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Author: DaveLee One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76390  
Subject: Re: decisions, decisions. Date: 2/19/2002 11:14 AM
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I will be retiring in a couple of months. Age 62. My pension can be $1200/month 10 year certain and life or $182,000 lumpSum. My wife is much younger than I am and earns $60,000/yr. Relatively debt free. The market is terrible, wouldn't want ind. stocks.I have approx. $30,000 in blue chip stocks. I was thinking about $90,000 vanguard S&P 500 index fund and $90,000 tax deferred municipal bonds.Will be receiving approx. $2,000 soc. Sec. monthly benefit. (We have a 15 yr old mentally challenged child.)WE would like to supplement our income with $500/month from the $182,000. We will still be in a high tax bracket that is why I was considering the Tax free municipal bonds.I am in good health and feel altho I am retiring, I can handle a little risk than all fixed income. I would appreciate any suggestions or advise. T.I.A.

If you are familiar with the studies of Jaye Jarrett, The Trinity Study, or the Retire Early Home Page spreadsheet then you might find my website, http://members.tripod.com/DaveLeeMn/ useful (links to these studies are at the website). One of the main motivations that I had for doing this work was to analyze the case of a large fixed annuity being a major element of retirement withdrawal requirements, using the same methodology as Jaye Jarrett and Coogan, et. al. at Trinity University. OTOH, if none of this makes sense then you probably will not find it helpful to you.

Based on the analysis that I have done the annuitized yield (a tad under 8%) is at or a little better than "break even" (in favor of the annuity) based on historical market data. Given what you have said I would certainly be factoring in what would replace this income stream when you are gone.

dave
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