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Retirement Portfolio Recommendations

Discussion in 'TUG Lounge' started by Bucky, Dec 2, 2019.

  1. Bucky

    Bucky TUG Member

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    We are just a couple of months away from age 70 so within the next year or so will have to start mandatory withdrawals. With politics being what they are we don’t feel comfortable leaving our 401K’s in what is considered right now as a Growth portfolio.

    Rather than individual stocks we have everything in MF’s. They cover the whole gamut. Everything from Bond Funds to High Growth funds. The market is starting to look toppy to me and combined with our age, I feel now is a good time to start playing defense instead of offense.

    Obviously we will seek out professional advice but was wondering what others would or are doing under these circumstances. Not concerned as much with income or growth anymore as protecting what we have. Now is as good as time as any to address this as we approach year end.
     
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  2. Passepartout

    Passepartout TUG Review Crew: Veteran TUG Member

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    You might want to spend a couple hours with a fee only advisor. One without a bunch of stuff to sell. I have moved a high percentage of mine to investment trade bonds, some foreign exposure. DW has a significant amount in gold and gold mining funds, and a smattering of real estate.

    We are a little older and RMDs are a consideration, but not something to lose sleep over. See a planner. What's right for me isn't necessarily right for you.

    There is not a set- it and forget it solution.

    Jim
     
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  3. Rolltydr

    Rolltydr TUG Member

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    I’m no financial expert by any means, but I’m thinking just like you. I actually got out of the growth fund a couple years ago because the politicians were scaring me. I’ve done well in maintain mode with bond and mutual funds and my portfolio has grown at a 7% clip this year. Good luck!


    Sent from my iPad using Tapatalk
     
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  4. bogey21

    bogey21 TUG Member

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    I'm sure the majority will shoot down what I have to say but if protecting what you have is your primary goal, I'd put 100% in multiple Low Duration Bond Funds...

    George
     
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  5. Eric B

    Eric B TUG Member

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    Took me a second to realize what you meant by “MF’s” in this TUG posting.... The ones you’re talking about are better to have than the others from a financial perspective.
     
  6. Big Matt

    Big Matt TUG Review Crew: Veteran TUG Member

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    Hire a pro and make sure they can discuss both investments and tax implications. I would suggest that you divide your portfolio into three parts. 1) growth, 2) income, 3) spending money. Make sure that you can live off of the yield from your income bucket and let the growth bucket fund the income bucket over time. That's the tax and gains part that you need help with.
     
  7. bluehende

    bluehende TUG Review Crew: Veteran TUG Member

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    Obviously this is not an easy question. You have received great advice to talk to a professional. Rule of thumb would be to have 50% or so in stocks and use the other half to weather any storms. If you truly believe this American experiment in democracy is fading you may want to take George's advice. It all depends on your own personal financial position and risk tolerance.

    I actually have the same opinion on the market as you have. I have moved from virtually 100% in stocks to about 60% in stocks over the last 3 yrs. Last year at the end of the year I looked like a genius (well at least smart) however I never bought back in. I actually had limit orders in that did not trigger by less than 1%. Now of course I look like an idiot (well at least a bit dumb). My account would be 10% higher if I had just left everything alone. Of course that would have left me open to much more risk than is prudent. But take my opinion with a grain of salt. I have been wrong for those three years for all except a few weeks last year. Timing the market is hard if not impossible. Have fun acting on opinions but do not move away from sound financial planning tenets.
     
  8. VacationForever

    VacationForever Tug Review Crew: Rookie TUG Member

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    Our investments are managed by a wealth management firm. Most of the investments are 60-35-5 stocks-income/bonds-cash. I no longer have an IRA account which is subject to RMD as I used that money to buy a couple of deferred fixed income annuities. My husband's IRA which is subject to RMD has 2 buckets. About 25 percent of that is in a dividend stock portfolio. The other 75 percent is in the 60-35-5 allocation portfolio. Our desire is to go more heavily dividends stocks through time and we are having the financial advisor liquidate the 60-35-5 portfolio to satisfy RMD. Since we don't need to live on more than what RMD generates, besides the annuities and SS, we are comfortable with this strategy.

    In 2021 and for a few years thereafter, we are also thinking of pre-paying taxes for the full amount at 24 percent IRS tax bracket to roll money from traditional IRA into Roth IRA. We expect our tax obligations to exceed 24 percent once my SS and annuities start paying. We also expect taxes to go up with changes in DC in future years.
     
