Market. Can you afford to suffer a large loss if things go south in the Maret?

[rjm1cc]

Sounds good. Be sure of the income taxes you might incur on cashing in the annuity.
I assume you are picking individual co's and not an ETF index. Thus their ability to pay the dividend has to be watched but the ups and downs in the stock price will not matter and your hires will inherit the stock.

[manaboutown]

The stock market is currently very highly priced so many feel now is far from an optimal time in which to jump in with both feet.

This is evidenced by the Shiller PE ratio which is at 37.27 today - Cringe!!!: Shiller PE Ratio - Multpl (https://www.multpl.com/shiller-pe)

Buffett has been selling huge amounts of AAPL and BAC to lock in capital gains. He has been a net seller of stocks and has built up an enormous cash reserve. This may in part be motivated by looming future tax increases on C corporations. Inflation has been horrible over the last 3+ years as anyone who shops for groceries, purchases gasoline and such will verify. We have been experiencing the worst inflationary period since the late 1970s -No one can predict if, when and how it will end. United States Inflation Rate (https://tradingeconomics.com/united-states/inflation-cpi)

I wish I could offer a solution but I have none. All I can say is I have built up my cash reserves to the highest percentage of investable assets they have ever been. I am mostly in T bills but also some AMT free munis.

[Rainger99]

Your money is safe in an annuity but not so in the Stock Market. Can you afford to suffer a large loss if things go south in the Maret?

I don’t think it is if they go south. I think it is when they go south!

[Jim1mack]

Nothing more than I already know or have experienced.

[Cuervo]

Since you are retired the goal is to find the safest place to protect the principle.
There is nothing that is 100% safe, but annuities are a fairly good parking space.
You seem to know what you're doing and hopefully you did all your homework.
I'm also in the same position and the first thing I did was tally all my yearly expenses and deducted that from my net income after taxes. Once I realized that I could live comfortably on what the annuity was bringing in whatever was not tied up in the annuity I felt was safe to invest in the stock market.
Each person has to determine what is best for them, just do your homework.

[rsmurano]

If you bought an annuity you already suffered a hit probably close to 10%, so if they let you out, assuming there are no more fees attached, you already paid the fees.
Annuity is the WORSE financial move anybody could make. Most people buy annuities because they don’t know how to invest in the stock market, and when the piranhas hear this, they offer you peanuts in guaranteed withdrawals but hide all the high fees and people think this is heaven.

Don’t let people fool you, we were in a recession 2.5 years ago by the technical standards, and the worst economy and inflation in 40 years, 2.5 years ago and It’s still not good today. Why do you think big investors are selling. 1/2 my holdings are still in money market making over 5%, while the other 1/2 is making a minimum of 35% to 70% with very very low risk and 3% dividends. If I thought the economy was doing great, 100% of my money would be in stocks/funds.

[RoboVil]

We bought an Annunity when we retired at age 60. Liked the perpetual guaranteed income that would continue till we expire. We now can take the remaining amount without penalty and add it to our brokerage account. Was tallying the dividends earned in that account which are reinvested. Saw that adding the Annunity amount to those holdings would result in dividends that more than replace the Annunity payments if I took them instead of reinvesting them. Principle would be untouched along with those holdings appreciating long term.

Opinions? What may I be missing?

May want to have some cash in a safe place. Dividend paying stocks will be the safest if there is a drop in the market. The "Buffett Indicator" of market value indicates the market is overvalued and will pull back at some point, probably sooner than later. I would have at least 50% of my investments in cash or similar at this time. Search "Buffett Indicator"

[Rainger99]

The other 1/2 is making a minimum of 35% to 70% with very very low risk and 3% dividends.

Can you provide some more details on where you are making a minimum of 35 to 70% with very very low risk?

[Desiderata]

If you bought an annuity you already suffered a hit probably close to 10%, so if they let you out, assuming there are no more fees attached, you already paid the fees.
Annuity is the WORSE financial move anybody could make. Most people buy annuities because they don’t know how to invest in the stock market, and when the piranhas hear this, they offer you peanuts in guaranteed withdrawals but hide all the high fees and people think this is heaven.

Don’t let people fool you, we were in a recession 2.5 years ago by the technical standards, and the worst economy and inflation in 40 years, 2.5 years ago and It’s still not good today. Why do you think big investors are selling. 1/2 my holdings are still in money market making over 5%, while the other 1/2 is making a minimum of 35% to 70% with very very low risk and 3% dividends. If I thought the economy was doing great, 100% of my money would be in stocks/funds.

