Wednesday, March 9, 2016

Why I am in the market and not annuities

When I retired a lot of financial advisers tried to steer my wife and me towards annuities. Money for life, was their claim. Less and less money for life was my worry. Most annuities do not increase the payment with inflation. I was concerned that if my wife lived to be 90, as she well might, she might be forced to get by on an income providing half the buying power of our present income. Of course, if inflation raged during a few of those intervening years the outcome could be much, much worse.

I put my money and my faith in the stock market. I didn't see this as betting on capitalism, as one friend has accused me of doing, I saw this as having faith in the strength of our overall economy - or at least the overall direction of our economy.

I retired with a small sum of money. The sum was no where near what one is told one needs to retire but it provided a solid base for investing. As of today, I have withdrawn an amount equal to about forty percent of the funds held at retirement. I was forced to remove this money in order to live. Living in retirement presents a steady drain on one's wealth.

Today I have forty percent more money than I had in 2009 at the time of my retirement. The market carried my portfolio up and the market carried it down but I have ignored the wild gyrations and I held to my invest strategy. Let the investments themselves roll and live off the dividends, if at all possible. So far, it has been possible.

The talk is that the bull market is getting old, long in the tooth. I'm surprised. I've suffered losses that I would have placed squarely on the shoulders of a big bear but I appear to be wrong. That was no bear; that was a retreating bull that gored me, I've been told. Hmmm. It sure looked like a bear to me.

Whatever, I'm going to let my excess dividends gather, I am going to sell the stuff that no longer delivers the dividends I demand. And I will sell those low dividend delivering stocks at a profit, I might add. I'm going to try and sit on a small war chest and when the advertised bear arrives, I will rejig my portfolio and invest a little more into the stock market and the bond market.

And my next kick at the investing-can may involve no more than four or five investments -- all ETFs. I'm planning an extensive overhaul of my portfolio and I'm looking at a new allocation model. I'm leaning towards the KISS philosophy: Keep It Simple Stupid.

This is an add from just days later -- March 11th, to be exact. Moments after the market opened, my portfolio climbed into the black for the year. It is important to keep in mind that in early January I removed more than twenty-two thousand from my portfolio in order to pay the bills for much of the coming year. Despite the withdrawal, my portfolio is in positive territory.

Lobsters were on sale. My wife and I bought two for dinner.
I think of the editorial I read in my local paper about the impossibility of getting good returns today and how retirees are being adversely affected. The writer decried the low interest rates and whined about retirees being forced to consider eating pet food in retirement.

If GICs are not paying enough to cover inflation, don't put your money there. If GICs are a guaranteed losing proposition, be bold, take a gamble. I did and so far dog food is not on the menu.

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