    Last edited: Dec 2, 2019
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  9. Brett

    Brett Guest

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    I'm invested in Vanguard 500 and Schwab 1000 index funds and real estate and international mutual funds but as I get older I'm slowly moving some of that money into short term corporate bonds. I'm not trying to market time the top or bottom or politics, just re-balancing the portfolio for my short and intermediate term requirements. I will always have a significant position with stocks be it "growth" or 'value' or dividend or whatever.

    I also second the advice to consult with a fee only advisor
     
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  10. Icc5

    Icc5 TUG Member

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    We all have different wants,desires,safety nets, and investment strategy. I've been in the market for 48 years and now I'm going to be 69 years old and both myself and wife have pensions. I started out with a stock portfolio which I manage myself. My broker manages our 401k's and Roth and some extra savings. We talk regularly and most of what he manages are ETF funds. Recently I had an inheritance which we put into bonds that are insured,state and federal tax free. Some pay 3 percent others pay 4 percent. I'm also giving gifts of cash to each of my 2 children. I had planned all this out for roughly 40 years except for the inheritage which I had already planned on giving the kids money before that came about.
    This is what has worked for me but everyone is different. We paid off our house 20 years ago so haven't had that bill in years. We also live in Silicon Valley though all that has done is cost me a fortune in house taxes. We accomplished this while both working in a grocery store making low wages but Google benefits. I'm on my second broker (1st was a different company) but both ran all our figures and both agreed that our plan is perfect for us. The only thing with the two of them is they think we should even take more vacations and reward ourselves more (last year for example was 2 cruises and 7 weeks of timeshare stays plus a week of hotels. Our plan works for us but your plan must work for you.
    Bart
     
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  11. geekette

    geekette Guest

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    Easy thing to do, if it is allowed, is to not let capital gains distributions reinvest This Year, so that should show as cash, giving you more cushion against having to sell in whatever market shows up later, vs allow these end of year distributions to buy more of the fund distributing. Unlikely to be the full RMD you'll need, but a start.

    You could move $ some TIPS and not let that cash reinvest. You could siphon some $ to CDs or other fixed, as that could give you the warm fuzzy guesstimate RMD maturing each year. You said 401k, and there is usually a Guaranteed Income (GIC) or other Stable Value investment you could choose. This would give some protection to money you have to take out. RMDs are calculated based on Dec 31 so you are asking questions at the right time so you can impact that number (to some extent, obviously, the market is the determinant).

    The problem with funds is that you are at the mercy of not only the market, but fears and greed of other investors' reactions to the market, your co-owners, as it were. Being a forced seller in unknown future markets is uncomfortable but not sure what level of angst you have over that, compared to angst over money not working for you based on parking it for safe withdrawal later. Tough questions you need to consult your gut for.

    Were I set in funds as you are, I would likely be doing little sales throughout the year, about the only control of the situation you have. I would probably be extracting the RMD funds throughout the year as well.

    One final thought - if you like your funds, you could transfer-in-kind some or all of a position(s) to a brokerage account. This would remove the money as RMD but not force you to sell. You would still need to pay the taxes, but you can pay that from any pocket, it doesn't have to be withheld in your distribution. You should be able to transfer in kind to any brokerage but it would be quicker and easier if it was same family as your 401k (Fidelity to Fidelity, for example). Once landed in the other accounts, I would not let funds reinvest. Let cash accumulate in that outside brokerage account to assist in paying the tax bill.

    Good luck, I hope you let us know how you proceed.
     
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  12. artringwald

    artringwald TUG Member

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    Not only does Vanguard have funds with low management fees, they also have personal advisors who will manage your money for low fees. A typical advisor might charge 3% of your net worth, their advisors only charge 0.3%. They'll interview you to ask many questions about your goals, risk tolerance, and tax situation. They'll also remind you about other things like wills and estate planning. After the initial interview, most of the investments are managed by algorithms. They meet with you quarterly (by video hookup) to discuss results and planning. I started using them a couple of years ago, and we've been very happy with our advisor.

    https://investor.vanguard.com/advice/personal-advisor
     
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  13. Talent312

    Talent312 Tug Review Crew: Rookie TUG Member

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    In finding a balance between fixed income (bonds) and equities (stocks), many use the formula "100 - age" for equities, with the remainder in fixed income, but it all depends on your comfort level. "They" say that, given longer life expectancies, it should be 110 or 120- age. I'm in the "115-age" camp, becuz that's where we're at... 50-50.

    Equities: I stick with low-cost ETF's, screened by cap-size and performance.
    But I use a Mutual Fund for foreign equities, where I like active management.
    I hold individual bonds becuz values vary, but you'll always get face value back.
     