Please share what you are investing in outside of your money market accounts. Those returns, dividends and level of safety sound very impressive.

[Windguy]

Your money is safe in an annuity but not so in the Stock Market. Can you afford to suffer a large loss if things go south in the Maret?

There are two ways to look at risk. There is the risk associated with market volatility and the risk of not having enough to fund your retirement. What I’ve heard is that money you don’t need for 10 years should be invested in the market such that you have enough time to weather a storm. If you invest everything in secure assets, you won’t be able to keep up with inflation.

[Steve]

We bought an Annunity when we retired at age 60. Liked the perpetual guaranteed income that would continue till we expire. We now can take the remaining amount without penalty and add it to our brokerage account. Was tallying the dividends earned in that account which are reinvested. Saw that adding the Annunity amount to those holdings would result in dividends that more than replace the Annunity payments if I took them instead of reinvesting them. Principle would be untouched along with those holdings appreciating long term.

Opinions? What may I be missing?

You're missing the fact that it's "annuity", not "annunity".

[retiredguy123]

You're missing the fact that it's "annuity", not "annunity".
It's also principal, not principle.

[Robbb]

If you bought an annuity you already suffered a hit probably close to 10%, so if they let you out, assuming there are no more fees attached, you already paid the fees.
Annuity is the WORSE financial move anybody could make. Most people buy annuities because they don’t know how to invest in the stock market, and when the piranhas hear this, they offer you peanuts in guaranteed withdrawals but hide all the high fees and people think this is heaven.

Don’t let people fool you, we were in a recession 2.5 years ago by the technical standards, and the worst economy and inflation in 40 years, 2.5 years ago and It’s still not good today. Why do you think big investors are selling. 1/2 my holdings are still in money market making over 5%, while the other 1/2 is making a minimum of 35% to 70% with very very low risk and 3% dividends. If I thought the economy was doing great, 100% of my money would be in stocks/funds.

Where are you getting 35 to 70% returns on a very low risk investment?

[bumpa]

Can you provide some more details on where you are making a minimum of 35 to 70% with very very low risk?

Yeah I'd love to see some detail on that claim.

[CybrSage]

1/2 my holdings are still in money market making over 5%, while the other 1/2 is making a minimum of 35% to 70% with very very low risk and 3% dividends. If I thought the economy was doing great, 100% of my money would be in stocks/funds.

It is probable you made a typo or the wording got confused.
Are you saying you are getting a 70% return on some of your investments? Specifically, which ones?

[JoMar]

35%-70%? Don't really expect an answer.... BS meter pegged?

[nn0wheremann]

We bought an Annunity when we retired at age 60. Liked the perpetual guaranteed income that would continue till we expire. We now can take the remaining amount without penalty and add it to our brokerage account. Was tallying the dividends earned in that account which are reinvested. Saw that adding the Annunity amount to those holdings would result in dividends that more than replace the Annunity payments if I took them instead of reinvesting them. Principle would be untouched along with those holdings appreciating long term.

Opinions? What may I be missing?
Your brokerage account has been in a bull market since the Great Recession of 2008. Growth and earnings have been good. If the market turns into a bear, that growth and earnings will not be there.

[Boomer]

Actually, the best way to invest for dividends is to carefully choose and buy dividend stocks 30 years ago and reinvest the dividends until retirement and then collect the dividends for income when you retire. AND, if you don’t like the current yield on a favorite old stock, just think about what the yield actually is now on your cost basis, all those years ago.

Know Yourself and Buy What You Know. That’s all dividend investing is — basically.

If you invest because you are looking for a rocket ride, dividend investing is too stodgy for you.

It is interesting to look up those lists of Dividend Aristocrats and Dividend Kings with their uninterrupted annual dividend increases over the past 25 or 50 years. You will see companies there that you might know something about.

Also, it can be fun to look at the top holdings in dividend mutual funds and ETFs.

You can make your own mutual fund if you think that could be fun to do.

I must say that I agree with mananoutown about the height of the market now, but that is not a bad thing as long as investors understand it —and when it dips — and it will dip — that is when to buy with some of the sideline money that old investors have been keeping in money markets because they always have sideline cash or because they have been happily harvesting gains in 2024 — or should be. Or gifting. Or just keep it in a money market, for now, to bubble around probably at least above 4% for a while. That is liquid money.

Old investors know darned good and well that some of this high market they like to bitch about is due to stock buybacks from corporate tax breaks, much of which went into the pockets of CEOs and yes, stockholders. Seems like those breaks should have come with some strings. Oh well, stockholders are happy but what about employees and capital investing in the companies. The percentages of the tax breaks used for stock buybacks is cringeworthy.

