Retirement portfolio help

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Retirement portfolio help

Postby Bears1970 » Mon Jul 01, 2013 6:41 pm

Need to generate $100,000 per yr in retirement which I plan to take next year at 62. With my wife's and my S.S., pension and post retirement part time work (approx $6000 yr)we will generate $60,000 per year leaving $40,000 needed from investments.
Emergency fund - yes too much have 80,000 in bank Savings acct
Debt - home 2.75% for 12 more years.
Joint return
Tax rate
Federal 28%
State -IN.
Age self 61, wife 64(retired) drawing S.S.
Plan to retire - sept 2014
Portfolio - 1mil. Will add $35,000-$40,000 more before retirement into 401k

My 401K - 75% ($730,000) of portfolio managed by Fidelity institution funds as follows:
Large cap growth .006 fee
Large cap .006
Large cap value. .006. Have 5% of monies in this****
Total stock market. .006. Have 3% of monies in this ****
Mid cap index. .006
Small cap growth. .006
Small cap index. .006
Small cap value. .006
Emerging market index .18
Asset allocation ( balanced/hybrid) .38. Have 10% monies in this ***
Retirement funds from 2020 through 2045 .12fee
Retirement fund 2015 - .12. Have 82% of monies in this ****
Retirement income .12
Tips index. .09
Treasury bond index. .09
Total bond index. .06
Interest income .34
Govt money market. .16

My taxable acct - fidelity $32,000
Duke energy $4000
Fidelity contra fund FCNTX $3,700 fee .74
Healthcare stocks - $4,000 big pharma stocks
Oak mark international OAKIX $2600 fee 1.06
Oak mark select 1 OAKLX $6400 fee 1.05
Oak mark fund 1 OAKMX $6400 fee 1.03
AT&T. $3500

My taxable acct - TD Ameritrade $33,000
AT&T. $3500
Ishares core S&P 500 IVV. - $8200. Fee .07
Ishares S&P mid cap IJH. - $5500. Fee .15
Ishares S&P small cap IJR -$5800. Fee .16
PG stock -$5700
Vanguard dividend growth VDIGX $3900. Fee .029

My Roth - TD Ameritrade - $19,000
Cash. $2200
Vanguard REIT. VNQ. $4600. Fee .10
Vanguard 2015 target fund. VTXVX. $12,000. Fee .16

Wife Roth - TD Ameritrade. - $80,0000
AT&T. $11,000
Duke energy. $3000
Ishares MSCI emerging markets EEM. $5400. Fee .66
Vanguard consumers staples VI index VDC. $12,500. Fee .14
Vanguard CRSP US LARGE CAP. VV. $8200. Fee .10
Vanguard dividend Appreciation VIG. $6300. Fee.10
Vanguard Health care VGHCX. $8200. Fee .35
Vanguard inter-term investment grade VFICX. $5000. Fee .20
Vanguard REIT VNQ. $5300. Fee .10
Vanguard 2015 target. VTXVX. $2000. Fee .16
Verizon stock. VZ. $7000
Cash from sell of ONYX stock on 7/01. $6500
Company stock vested - 65,000
Money market 25,000 and emergency fund of 80,000
Allocation desired 40/60 to 50/50
Vested for Medical insurance through retirement I will pay 23% of premium and is figured into expenses
Would transfer to 1 account with best funds and expenses
Questions:
1. Am I on track to have enough monies for retirement
2. Should I keep funds in 401k in retirement due to low fees
3. Need help in 401k allocation - my return for this year is pathetic compared to market, I tend to play the market ( I know very dumb idea if you don't know what you are doing and I don't, learned my lesson).
4. Help with funds outside 401k, like to consolidate to 3 or 4 funds that will generate needed funds in retirement.
5. Should I take excess emergency fund ($40,000) and combine with other investments
Risk tolerance- middle willing to take some risk but don't want to worry everyday on what happen to market when retired.
Sorry this is so long - hope I provided enough info.
Thanks
Last edited by Bears1970 on Sun Jul 07, 2013 12:54 pm, edited 1 time in total.
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Re: Retirement portfolio help

Postby Jim180 » Mon Jul 01, 2013 10:22 pm

Well, I will make a few observations which won't answer all of your questions, but may help some. I'm sure others will respond shortly.
1. The rule for many years was that if you withdraw 4% from your portfolio per year you should be OK. Lately there has been some doubt about that with low interest rates. 4% of $1M is $40K which is exactly what you say you need.
2. You need to figure out how much of your portfolio is in stocks vs. bonds and cash. A 50/50 balance or 40/60 can be used in retirement.
3. You have too many funds. Your 401K is too redundant with large cap, mid cap, and small cap. If you have a total stock market fund just combine the others into the total market. Your taxable funds could be combined also if you don't have a lot of capital gains.
4. For expenses take money from taxable first and 401K last.
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Re: Retirement portfolio help

Postby Bears1970 » Mon Jul 01, 2013 10:39 pm

Thanks, yes by reading advice on other posts I realize I have too many funds spread over tax and non tax accounts. Will work on finding 3 or 4 low fee mutuals or ETF and combine into 1 broker acct possible Vanguard. 401 still needs tweaked but like your suggestion of equities going into total market fund. Bonds not sure. Looking at 40/60 split.
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Re: Retirement portfolio help

