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Jared is interested in the attractive terms of the annuity plan provided by his employer, but he is uncertain about the opportunity cost of tying up his funds now. What should he consider doing?
An anonymous caller is having difficulty locating the efficient frontier with only three available funds in his Thrift Savings Plan. Is there a solution for him?
Jack is pleased with the investments in his portfolio but is worried about how to distribute them among his taxable, pre-tax, and Roth accounts. What is the most effective tax strategy for him?
Former financial planner Joe Saul-Sehy and I address these three inquiries in today’s episode.
Enjoy!
P.S. Do you have a question? Feel free to leave it here.
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Jared inquires (at 1:41 minutes): Is it prudent to commit part of my portfolio now in exchange for guaranteed income in the future?
I’m 45 years old with a net worth of $1.5 million and a 92 percent stock allocation. I’ve been comfortable with the risks—didn’t panic-sell amid the Spring 2025 fluctuations—and haven’t felt the need to change strategies… until now.
While exploring diversification, I discovered TIAA Traditional, available through my employer. It appears to be a two-part product. Initially, I invest now for a guaranteed minimum return of three percent, though in practice it’s often four to six percent.
Later in retirement, I can convert this into a fixed income annuity, with an 8 percent conversion rate based on historical norms. TIAA is generally well-regarded, and the guaranteed income looks more favorable than other providers.
However, this is not your standard volatility-reduction investment like a bond fund. Although some guests on this podcast have praised annuities in retirement planning, this is more intricate than a simple annuity product.
Therefore, I’m curious: should I invest in this now, securing favorable terms and guaranteed income for later? Or should I maintain flexibility, continue investing in growth-oriented assets, and consider an annuity closer to retirement—even if future terms might be less appealing?
How should I approach this decision?
Jack asks (at 18:06 minutes): My wife and I are satisfied with our asset allocation, but we’re struggling with our asset location. With a taxable brokerage, pre-tax, or Roth account, how can we determine which fund is the best fit for each account?
We only utilize three main funds: domestic stocks via Vanguard Total Stock Market Index (VTI), international stocks through Vanguard Total International (VXUS), and a significant holding in Fidelity Blue Chip Growth.
Should VXUS be placed in the taxable account to benefit from the foreign tax credit? Or does its lower tax efficiency mean it should be in a pre-tax account instead? Should VTI go into the Roth due to its potential for higher growth?
Then there’s the Fidelity Blue Chip Growth fund. My wife and I prefer not to sell it, but I realize it might be the least tax-efficient option. If we want to keep it, should we aim to move it into a tax-advantaged account?
In short, how should we evaluate the placement of these three specific funds across our various account types to maximize tax efficiency—while still respecting our choices and keeping things straightforward?
An anonymous caller asks (at 34:13 minutes): How can I utilize the efficient frontier with a limited selection of investment options? I’m a government employee utilizing the Thrift Savings Plan (TSP) and struggle to connect the concept of the efficient frontier with the limited funds accessible to me.
I’ve tried various combinations, but I haven't figured out a way to reduce risk without simultaneously causing substantial declines in returns. My options include a fund tracking the S&P 500 (C Fund), a small-cap fund (S Fund), and an international fund that excludes China (I Fund).
Currently, my allocation is 60 percent in the C Fund, 20 percent in the S Fund, and 20 percent in the I Fund. That feels like a solid mix, but I’d like to understand—how would you assess these options to get as close to the efficient frontier as possible, given these limitations?
Resources Mentioned:
Article 34: Gold Hedge Against Sequence Risk
Everything You’ve Ever Wanted to Know About Annuities
How Should You Invest 1 Million
Retirement Planning with Dr. Wade Pfau
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