Wise old investors are projecting income tax implications and pushing IRMAA as they are taking profits where it makes sense. That does not mean there will be a crash. It just means they have been in the market for decades and know when to take gains.

I think the economy is trying to return to normalcy if given a chance. It will take time. The country needs breathing room right now, a chance to calm the hell down.

Boomer, a Pragmatic Capitalist Woman

[CoachKandSportsguy]

Put your money in BIL which are 1-3 month treasuries earning 5% plus plus cap gains.

Then diversify between BIL , MBB and PFF, and you have 4+ percent dividends plus capital gains eventually when you sell.

[FredJacobs]

If you have already annuitized your annuity you no longer have access to the cash value. If not, you can surrender the annuity - you said you have passed the sales charge requirement - however you will have to pay ordinary income tax on the profit only. There is an invcome tax component when you annuitize. Your periodic payments are made up of two parts - similar to a mortgage (loan interest and principal) - partially growth profits and return of your own money. The portion that is made up of growth is taxable income. Unlike a mortgage, where your payments go first to interest and the balance to increase your equity, an annuity payments will bring the portion that is your own non-taxable money down to zero and your entire payment will be taxable.

Depending on your risk tolerance, you need to decide on the safety and guarantees of the insurance company vs the risk if investing.

[Rwirish]

An annuity is one of the best investments you can make as part of an overall investment portfolio imo.

[crash]

Your money is safe in an annuity but not so in the Stock Market. Can you afford to suffer a large loss if things go south in the Maret?

Your money disappears when you die in an annuity but not in the stock market. I did exactly the thing the OP is talking about and have the same or more income than an annuity with the principle still growing.

If you invest in stocks that pay a dividend and have raised that dividend every year your income will actually grow. You also don't care whether the market goes up or down but just does the company have enough free cash flow to pay and increase the dividend. Search for dividend aristocrats they have increase their dividend for at least 25 years. If you want to be really safe search out dividend kings they have increased it for at least 50 years.

[Remembergoldenrule]

I don’t think it is if they go south. I think it is when they go south!

I agree regardless of election outcome. I fear the market will “adjust” political term that will be used. I wish my significant other would start putting our retirement in less risky accounts so we won’t have to worry this time next year.

[Ray Greene]

It's also principal, not principle.
Principal is a person
Principle is money!

[Ray Greene]

Principal is a person
Principle is money!
Principal is money
I stand corrected

[rsmurano]

BS meter! If you can’t find investments that give you 40-200% gains, you shouldn’t be in the market.
BS meter? How about these as a small example, 1 year gains:
Tesla 50%
Facebook/meta 263%
Apple 58%
Nvidia 99%.
That’s just in tech stocks. There are other sectors that are booming. Small cap is doing good. My s&p fund is up almost 40% for the last year, whereas my tech funds are up even more.

I also have a couple dozen low cost/low risk index funds (that I pick from) that I’m getting over 40% plus good dividends on top of that. These fund symbols I only give out to friends. It takes some research and a little bit of time to come up with funds that match my stringent requirements that produce these types of gains (low cost, low risk, low turnover, 3% min dividends, 2 digit gains over the last 10 years, growing dividend each year for the last 10 years, and more). Again, there are dozens of them, I have been using the same indexed funds for the past couple of decades.

For no risk, I’m still getting over 5% in money market funds as we speak.

I think that takes care of any BS meter posts

[Robbb]

BS meter! If you can’t find investments that give you 40-200% gains, you shouldn’t be in the market.
BS meter? How about these as a small example, 1 year gains:
Tesla 50%
Facebook/meta 263%
Apple 58%
Nvidia 99%.
That’s just in tech stocks. There are other sectors that are booming. Small cap is doing good. My s&p fund is up almost 40% for the last year, whereas my tech funds are up even more.

I also have a couple dozen low cost/low risk index funds (that I pick from) that I’m getting over 40% plus good dividends on top of that. These fund symbols I only give out to friends. It takes some research and a little bit of time to come up with funds that match my stringent requirements that produce these types of gains (low cost, low risk, low turnover, 3% min dividends, 2 digit gains over the last 10 years, growing dividend each year for the last 10 years, and more). Again, there are dozens of them, I have been using the same indexed funds for the past couple of decades.

For no risk, I’m still getting over 5% in money market funds as we speak.

I think that takes care of any BS meter posts

Great point, what could go wrong with buying tech stocks with PE ratio's in the triple digits? after all these things never crash and readjust, they just keep going up.

