I have given annuities a lot of thought recently in my retirement planning. The only that ones that make half way sense are deferred annuities. And there especially the ones where the recent Treasury rule allows you to exempt up to $125,000 in your IRAs from the RMD rule. Still, I just can't see the financial allure of annuities of any stripe or color. Piece of mind and psychological allure I can understand and peace of mind in old age is a powerful motivator. The bottom line with annuities are they seem more of a return of principal gimmick for x amount of years and then after that you better hope you live a long life (real long) to reap some real benefits. But I am always open to differing opinions.
Edit: If anything, maybe suited for a small, very small portion of your retirement nest egg.

This is a most interesting study.
I found review of the chart most interesting as my asset allocation range for stocks is a low of 40% to a high of 60%. From the chart, the 40/60 mix returned 8.8% with a worst drawdown of 25% while the 60/40 mix returned 9.9% with a worst drawdown of 38%. Since, 2009 the 40/60 mix has returned an average of 7.4% per year while the 60/40 mix returned 10.0% ... and, Old_Skeet's asset allocation ranged for the most part somewhere in between these two mixes; but, with moving in and out of some special equity positions (spiffs) averaged 15.7% for the same time frame. And, folks that is a lot of added alpha being generated from using those spiffs. From my recollection, I believe there were a few times that my asset allocation did work its way, from capital appreciation, on my equities upwards to around 65% before being trimmed back.
In troubling market times my portfolio's asset allocation would allow for a mix of cash (30%), bonds (30%) stocks(40%). Currently, I am at about cash 20%, bonds 20%, stocks 50% and other 10% as reflected in my most recent portfolio's Instant Xray review.
As Flo states in those Progressive Insurance commercials ... "Feeling Kinda Good" ... and, "lucky" after this brief study.
Now off to the beach ... and, hoping you have a pleasant summer weekend.
Old_Skeet

FYI: The way financial advisers charge for their advice often makes no sense, and it needs to change.
The typical adviser charges absurdly high fees to manage your money, often with mediocre results—but next to nothing to provide financial-planning expertise, which can be hugely valuable.
Regards,
Ted
http://blogs.wsj.com/moneybeat/2015/06/19/why-youre-paying-too-much-in-fees/tab/print/

FYI: (Scroll & Click On Article Title) The Best Annuities
Fixed-income annuities have never paid out so little, and yet had so much appeal. These annuities, which provide a lifetime of guaranteed income, are paying out 12% less, on average, than in 2011, and 25% less than in 2007. And yet sales jumped 17% last year, to their highest level in five years.
Regards,
Ted
https://www.google.com/#q=The+Best+Annuities+

See Yahoo's historical prices for this fund:
http://finance.yahoo.com/q/hp?s=FCFAX+Historical+Prices
The drop in price, between May 28th ($10.17) and May 29th ($10.14) can be attributed largely to the 3.73 cent dividend paid on May 29th. The much larger drop in NAV of 7 cents (twice the distribution size) between June 1st and 2nd may be attributable strictly to market forces.
FundStudent didn't say it, but the chart posted is from M*, so it is a total return chart that already took the distribution into account (M* assumes all dividends are reinvested).
You can verify this from the fact that the NAV dropped between May 28th and May 29th, but the chart shows an increase in total return, because the market (or at least the part that this fund was invested in) went up that day.

Yes. It looks like a dividend was paid on 5/29.
https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/00766Y414

I am looking at a chart of FCFAX. Is this drawdown on June 1 caused by a dividend or distribution?

A look at the numbers...

Hi Davidrmoran
You asked if the risk-reward curve has a distinctive character such that it attracts special financial attention. The simple answer is No.
The marketplace risk-reward curve rises in a continuous well-behaved manner as the equity fraction increases; higher risk, higher rewards. There are no outstanding features.
Note that I did not answer the title question in the original post; “How Much Of Your Retirement Portfolio Belongs In Bonds?” One size does not fit all; there is no single overarching reply. Each investor has a logical different answer to that question for very disparate logical reasons. The answers lead to the complete spectrum of the equity-bond tradeoff.
One historical standing rule is that younger folks should have a portfolio that heavily favors equity positions, while older folks should be more conservative with a portfolio weighted towards bond products.
Today, some industry experts are challenging that wisdom. In the end, it depends on the individual investor, his wealth, his plans, his risk aversion. One size definitely does not fit all.
To help answer your question, I input the annual returns (AR) data and the cumulative annual growth rate (CAGR) data into a curve fitting program available on the Internet. The program automatically “best fits” the data sets to Linear, Exponential, Power, and Logarithmic equation formats.
This statistical curve fitting was done on the following mathematical website:
http://www.had2know.com/academics/regression-calculator-statistics-best-fit.html
Goodness of fit values (correlation coefficients) were high for all the tested equations. The Logarithmic form was slightly superior for all cases examined. However, the Linear modeling did an excellent job also. For simplicity, I’ll report the Linear modeling. Here are the equations:
AR = 0.452 X SD +6.41 Correlation Coefficient = 0.972
CAGR = 0.369 X SD + 6.71 Correlation Coefficient = 0.950
The percentage signs were just ignored in these correlations (use 5 for 5%). You get to choose whatever volatility (Standard Deviation) you find comfortable, and the equations provide an estimate of returns using the historical data sets.
For every unit that you move up the risk curve, estimated AR increases by 0.452 units and the CAGR increases by 0.369 units. If the more complex Logarithmic formulation were deployed, a slightly more refined estimate would be predicted that is not constant over the entire range of Standard Deviations.
This submittal might be a little more than folks wanted, but it puts the trends and relationships into a rigorous statistical framework that uses historical data. I hope you find this first-order analysis of some utility.
Best Wishes.

