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October 18, 2012


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When you complain that they're not showing you the interest rate on an immediate annuity, you're missing the point. In the end, what matters most is money in and expected money out.

Take the third quote: $500,000 for $2,318 with a spousal survivor benefit (100%, I assume, but that would be something to verify). You pay them, and they start paying you. It doesn't matter much to you, as the investor, exactly how they came up with the $2,318/month figure, because what you're buying is not the interest rate but the payout rate.

Suppose the interest rate is low. They're still obligated to pay you $2,318/month. Suppose the interest rate is high. They're still obligated to pay you $2,318/month.

The only place the interest rate comes into play is taxes, because the interest paid out to you will be taxable, while the "return of premium" paid out to you will not be taxable (unless it's an IRA, in which case, of course, the whole thing is taxable, or a Roth IRA, in which case none of it is taxable). So a lower interest rate would mean more return-of-premium early on and a lower taxable amount, but possibly a higher taxable amount later, while a higher interest rate would mean a higher taxable amount early on, but the taxable amount wouldn't rise as much.

As for expenses, they're hidden. On an immediate annuity, the profit for the company is baked into the payout rate. So again, when you're comparing annuity companies for an immediate annuity, you wouldn't need to consider expenses separately, just compare payout rates.

Other considerations do come into play. The most important are usually extra benefits (like a survivor lifetime benefit, and/or a period certain benefit that guarantees payments for a certain minimum length of time), and the insurer's financial stability (key considerations for any form of insurance are financial ratings and how long they've been offering that particular form of insurance).

Along the lines of the first comment, is the payout guaranteed? These are mainly for people who are very risk averse. Though they would probably do better buying TIPS, this is probably easier for roughly the equivalent risk. In the end, you are buying a guarantee, that costs money.

The problem with your last point, FMF, is that if you enact on an annuity, it would likely consume a LARGE part of your retirement. Maybe if I had $10,000,000 I would dabble in a $500,000 annuity (5%). But then again, with that large sum, why would I bother chasing a measly $1987 per month? Second, If you are in position to live off of retirement principal then there is no need to insure your retirement with an annuity, is there?

In sum, annuities are expensive, they are risky, hidden fees are costly, and the guaranteed benefits they sell you are eaten up with inflation.


Annuities are insured by your state to a certain limit- which varies from state to state. If I was going to purchase an annuity I would check on the limit in my state and then potentially buy multiple annuities from different companies to keep below the state coverage limits. That way even if all of the insurance companies went bankrupt I would still get the payments.

-Rick Francis

I think the problem most have with annuities is they don't understand them and the fees are hidden. I definitely don't understand the intricacies but do like the idea of it be long life insurance.

Annuities make no sense at all for my family.

Our living trust contains $3,345,000 of municipal bonds that are currently paying $13,333/month (4.851%). The money is totally free of federal income taxes and a significant portion is also free of state taxes because many of the bonds are issued by the state in which I live and some others are issued by a US protectorate.

The advantage to us, apart from the tax benefit is that when we are both deceased the money doesn't just turn to dust like an annuity, it will pass on to our children. One 52 year old daughter in particular, as a result of a divorce settlement, already has a portfolio containing $2,595,000 of muni bonds, earning $10,304/month (4.876%) and I am already teaching her how to manage them when I am no longer able to do the job. In her case she plans to use some of the interest for living expenses when her alimony ends in another 4 years, meanwhile her portfolio continues to grow and the amount of interest continues to rise.

The interest rates quoted work out a little higher because many of the bonds were purchased at prices below par and yet you receive par value at maturity. Some bonds are also currently valued considerably more than we paid for them several years ago, but that's academic because none will ever be sold.

With this approach the money stays in the family and whatever interest doesn't need to be spent can be reinvested so that the principal continues to grow.

Since interest rates have dropped so much since the recession started it would be almost impossible to put together a portfolio with the yields that we have. New issues of municipal bonds have very low interest rates.

I think that muni bonds like ours have significant advantages over owning rental real estate, especially as you get older and don't want the hassle of dealing with renters and building maintenance. I can take care of everything from my computer and since interest only comes in on the 1st. and the 15th. of the month it is a simple job to reinvest it in the secondary market where I can get bonds that are a lot more attractive than new issues.

The interest rate is not mentioned because it changes over the years. You buy an annuity with a guaranteed rate for X number of years when it is subject to change. Annuities plus Social Security that cover basic expenses provide seniors with piece of mind and assurances of a minimum guaranteed income for life.