[jimjamuser]

Sounds good. Be sure of the income taxes you might incur on cashing in the annuity.
I assume you are picking individual co's and not an ETF index. Thus their ability to pay the dividend has to be watched but the ups and downs in the stock price will not matter and your hires will inherit the stock.
Individual stokes can (in some cases) go all the way down to ZERO. That won't happen with an ETF.

[jimjamuser]

The stock market is currently very highly priced so many feel now is far from an optimal time in which to jump in with both feet.

This is evidenced by the Shiller PE ratio which is at 37.27 today - Cringe!!!: Shiller PE Ratio - Multpl (https://www.multpl.com/shiller-pe)

Buffett has been selling huge amounts of AAPL and BAC to lock in capital gains. He has been a net seller of stocks and has built up an enormous cash reserve. This may in part be motivated by looming future tax increases on C corporations. Inflation has been horrible over the last 3+ years as anyone who shops for groceries, purchases gasoline and such will verify. We have been experiencing the worst inflationary period since the late 1970s -No one can predict if, when and how it will end. United States Inflation Rate (https://tradingeconomics.com/united-states/inflation-cpi)

I wish I could offer a solution but I have none. All I can say is I have built up my cash reserves to the highest percentage of investable assets they have ever been. I am mostly in T bills but also some AMT free munis.
If you simply google inflation rate, you get that it is currently 2.4% and the long term rate is about 3.2%. Buffet may be smart in selling.

[rsmurano]

Let’s take stocks as an example. Why would anybody let a stock go down to $0? I would never let that happen. Have you heard about putting a trailing stop loss on your stocks/etfs? Probably not or you would know ways to prevent your stocks to go down to a $0 value. You can put in a $ value or percentage value to trigger a sale. This is 1 way to take emotions out of selling something you really like.
When I leave the country for weeks/months and will have no internet, all my stocks/etfs have trailing stop loss trades on them.
For funds, I do something different because you can’t apply a trailing stop loss.
If people are nervous about investing in the market, or don’t know what they are doing, you should not do stock trading. But if you haven’t taken the time to learn the basics of investing, or learned from your mistakes in your early trading/investing days, it might be too late to start now. Big screwups now and you might not be able to recover from them

[Blueblaze]

I sure wish I was as smart at 70 as I was at 46 when I got out of the market in time to miss the last dotcom crash. At 54, I became an idiot who lost half my savings with "buy-and-hold", believing in lying balance sheets and my market "genius", during the mortgage banking crash. The market instantly turned around the day I realized I couldn't even pay off my own mortgage with what was left, and cashed out. Afterwards I could never find a point to get back into the market without risking it all again, and I missed the recovery -- along with the ridiculous swings in the corrupt casino the "market" has become. I found better investments -- a home business and real estate (plus a 20% savings rate) that salvaged my retirement.

I would absolutely love to turn it all over to an expert, in the form of annuity that takes the same market risks along with me, knowing that a 100-year-old insurance company can outlive a downturn that I can't. But every time I look into it, I find the same thing. The crooks want you to give you their money and feed it back to you with a real return rate barely equal to the inflation rate -- plus enormous fees.

So I'm stuck in the money market, where at least I don't have to beg someone for my money if I need it, while getting the same rate I'd get from an annuity.

I sure wish I was still a 46-year-old market genius (with 46-year-old knees). But 70-year-old me can't afford to play casino games anymore.

[manaboutown]

I sure wish I was as smart at 70 as I was at 46 when I got out of the market in time to miss the last dotcom crash. At 54, I became an idiot who lost half my savings with "buy-and-hold", believing in lying balance sheets and my market "genius", during the mortgage banking crash. The market instantly turned around the day I realized I couldn't even pay off my own mortgage with what was left, and cashed out. Afterwards I could never find a point to get back into the market without risking it all again, and I missed the recovery -- along with the ridiculous swings in the corrupt casino the "market" has become. I found better investments -- a home business and real estate (plus a 20% savings rate) that salvaged my retirement.

I would absolutely love to turn it all over to an expert, in the form of annuity that takes the same market risks along with me, knowing that a 100-year-old insurance company can outlive a downturn that I can't. But every time I look into it, I find the same thing. The crooks want you to give you their money and feed it back to you with a real return rate barely equal to the inflation rate -- plus enormous fees.

So I'm stuck in the money market, where at least I don't have to beg someone for my money if I need it, while getting the same rate I'd get from an annuity.

I sure wish I was still a 46-year-old market genius (with 46-year-old knees). But 70-year-old me can't afford to play casino games anymore.

