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‘Will I ever retire?’: millennials wonder what’s on the other side of middle age
(www.theguardian.com)
this post was submitted on 18 Jun 2024
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Gonna leave a bit of advice for any young folks that might see this. Something I wish to god someone had told me when I was 20.
Start an annuity plan. They're generally stable, all but guaranteed to accrue money. You can set a percentage of your paycheck to be deposited automatically into the account. If you have the option to do this through your employer, do it, find out if they match the deposit like mine. Put 10% of your paycheck in there. After 10 years, I have $40,000 sitting in a retirement account with a progressive series of bonds set to mature in between now and my retirement age. Those bonds will roll back into shorter term bonds as they mature, and add more value to the account. My projected retirement age is still 72, but at least I know that money is there.
Also, after 4 years, the account matures and you're able to borrow against it, like collateral for a loan. So if I wanted to right now, I could take that money and use it as a down payment on a house. I'll be expected to put it back, but the interest is generally lower than a home owner's loan.
Generally speaking in the US annuities are horrible and significantly underperform a regular 401k/IRA invested in a broad total market index fund. The fees eat you alive. Don't know how it is in other countries. But annuities here are damn near fraud.
Annuities have been bad because they invest in bonds and interest rates have been very low in recent years.
Over the next 10-20 years stocks could crash and rates increase.
I mean, if this is what you believe, you can still invest in bonds in a 401k or brokerage account. Even if I believed this about stocks crashing, I still wouldn't put any $ in an annuity.
Also, predicting the stock market and making huge decisions based on that tends to not go well.
The main benefit of an annuity over bonds is that it will keep paying out until you die.
A small annuity that just covers you and your spouses essential living expenses is not a bad investment.
I agree, large annuities are a waste.