@Old Limey
In your case I don't think Annuities make any sense- you have a large enough portfolio that the chances that you will run out of money are basically 0, so you don't have to insure against living too long.
For someone with a much small portfolio, there is a very real chance they could run out of money before they die, so insuring they always have some money coming in makes sense.
As for going 100% bonds- bond values can go down when interest rates go up. If we see inflation and interest rates like the 80es, what would happen to the value of your portfolio?
Interest rates are historically low today so your bonds are as valuable as they are going to get... doesn't that seem like a bubble? I know you timed the .com bubble masterfully, but why risk having to do it again when you could remove that risk entirely by allocating ~30% of your portfolio to a stock index fund?
-Rick Francis

I have an annuity paying out 8.307% and municipal bonds at various rates. I find it useful to calculate how long it would take to recover my investment. After I recover my investment (assuming I'm still alive), beyond that would mean I'm making money. For example, in 2009 (when I was 58), I purchased an immediate annuity for $100,000. Because of my medical condition (aortic stenosis), I'm gettig $692.30 per month or $8,307.60 per year forever. It would take me little over 12 years to recover my $100,000 when I turned 70(yr 2021) or so. So, I break even in 2021, and start making money beyond that! This gives me incentive to live a long, long life. The key is to live as long as I can. The longer I live, the more I make! Who knows, science might increase life expectancy to 125 yeats or so!

I didn't think about the tax implications of the interest rates on the annuity so I'll defer to cmadler on that topic.

I wouldn't be so fast to accuse them of shenanigans for not stating an interest rate for the product, I might even argue that it is MORE misleading to simply state an interest rate on the annuity. The average investor when seeing an interest rate quoted for an annuity is going to go compare that to interest rates they can earn in the fixed income markets, this is a massive mistake. The reason is simple, an annuity disappears when you die, a bond does not.

Let's say you know you are going to die 25 years from today. If you purchased a $1mm 25 year bond with a 2% coupon, it is going to pay you $20,000 per year for the next 25 years and then pay you $1,000,000 at the end of that 25th year. A $1mm annuity with a 2% interest rate is going to pay you a lot more than $20,000 a year for 25 years, but at the end of that 25th year it is worthless. Those are clearly very different sets of cashflows. To compare the annuity to ordinary fixed income investments you have to make a complicated analysis of the extra of amount of cashflow you receive from the annuity and compare it to the fact that you will lose $1mm between now and when you die.

I can save you a lot of time and energy though, annuities are always a bad deal based on expected value. By definition they have to be, insurance companies don't sell negative expectation products. On average they are going to make money by selling you an annuity and investing the premium, that's how they price the things.

It doesn't mean annuities are a bad idea though, it just means they are a "bad" or sub-optimal investment. You should really think of them as a good investment plus insurance. The insurance being for income protection in case you live much longer than expected. If you analyze them in that manner you can then make a determination on whether this insurance is worth the price they are charging.

In my opinion this is almost never going to be a good investment for individuals with significant wealth. Just like large companies self-insure their employees health insurance plans. Or just like upping your deductible on car insurance is a good idea if you have the funds to self-insure yourself for small losses. Self-insuring your retirement income is usually a good idea.

They can't really quote an interest rate since you aren't making interest and nobody knows how long you'll live. This isn't like a bond or CD. As pointed out annuities are more like car or life insurance. Whats the interest rate on your car insurance?? The 'return' for an annuity is based on how long you live which is an unknown and the annuity is not paying 'interest'. If you want to try and figure the ROI then you can't do so without knowing your lifespan, which is unknown until the point you die. You can guesstimate the IRR of an annuity based on life expectancy but thats just an average and everyones own return will vary based on their lifespan. Say you buy a single life guaranteed annuity for $100,000 that pays out $6576 a year. Assume you are 65 and expect to live 22 years. The IRR would be about 3.5%. It will be higher or lower if you live longer or shorter than average.

Annuities are generally ensured by the state guarantees by $100k and sometimes more. It operates similarly to FDIC but its ran ate the state levels. Such insurance companies rarely fail. (~1/10 as often as banks)

There is really nowhere for surprise fees in an immediate annuity. You pay $500k and then you get $3,973 a month for life. Thats it. The fees and costs are baked into the payments. Of course you need to read the contract and understand any costs and how exactly it works.