I understand your history. I bought a few shares of Colt Industries while still in high school in 1959 or so. At that time my father was trading the nifty fifty. I remember him calling his broker in the morning before he went to work. However I never was much of a stock market guy but invested in rental real estate, first residential and then commercial, starting in 1967/1968. Along the way I held a few stocks and started an IRA when they became available. I bought a few shares now and then of stocks like IBM, MSFT, WMT, JNJ and BRK and never paid them much attention, just let it all sit. I needed to maintain liquidity so held mostly money market funds. I do remember all the hysteria during the 1999 dot-com bubble crash, day traders going broke, and I knew a few. I also remember the 2007-2008 financial crisis. I did not pay much attention to either as they did not affect me. My rents just kept coming in. Today I remain focused on RE but needed to sell sizable multi-partner properties in 2022 and 2023. Thus I was faced with what do I do with the money. That is how I ended up spending time on the market. I am about 50% in cash (T-bills and money market) as the market seems very pricey to me. I did get lucky on some NVDA, lol. At this point in time I am slowly going Boglehead with low cost indexed ETFs, Vanguard and Schwab. I have just put my toe in the water, though, and am not about to dive in. After a lot of soul searching I decided to continue to hold onto my remaining commercial real estate as I am not really a stock market guy.

[bragones]

BS meter! If you can’t find investments that give you 40-200% gains, you shouldn’t be in the market.
BS meter? How about these as a small example, 1 year gains:
Tesla 50%
Facebook/meta 263%
Apple 58%
Nvidia 99%.
That’s just in tech stocks. There are other sectors that are booming. Small cap is doing good. My s&p fund is up almost 40% for the last year, whereas my tech funds are up even more.

I also have a couple dozen low cost/low risk index funds (that I pick from) that I’m getting over 40% plus good dividends on top of that. These fund symbols I only give out to friends. It takes some research and a little bit of time to come up with funds that match my stringent requirements that produce these types of gains (low cost, low risk, low turnover, 3% min dividends, 2 digit gains over the last 10 years, growing dividend each year for the last 10 years, and more). Again, there are dozens of them, I have been using the same indexed funds for the past couple of decades.

For no risk, I’m still getting over 5% in money market funds as we speak.

I think that takes care of any BS meter posts

Hmmmm....On Aug 6th you posted the following, so did you miss record high market gains?

"I got completely out of the market and put everything in 5.25% money market holdings."

[BrianNotFromNYC]

Where are you getting 35 to 70% in low risk? Not saying I call bs, unless you don't have an answer. I do agree annuities are the worst investment among those regulated anyways

[Robbb]

If you bought an annuity you already suffered a hit probably close to 10%, so if they let you out, assuming there are no more fees attached, you already paid the fees.
Annuity is the WORSE financial move anybody could make. Most people buy annuities because they don’t know how to invest in the stock market, and when the piranhas hear this, they offer you peanuts in guaranteed withdrawals but hide all the high fees and people think this is heaven.

Don’t let people fool you, we were in a recession 2.5 years ago by the technical standards, and the worst economy and inflation in 40 years, 2.5 years ago and It’s still not good today. Why do you think big investors are selling. 1/2 my holdings are still in money market making over 5%, while the other 1/2 is making a minimum of 35% to 70% with very very low risk and 3% dividends. If I thought the economy was doing great, 100% of my money would be in stocks/funds.

Not to be disrespectful but 35-70% with "very very low risk" is delusional.

[Robbb]

BS meter! If you can’t find investments that give you 40-200% gains, you shouldn’t be in the market.
BS meter? How about these as a small example, 1 year gains:
Tesla 50%
Facebook/meta 263%
Apple 58%
Nvidia 99%.
That’s just in tech stocks. There are other sectors that are booming. Small cap is doing good. My s&p fund is up almost 40% for the last year, whereas my tech funds are up even more.

I also have a couple dozen low cost/low risk index funds (that I pick from) that I’m getting over 40% plus good dividends on top of that. These fund symbols I only give out to friends. It takes some research and a little bit of time to come up with funds that match my stringent requirements that produce these types of gains (low cost, low risk, low turnover, 3% min dividends, 2 digit gains over the last 10 years, growing dividend each year for the last 10 years, and more). Again, there are dozens of them, I have been using the same indexed funds for the past couple of decades.

For no risk, I’m still getting over 5% in money market funds as we speak.

I think that takes care of any BS meter posts

Just humor us and give us one fund that is has increased 40% and provided a good dividend.

[will1546]

Hi Find a CFA. Everyone on this has their own idea.