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  14. artringwald

    artringwald TUG Member

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    Many people recommend that formula, but I don't like it because it doesn't take into account how much of your savings you'll need, and when you'll need it. I have a pension, and we're both drawing social security. We could get by without using any of our saving, so we're heavy on the equity side even though we're both 70. As we get older, if it looks like we'll need more care, we'll shift to more conservative investments. However, whatever you decide your ratio should be, it's important to rebalance regularly to keep the ratio the same.
     
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  15. Eric B

    Eric B TUG Member

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    I believe that your approach is a rational one that effectively takes your pensions and social security into account as more stable assets, allowing a heavier equity weighting. You could assess the net present value of the pensions and use that as an input to your rebalancing process, using an estimate of how risky the pensions are based on sources. Ours are military and federal, so I consider them a low risk, allowing more equity in the remainder of our investments.
     
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  16. artringwald

    artringwald TUG Member

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    Very good point! Annuities should also be considered as stable assets.
     
  17. pedro47

    pedro47 TUG Review Crew: Expert TUG Member

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    Suggestion only I would look at Vanguard, Fidelity and Charles Schwab mutual funds for their low management fees. I would read Kiplinger’s magazine . Finally I would diversify my money in bonds, stocks, cash, International funds, utilities, money market funds(cash available to write checks for emergencies) etc., etc. imho.
     
    Last edited: Dec 3, 2019
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  18. rapmarks

    rapmarks TUG Review Crew: Elite TUG Member

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    I have slowly sold off mutual funds after they dispersed very large capital gain distributions in December, making for large tax consequences but reverting to pre distribution value.
    Also, have not been able to find good quality bonds that paid 4%, closer to 3%.
    We will need to revamp portfolio because I will be paying for nursing home care and will need income producing investments. I hope the new tax code won’t limit the medical deduction too much.
     
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  19. pedro47

    pedro47 TUG Review Crew: Expert TUG Member

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    To the OP, there is a very nice article in the November 2019 Kiplinger’s magazine edition called “The 7 Secrets of Highly Successful Investors.” Starting on paged 18.
     
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  20. Conan

    Conan TUG Review Crew: Elite TUG Member

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    The updated joint-and-survivor life expectancy table gives an age-70 couple a life expectancy of 23.3 years. https://www.federalregister.gov/doc...bles-used-for-purposes-of-determining-minimum

    If that's your investment horizon, I think it's prudent for you to a keep significant equity component, say somewhere between 50% and 70% (especially since interest rates and future prospects on the non-equity side are so poor these days).

    Yes the stock market could drop 20% or more tomorrow, but hang on and you'll be fine. Stay the course and rebalance once or twice a year.
     
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  21. geekette

    geekette Guest

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    I had another idea that might be too wacky. "Ladder" target date funds. You know you have to take RMD from first to end of account, why not set aside into obviously-labelled accounts? Might not be exact year, you can do the mental part on that. Whatever you don't need from that fund can sit there to be first to pay the next RMD before you use that next target fund to pay em.

    roll them with dough you have already mentally slivered from what you know you want to what you know has to go (based on estimates, of course). I would probably sliver 10% off main account right up front to get the target funds started to cover for a while without needing to raid main funds.
     
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  22. tompalm

    tompalm TUG Member

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    Exactly right and a very good point is how much of that savings you might need during retirement makes a difference on how aggressive you should be. We don’t think we will need our savings and can be agressive with it. But, I don’t want to ride out another 50 percent drop like we did in 2008 so our asset allocation is based on how much our stomach can take watching our value go down.

    One thing to keep in mind is that past performance is no guarantee of future results. An asset allocation of 50-50 in 2008 might have dropped 20 percent or less while the market dropped 50 percent. That is because bond values went up as interest rates went down and it prevented a big loss. The problem right now is interest rates are so low, the Fed can’t drop them very much and bonds will not go up much. But who knows what will happen. This is more difficult than when you should file for social security.
     
    Last edited: Dec 5, 2019 at 1:55 AM
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  23. Brett

    Brett Guest

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    yes, the old "100 minus age" formula is not exactly for people that have good pensions and annuities.
     
    Last edited: Dec 5, 2019 at 3:48 PM
  24. WinniWoman

    WinniWoman TUG Review Crew: Veteran TUG Member

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    Really- if some people can get by in retirement without having to touch their savings, if it were me I would keep most of it safe and sound in savings accounts and CD's and so forth and with the rest live it up.
     
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  25. VacationForever

    VacationForever Tug Review Crew: Rookie TUG Member

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    We don't need to touch our savings other than RMD and I told the FA to go higher on stocks but he said no. I had already turned my entire IRA into annuities. He said no, he still wanted us to still protect the savings...
     
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