Personally I think an immediate annuity can be a good choice for someone with a limited retirement nest egg. If you're retiring with $8 million in the bank you don't need an annuity. You've got more than enough cash and can take a risk of losing some of it and you shouldn't worry about outliving your money (assuming you manage it with some common sense). But say you only have $100k in the bank and a $1500 monthly social security check. That SS check could be tight to live off. You could plan to spend down 4% of your $100k and allot anohter $4k annually, but thats only another $333 a month and if things go bad with your investments you could risk losing principal. With an annuity you could get $473 a month for a joint life annuity at age 65 or $548 /mo for single life. And its guaranteed your whole life without any risks of losing premium or outliving your money. so.. do you want $333 a month and some risks or $473/548 a month and no risks? No you don't have money to leave to heirs but you'd probably spend all your money in retirement anyway. The more money or fixed income you have at retirement the less sense an annuity makes.

I'd say annuities make NO sense for Limey or FMF as their retirement nest eggs are/will be too large to worry. But for people with more typical retirement savings who might have serious risk/worry about outliving their money or affording monthly expenses after retirement then immediate annuities might make some sense.

I know very little on this subject, in fact I'd say the post could sum up 95% of my knowledge on annuities.

Fundamentally, I don't care for the option at all, just from the get go, my gut tells me I'd feel better about managing my own money in the time rather than giving it to someone else to dole out for me. Without interest, I could take $500k and pay myself $1,987/month for 20 years. Not to mention if I wanted to invest it and make it grow for me. Now if annuities gave the excess to my kids after I died, it might be more appealing, still would have to think hard about it.

Seriously, unless I can no longer make decisions for myself, come down with dementia, or any other mental disability, I opt for continuous control of my money.

This piece comes with very good timing - I was just online yesterday trying to understand annuities better myself. This piece really helps. I especially like the quotes you added. I haven't tried any cheesy websites yet to get one - They all want me to enter my personal information in which is not something I want to do. The aspect of the interest rate is interesting. We could easily calculate the "effective rate" of return using MS Excel.

@Rick Francis
When you hold a bond to maturity you receive back $1,000/bond. The 295 bonds that I have bought this year as the result of bonds that matured and income reinvestment have all been between $980 and $1,015 each so it doesn't matter how their price varies between now and when they mature - you basically get your money back, something that just doesn't hold true for shares of stocks, mutual funds, or ETFs. What you have to avoid is paying too much over par when you buy bonds, which is exactly why these days it's not even worth looking at new issues, whereas good buys can be found in the secondary market, such as the 20 PALMDALE, CA "A" rated bonds with 5% coupons and a nice long 9/1/2032 maturity, free of state and federal taxes that I bought yesterday at $1015 each.

The maturity dates on this year's 295 bonds range between 2031 and 2040 so after my wife and I are deceased the children will still continue to receive the interest right up until the bonds mature. The range of coupon rates on these bonds have been between 4.75% and 5.95% free of federal tax.

Since my reason for buying municipal bonds is to receive interest free of federal income tax, not capital gains, it won't bother me at all if interest rates go up, it just means my income on new purchases will tend to be higher. My bond portfolio has maturity dates running from 2012 to 2040 so bonds are coming and going every year.

The very last thing I need at my age is to have 30% in a stock index fund and all of the resulting stress and worry that it brings. I gave up on high volatility investments at the end of 2007, and I'm sure glad I did.

As you mentioned, the article only talks about immediate annuities. These type of annuities are designed to provide you monthly income immediately (within 12 months). There are different options to annuities--Fixed interest rate, equity index annuities and variable annuities. Depending on the product and company you have various bells and whistles.

I remember a husband and his wife were asking me about his annuity. He explained to me what the expenses were and his monthly income from the annuity. I simply explained to him if he were to rollover the funds into an IRA would he be able to provide himself with the same or better income at a lower rate. He knew he couldn't. He kept his annuity.

Annuities are not retirement plans, but more of a retirement product sold by insurance companies. Annuities have their place. You don't always have to annuitize and lose control over your money. You can accept withdrawals and still maintain control.

@Limey -- Do you have a defined benefit pension from your employer that pays a set amount each month? That's the very definition of an annuity.

You are quite correct.
The pension I received after working for Lockheed/Martin for 32 years was non-contributory. I also had the typical 401K plan with a 50% company match.

From what I understand, when a salaried employee retired the company purchased an annuity that paid for my monthly pension, thereby not having it be dependent upon the future financial health of the company. The pension is fixed, and I elected to receive the maximum benefit that ceases upon my death rather than a smaller benefit that would continue on to a surviving spouse. The year after I retired the company cancelled pensions for new employees, just another example of how a lot of things were better during my working life than they are for current workers. I am also glad that my seniority enabled me to remain in the Lockheed Group Insurance Health Plan.