Actually , as I recall from the period (1990s), AC encountered numerous legal challenges to their stipulation that the money couldn't be touched for a set number of years. In other words, certain investors tried to take the $$ out early (for a myriad of different reasons) and than went to court and fought AC after they declined. I believe some of the plaintiffs were successful. Whether from exhaustion over fighting these challenges, or perhaps based on their own legal research, they threw in the towel.
A great idea in concept. Leave the money alone and let the managers run the fund for the long term. Go fishing or whatever - and stop reading or viewing the financial press for 10-20 years. (The "Rip Vanwinkle" approach to investing). For whatever reason, the public's attitudes changed. It's possible, too, that AC screwed up in their execution of the fund's investment mandate. But my guess is the downfall was more related to changing investor behaviors and the legal challenges mentioned.
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Here AC discusses a (new) 2005 Missouri law (their home state) that affected/altered the status of gift-trust accounts: https://www.americancentury.com/content/americancentury/direct/en/investment-products/mutual-funds/giftrust/trust-law-information.html
Here owners and former owners vent their frustrations with the fund - particularly their difficulties withdrawing money. While I can't vouch for the accuracy of any of these complaints, they do provide a sense of some of the issues that arose: http://www.consumeraffairs.com/finance/american_century.html

John, thank you. I'm one of those grandparents who made the mistake of gifting this fund to 4 grandchildren in 1980's 90's. What hard to understand is how American Century got away with it.

http://finance.yahoo.com/news/cyber-security-etf-flies-1-160852126.html
Certainly one of the biggest themes right now.

I found this while researching. It explains the matter pretty well.
http://www.wsj.com/articles/SB10001424052970203687504576655152479572910

"I see that at age 70 a 15 year $125,000 deferred annuity pays out some $4600 monthly (over $55,000 annually) beginning when I am 85."
That may be what you're missing - the age 85 part.
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Thanks for the links Junkster. Both sides make compelling cases.

We have had many discussions recently about retirement planning (thanks Dex) I sense most, if not all of us including me, tend to far overestimate their longevity. Obviously that optimism is warranted less we outlive our nest egg and the consequences thereof. But the other side of the coin also has drawbacks primarily dying too rich and not fully enjoying the fruits of our labor over a lifetime of investing. Longevity tables tell us that the first wave of baby boomers should expect to live to around 85/86. But I have my doubts about that statistic. I know a lot of widows and females in my neighborhood who are in their mid 80s+ but not one widower or male. I am just curious if any males who actively follow this board are over 85. I know Ron and MJG are around 81 but can't recall anyone much older. Maybe a stupid question so just humor me.
Edit: I don't mean to imply that there aren't any of us males around over 85. Just few and far between.

I tried this calculator for N=10 (payments to age 95) and came up with 7.61% rate.
With N = 5 (payments to age 90), the return is 4.49%.

Thanks - neither of those returns seem very interesting.

Many thanks msf for your usual exhaustive and excellent research. I think I may pass on the deferred annuity and just stick with the junk bond funds. A simple buy and hold on some of the longer tenured ones ala T Rowe Price has exceeded 8% over its lifetime. And because junk bond funds lend themselves better than most asset classes to various timing strategies double digits lifetime returns would have been attainable. Either way, passive or proactive, better than annuity returns.

I tried this calculator for N=10 (payments to age 95) and came up with 7.61% rate.
With N = 5 (payments to age 90), the return is 4.49%.

Thanks - neither of those returns seem very interesting.

I guess the question for those with at least a moderately longer term view is - what's changed?
With stuff like this:
http://www.mutualfundobserver.com/discuss/discussion/21815/look-how-much-weight-we-ve-gained-since-the-1960-s#latest
I just see continued tailwinds for healthcare. I don't know if I want to add too much more to the sector, but I'm open to adding more if I find things that compliment what I already own rather than adding more similar names.

@Ted, M* says $10,000 become $35,280 in 10 years with VGHCX so you should probably send the bill for 2 dinners!