Postby Whit » Tue Jul 02, 2013 10:06 pm

Bears1970 wrote:Need to generate $100,000 per yr in retirement which I plan to take next year at 62. With my wife's and my S.S., pension and post retirement part time work (approx $6000 yr)we will generate $60,000 per year leaving $40,000 needed from investments.
Emergency fund - yes too much have 80,000 in bank Savings acct
Debt - home 2.75% for 12 more years.
Joint return
Tax rate
Federal 28%
State -IN.
Age self 61, wife 64(retired) drawing S.S.
Plan to retire - sept 2014
Portfolio - 1mil. Will add $35,000-$40,000 more before retirement into 401k


How much is left on the home? This is going to sound like a crazy idea because 2.75% is a low rate and everyone loves a tax deduction, but paying off the house may help. Humor my examples, I did not know all of your numbers so I made up some of my own.

Needs $100,000/year in retirement
- $60,000 in S.S. and income
= $40,000 for investments to generate (which is 4% of $1,000,000)

If you still owe $60,000 on the house at 2.75% that would be $489.66 per month or about $5,875 per year. So if you pay off the house...
Needs $94,125/year in retirement because you don't have a house payment
- $60,000 in S.S. and income
= $34,125 for investments to generate (which is 3.63% of $940,000 because you spent $60k on the house)

If you still owe $150,000 on the house at 2.75% that would be $1224.16 per month or about $14,690 per year. So if you pay off the house...
Needs $85,310/year in retirement because you don't have a house payment
- $60,000 in S.S. and income
= $25,310 for investments to generate (which is 2.98% of $850,000 because you spent $150k on the house)

I know it seems silly since a 2.75% rate is so low, but don't assume a low mortgage rate is automatically "good debt". If you have big payments it may be beneficial to axe the mortgage if you can do so without major tax consequences. A 3.63% or 2.98% withdrawl rate look much better than 4%. You should definitely run your own numbers.
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Re: Retirement portfolio help

Postby Bears1970 » Sat Jul 06, 2013 11:13 am

Thanks Whit that was something I was considering. I have $225,000 left on house which is P&I of $1400. I can get lump sum on my pension of which would pay home off and leave about $70,000 left however that would reduce my monthly pension from $1800 a month to about $450 month. My thinking was I would use pension to make house payment for next 12 yrs then have pension for rest of my life w/o house payment after age 72.
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Re: Retirement portfolio help

Postby ruralavalon » Sat Jul 06, 2013 12:10 pm

Bears1970 wrote:Questions:
1. Am I on track to have enough monies for retirement

I only see $894k in the accounts you list, not the $1 million portfolio you state. Is there another account somewhere?

The $894k would only generate about $35k/yr at a 04% withdrawal rate (please see --Wiki article link: Safe Withdrawal Rates ), significantly less than you say you need net of SS and pensions.

As you plan to retire at about age 62, have you priced the cost of medical insurance for the years before Medicare eligbility? Most peope don't realize what this costs, unless they have been buying health insurance all along with out an assist from their employer. Its likely to be quite expensive, and you need to make sure thats included in your number for annual expenses.

Also have you tracked your expenses for a period of years to make sure you have included all expenses, including those that do not occur monthly (like auto or home insurance premiums or real estate taxes) or which do not occur on a regularly scheduled basis (like home repairs and maintenance, cost of new cars)?

I too question the advisability of having mortgage debt in retirement. Its best to go into retirement debt free in my opinion. But as you indicate paying that off that would significantly reduce your net pension or your net assets.

If you can please answer my questions about total accounts/assets and medical insurance/other expenses, do that in your original post using the "edit" button. It helps a lot to have all of your information in one place.

I would not feel secure in retiring in one more year based on what you have said so far, but I wouldn't feel comfortabe further addressing your first question without knowing more.


Bears1970 wrote:2. Should I keep funds in 401k in retirement due to low fees
3. Need help in 401k allocation - my return for this year is pathetic compared to market, I tend to play the market ( I know very dumb idea if you don't know what you are doing and I don't, learned my lesson).
4. Help with funds outside 401k, like to consolidate to 3 or 4 funds that will generate needed funds in retirement.
5. Should I take excess emergency fund ($40,000) and combine with other investments
Risk tolerance- middle willing to take some risk but don't want to worry everyday on what happen to market when retired.
Sorry this is so long - hope I provided enough info.
Thanks

The good news is that I see no big mistakes or anything very dangerous in your investments. You are largely in low cost mutual funds or ETFs, usually index funds. You don't have large holdings in individual stocks or concentrated sector funds. Most of your investments are in tax protected accounts. You say you have learned your lesson about "playing the market."

I do think it will be possible to greatly simplify your portfolio, and reduce unnecessary duplication and overlap.

Can you indicate the current gain/loss situation for each holding in your taxable account? I wouldn't want to suggest changes there if it would create a large tax liability for you.

Do you wish to keep the taxable account and the Roths at Fidelity and TD Ameritrade, or would you be open to moving them to Vanguard for simplification and ease of management?

Do you have a desired asset allocation in mind? Wiki article link: Asset Allocation . Wiki article link: Domestic/International .

Again, please add this information to your original post using the "edit" button.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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