It seems that these days many workers are being squeezed, but the top executives are doing better than ever.

Limey said : " 20 PALMDALE, CA "A" rated bonds with 5% coupons and a nice long 9/1/2032 maturity, free of state and federal taxes that I bought yesterday at $1015 each."

Where do you find bonds that good? Best I see is 4% at 100 price.

MyMoneyDesign said the websites for annuity quotes "They all want me to enter my personal information"

The site linked to :
does NOT require any personal info. It just wants ages and the state and then gives quotes.

@Old Limey

I would caution readers to be extremely careful when evaluating fixed income investments on a granular level. Your description of municipal bond investing is vastly over simplified, I assume intentionally so. As a fixed income trader I can tell you that brokers love retail clients, and it's not because retail clients are good at trading.

Buying premium priced bonds has little bearing on the attractiveness of the offer, it's just one more input into your analysis. I can show you a dozen $110 bonds that are far more valuable than a $90 bond.

The Palmdale bonds you reference are also highly complicated instruments. I assume you fully understand them but for others' benefit it needs to be said that generic municipal bonds are not in any way a simple investment to evaluate.

For example The Palmdale 5% 32's you point out do not pay you par in 2032. These are sinking fund bonds meaning they begin paying you back principal prior to their maturity date, in this case in 2025. By the maturity date in 2032 only 16% of the bond's principal will be outstanding.

Secondly and of huge importance is that these are callable bonds. The issuer has the right to redeem them early beginning 9/1/2012. That call was for 102% of face value but it will step down to 101% next year and 100% on 9/1/2012. You could and with considerable probability will be paid back par in 2014 when the issuer refinances these bonds.

Thirdly and of greatest important these bonds are not riskless. There is a very real, albeit small, risk of default. These bonds are not obligations of the City of Palmdale, or GO (general obligation) bonds. GO bonds are obligations of the originating muncipality and have a claim on all tax receipts (as well as some other sources of revenue) that municipality does OR is able to impose. These Palmdale bonds are revenue bonds issued by the Palmdale Civic Authority. The Authority is leasing some recreation areas as well as buildings to the city. The source of funds available to pay these bonds are these leases. It says so clearly in the prospectus "Neither the full faith and credit of the City, Los Angeles County, the State, nor any agency or department thereof is pledged to the payment of the Lease Payments. The obligation to make Lease Payments does not constitute a debt, liability or obligation of the City for which the City is obligate to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation." You can't accelerate the lease payments if the city defaults. Repossessing the properties from the city is also difficult and potentially not possible. "Due to the essential nature to the governmental functions of the Property, it is uncertain whether a court would permit the exercise of the remedies of repossession and leasing with respect thereto."

Why would a city transfer ownership of public lands and buildings to a separate authority and then lease them back? It's usually a ratings or legislation arbitrage, they wouldn't be allowed to take on the same amount of debt at the city level but can take advantage of complicated rules to do so in complex financial structures. They also very intentionally want to preserve the right to default on their "obligations" with out defaulting obligations, as they clearly stated in the issuing documents, the leases that back these bonds are not obligations in a legal sense.

I'm not trying to say that these bonds were a bad investment, I haven't looked at them closely enough to form my own opinion on that. I'm just trying to make other readers aware that fixed income investing takes a lot more know-how than just looking at price and coupon. If that's all someone is doing they are going to get slaughtered by the market.

I am a Fidelity customer so I bought them at their website.
Since I'm in California I have to be at my computer by 5.30 am when the bond market opens if I want my pick of what's available. You have to customize a preset bond parameter page to tailor it to what you're looking for. The output has two choices "Table" or "Graph". I use the table and then sort by "Yield".

Bill said: "Secondly and of huge importance is that these are callable bonds. The issuer has the right to redeem them early beginning 9/1/2012. That call was for 102% of face value but it will step down to 101% next year and 100% on 9/1/2012. You could and with considerable probability will be paid back par in 2014 when the issuer refinances these bonds. "

I take it you meant 100% on 9/1/2014?

So the issuer has the right to buy back the bonds at face value in 2014 in 2 years. If limey paid $1015 today he'll get $1000 then?

How often are such bonds called?

Yes, I meant to say 100% call in 9/1/2014. And yes you are correct the issuer can buy back their bonds at face value in Sep of 2014. The information I have was a bit unclear, in one place the call was listed as continuous, as in exercisable any day after the call date, in another location every Sep 1st from 2014 to 2032 was listed as a call date, I didn't actually look at the documents to see which was correct.

