I would like to request advice about my portfolio. I am 66 years of age and my wife is 58. We are married filing jointly. We both plan to retire in 4 months. We are both employed and I carry medical benefits for both of us through my employer. I am eligible for Medicare and my wife plans to purchase her health insurance through the Healthcare Exchange after we retire (she will initially COBRA until the end of 2024).
During our first year of retirement, we anticipate needing $60,000 to meet our core expenses plus another $15,000 annually for traveling and unexpected expenses, for total expenses of $75,000/year. We anticipate requiring approximately that amount every year knowing that it will gradually increase due to inflation.
Our financial portfolio is currently about $3.6 million plus our home and vehicles. We do not have any pensions. We have no debt.
My full social security benefit age is 66 years 8 months (6 months from now; $3219/month) but I am planning to defer taking social security until age 70 when it will provide $4088/month; we are uncertain about when my wife will take SS since it is still some years away.
We have not used a financial advisor but we have an accountant who advises us on taxes.
Here is our current asset allocation:
60% ($2.1 million) in traditional IRAs (Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX); expense ratio 0.040%)
21% ($750,000) in Roth IRAs (Schwab S&P 500 Index Fund (SWPPX); expense ratio 0.020%)
10% ($360,000) in taxable account (Schwab 1000 Fund (SNXFX); expense ratio: 0.050%)
8% ($288,000) in cash (0.45% yield at Schwab-- terrible, I know)
It is past time for us to protect our assets from potential downturns in the stock market and invest our cash for a better return. We would like to continue managing our investments ourselves if possible. Of course, during retirement we will shift from asset accumulation to asset withdrawal and we are struggling with how to best allocate our assets.
We have read 3-fund Portfolio, the Bogleheads Guide to Investing and several other investment books. However, most of the writing seems to be about the accumulation phase (saving & investing for future retirement) rather than asset allocation and withdrawal strategies during retirement itself.
We are uncertain about how to proceed, however we are considering the 3-Fund Portfolio because it appears to be a straight-forward and fairly low risk strategy and many are reportedly using it during retirement with good success, according to the 3-Fund Portfolio book. Based on the book and the Bogleheads Wiki, here are our tentative 3-fund Portfolio allocations:
65% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX); expense ratio is 0.05%. 10 year performance is 1.25%.
20% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX); expense ratio 0.040%. 10 year performance is 12.03%.
12% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX); expense ratio is 0.12%. 10 year performance is 4.29%
3% Cash (money market)
By my calculations, the average annual return on this portfolio based on 10-year performance data is 3.75% (money market not included in this calculation).
We would appreciate perspectives on using the 3-fund Portfolio (and other approaches) while in retirement and how to go about drawing off an income stream in a tax-smart way. We would appreciate guidance and resources.
Questions we have:
1) Bond fund returns have been low over the past decade and not keeping pace with inflation. To minimize risk to the principal, most of our funds would be in the bond fund. Is this a good strategy?
2) Would money market funds be a better investment than bond funds for a low risk investment?
3) If bond funds are indeed recommended, should bond fund investments be in traditional IRA accounts, Roth IRA accounts, or split in some fashion?
4) International total stock index funds typically return less than US total stock market index funds and fund expenses are much higher. Is the only advantage of international funds diversification for the occasional years when the US stock market performs less well than international funds?
5) Is there a ‘standard’ order to follow when withdrawing funds during retirement? For example, use cash (keeping a cushion on hand), then withdraw Roth funds until minimum withdrawals are required, then withdraw traditional IRAs?
6) Does it make sense for us to convert traditional IRAs to Roth while in retirement?
Thank you in advance!
During our first year of retirement, we anticipate needing $60,000 to meet our core expenses plus another $15,000 annually for traveling and unexpected expenses, for total expenses of $75,000/year. We anticipate requiring approximately that amount every year knowing that it will gradually increase due to inflation.
Our financial portfolio is currently about $3.6 million plus our home and vehicles. We do not have any pensions. We have no debt.
My full social security benefit age is 66 years 8 months (6 months from now; $3219/month) but I am planning to defer taking social security until age 70 when it will provide $4088/month; we are uncertain about when my wife will take SS since it is still some years away.
We have not used a financial advisor but we have an accountant who advises us on taxes.
Here is our current asset allocation:
60% ($2.1 million) in traditional IRAs (Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX); expense ratio 0.040%)
21% ($750,000) in Roth IRAs (Schwab S&P 500 Index Fund (SWPPX); expense ratio 0.020%)
10% ($360,000) in taxable account (Schwab 1000 Fund (SNXFX); expense ratio: 0.050%)
8% ($288,000) in cash (0.45% yield at Schwab-- terrible, I know)
It is past time for us to protect our assets from potential downturns in the stock market and invest our cash for a better return. We would like to continue managing our investments ourselves if possible. Of course, during retirement we will shift from asset accumulation to asset withdrawal and we are struggling with how to best allocate our assets.
We have read 3-fund Portfolio, the Bogleheads Guide to Investing and several other investment books. However, most of the writing seems to be about the accumulation phase (saving & investing for future retirement) rather than asset allocation and withdrawal strategies during retirement itself.
We are uncertain about how to proceed, however we are considering the 3-Fund Portfolio because it appears to be a straight-forward and fairly low risk strategy and many are reportedly using it during retirement with good success, according to the 3-Fund Portfolio book. Based on the book and the Bogleheads Wiki, here are our tentative 3-fund Portfolio allocations:
65% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX); expense ratio is 0.05%. 10 year performance is 1.25%.
20% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX); expense ratio 0.040%. 10 year performance is 12.03%.
12% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX); expense ratio is 0.12%. 10 year performance is 4.29%
3% Cash (money market)
By my calculations, the average annual return on this portfolio based on 10-year performance data is 3.75% (money market not included in this calculation).
We would appreciate perspectives on using the 3-fund Portfolio (and other approaches) while in retirement and how to go about drawing off an income stream in a tax-smart way. We would appreciate guidance and resources.
Questions we have:
1) Bond fund returns have been low over the past decade and not keeping pace with inflation. To minimize risk to the principal, most of our funds would be in the bond fund. Is this a good strategy?
2) Would money market funds be a better investment than bond funds for a low risk investment?
3) If bond funds are indeed recommended, should bond fund investments be in traditional IRA accounts, Roth IRA accounts, or split in some fashion?
4) International total stock index funds typically return less than US total stock market index funds and fund expenses are much higher. Is the only advantage of international funds diversification for the occasional years when the US stock market performs less well than international funds?
5) Is there a ‘standard’ order to follow when withdrawing funds during retirement? For example, use cash (keeping a cushion on hand), then withdraw Roth funds until minimum withdrawals are required, then withdraw traditional IRAs?
6) Does it make sense for us to convert traditional IRAs to Roth while in retirement?
Thank you in advance!
Statistics: Posted by jj66 — Thu Jun 20, 2024 5:25 pm — Replies 2 — Views 198