How often are bonds called is a difficult question to answer, how often to homeowners refinance their mortgages? It depends on interest rates, when rates go down lots of people refinance, when rates go up few people refinance. If Palmdale can issue debt significantly below yields of 5% they will call these bonds and issue new lower coupon debt. If they can't refinance them economically they won't.

The 2032 at a price of 101.5 is a yield of 4.88% to maturity or 4.15% to the 2014 call. Most of the other trades I saw for the same name were in the 4.5-5% yield range. It's tough to say based on retail trading, the liquidity in Munis can be very low, there are tens of thousands of CUSIPs for thousands of issuers. the pricing for a whole new issuance can vary from the small retail lots that change hands, not tremendously of course. It seems like these bonds are on the cusp of callability (assuming today's yields are the same in 2014). It's not an obvious call or non-call to me. If the credit spread decreases they could surely become callable. In Nov 2002 when they were issued 30 year treasuries were trading at 5.27% and these bonds were issued at a 4.97% yield. Today that same treasury is trading at a yield of 2.47% and these bonds are in the upper 4's. So clearly the credit spread has increased substantially. They were issued at AAA and are now down to A, not that I would put any stock in a rating.

That's actually a great example of why buy and hold investors should care about interest rate exposure. If you had a choice of the 5.375% 2031 treasury on 11/11/02 at 101.50 or these Palmdale 2032 5% at 100.25 you might have thought them fairly comparable if you are buy and hold, 5ish yields and 30 year maturities. Today the Palmdale trades at 101.5 and the treasury is at 142.50. So you made an extra .375% annually since that day and can sell your treasury for 142% of face to reinvest wherever you like.

Thank you for your comments here. Well said and informative. It's important for investors to understand the muni space and your posts were spot on.

Don't forget that my CA muni bond interest is free of both state and federal income tax whereas I believe T-bond interest is taxable, not that I have ever bought any. It also seems that T-bonds are also far more volatile than muni bonds and I try to minimize volatility as much as possible.

The 20 bonds it was replacing were, recently called, Chicago O'Hare Airport bonds purchased on 6/13/2011 with a 5.25% coupon and a 1/1/2032 maturity that I purchased at $961.6. Thus I made $768 on the trade as well as avoiding some future state taxes. Both bonds are also insured by MBIA.

However I hasten to add that I am no expert in the ins and outs of muni bonds and never will be. I have learned how to buy them but have no plans of ever selling any. My screening parameters also eliminate all bonds below Tier 1.

You are correct Limey, I didn't mean to make a comment on the attractiveness of this particular investment only to highlight the complexities that can be involved in what would seem to be a simple fixed income instrument. It's just important for a potential uneducated investor to realize how little they actually know and how careful they have to be.

Limey, How often have you seen the bonds you buy called? Just curious.

Out of a total of 3,345 bonds in my account 60 were called and easily replaced.
Out of a total of 2,595 bonds in my daughter's account 95 were called and easily replaced.

As Bill mentioned the process is like refinancing a mortgage and it does involve considerable expense and effort to float a new issue. Also investors like myself take a look at new issues and find them ALL ridiculously unattractive compared with what's available every day in the secondary market. There's not one in Fidelity's "New Issue" inventory that's worth looking at unless you like yields to maturity of 3% and below.

Limey, were all those bonds actually callable? What % were callable? Thanks. I'd imagine that a lot of the older higher coupon rate bonds might get called now since rates are so low, but moving forward fewer will get called when rates go up again.

Every bond I have ever purchased is callable, however the terms vary from one bond to another in different ways. You would need to check this website to obtain all the details of a particular bond.
On Fidelity's "Transaction Confirmation" they show the call details. You need the name of the bond or its Cusip# to locate the one you are interested in.
Personally I don't bother about it now but I would if it was happening very frequently and having an effect upon my income. Out of 110 groups of bonds I have had 4 Calls in 2012, none in 2011, 2010, 2009 & 2008.

I couldn't find any quick numbers on the current existing market but callable securities represent the majority of municipal issuance. For example, in 2005 roughly 85% of muni's issued were callable.

Your intuition on older bonds being called in a low rate environment is correct, however in practice that's not what has actually happened. To understand why you have to remember that the current low rate environment is not a normal one. It was caused by a SEVERE credit contraction that is highly unusual. Rates are low because credit concerns across the world are at very high levels.

For example those Palmdale 32s we've been discussing. When issued in 2002 they were trading at a "spread" of -30 bps. The spread is a simple first order way to compare the relative cost of different issuers, it is just the yield on a security minus the yield on a benchmark, most often treasuries. The Palmdale bonds were sold at a yield of 4.97% and a comparable treasury was 5.27%. Today they trade at a spread of +240 bps. People are demanding a much higher yield to own these Palmdales than they were back in 2002. That has several causes.

An increase in liquidity premium. When you are concerned about risks to the overall financial system you want to own the most liquid securities you can. A $40mm municipal issue is going to be much less liquid than a $3bb treasury issue.

An increase in credit spread. When you are not buying a risk free bond you will demand extra spread to compensate you for the probability your bond will not pay you back. People now demand a credit spread for municipal bonds to compensate for non zero expected losses. Previously muni's were considered incredibly safe, while still very safe they are now priced with the expectation that some portion of the market will default.

A spread for tax changes. While currently muni's offer tax free interest (depending on the state of issue) the market is now pricing in a probability that tax laws will change and they will become taxable investments. Historically this has never been priced into muni yields but is now a serious consideration among investors.

Keep in mind that all of these risks don't have to be large to have major influence on spreads. A 2% probability of default and a 50% recovery rate is going to add 100 bps to a spread.

So normally when general interest rates go down you'd expect a huge portion of the muni market to refinance. However in this low rate environment we've seen a massive widening in spreads (-30 to 240 in our example above) this has negated the 250 bp tightening in overall rates. Because many individual issuers have seen their funding levels not change substantially calling their bonds makes no sense. Perversely if we see rates go up because credits concerns diminish you might actually see more calls take place. If rates go up 100 bps but credit spreads contract 200 bps this call might begin to make sense.

The bonds that are being called are the safer issuers who didn't see their spreads widen as much. As a result the new issuance market is going to be the highest quality muni borrowers, the weaker issuers will find it uneconomic. This is backed up by Limey's experience of seeing new issues trading significantly tighter than the secondary market. If you looked at something like average rating in the market and new issue ratings I'm sure you'd see a massive gap currently.

I am probably too late for this conversation as I was out of the loop for a while.

One thing I have wondered is how the buying a Social Security annuity compares with what is offered in private industry. When a person reaches full retirement age, and defers benefits, this seems to me like purchasing an annuity.

For example, a 66 year old waits to collect social security until age 70 (in this example assume 2k/month for benefit). The 96k that he could have earned is gone and instead he will receive 32% more(8% more per year) or an extra $640/month indexed for inflation.

There is no survivor benefit here but ~100k turns into around $640/month that grows with inflation. That seems like a better deal than the insurance industry but not sure as the person is 70 and there are no survivor benefits.

Any thoughts?

Interesting, thanks Bill.

Bonds are obviously a pretty deep topic. I think an individual retail investor has a high learning curve and a lot of area for mistake.

Say I want to go buy some bonds. Whats the best way for an individual to do this? Are there good resources to learn how bonds work? I'd prefer not to pay a broker a high commission to make trades for me. But I don't want to make amateur mistakes cause I don't know what I'm doing.

This is more theoretical, I'm not in the market to buy bonds today, though eventually I might want to buy some.

The only decision on SS is whether to take it early or take it late. My wife and I each took it at 62. I'm 78 and she's 79 so our choice worked out well for us.

Since SS is not an option for most workers and the contributions are a fixed percentage of your income, there aren't any other decisions to make in its regard. As my prior posts indicate I favor tax free municipal bonds once you have decided that you are all through with owning volatile investments. For me, the reasons being that 5% tax free is pretty good, you get your money back when they mature, and if you die first then they can be passed on to your beneficiaries.

In our case it's more about preserving our wealth for our beneficiaries since we lack for nothing and have a very comfortable and happy life without any money worries whatsoever. Our pensions and SS checks easily cover our expenses. The only withdrawals we make are from our IRAs, once/year, for paying the tax witholdings on our fairly large "minimum required distributions" as we move money from our IRAs into our Trust account.

I learned enough from Fidelity's website to be able to buy all of my bonds. Our accounts are sufficiently large enough for me to be in a "Private Client Group" where I have free access to a Fidelity VP, CFP, and Senior Account Executive at a Service Center that is only about 3 miles away. I haven't had a need to use his services for transactions but met with him to take care of a foreign exchange transaction when my wife received an inheritance from an uncle in England.

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