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chaz
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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by chaz » Sun Apr 13, 2014 9:21 pm

Also consider a Target Retirement fund from Vanguard.

Good luck.
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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by RNJ » Sun Apr 13, 2014 9:28 pm

Re: Single Premium Immediate Annuities (SPIA):

Check out this recent thread: http://www.bogleheads.org/forum/viewtop ... 0&t=137066

Hope that helps.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Bidwell » Sun Apr 13, 2014 9:43 pm

Wolf , welcome. You'll get solid advice here as moderators and some well informed people read your post and respond. Take a while to read up on their suggestions. The advice here is priceless. I'm not qualified to give you advice okay, but with lots of money sitting on the sidelines what I did was put it in a Vanguard Bond. I do have some stocks too. Vanguard has low, low fees, good customer service and doesn't ever have a 1.5 percenter feeding off you. I called Vanguard and set up a brokerage account, then transferred funds to them from a bank with outrageous fees. While I was heavy in stocks at one time, I've taken most of my cash and put it in a corporate bond fund with some risk. You may hear the old guard here gasp as they read my post. But that's alright it's not interest rate sensitive. My fund is WVEAX and pays close to six percent. Certainly you nor I would put all money in one fund. So, my 300k in that fund has a expense charge of .13% (.0013) or $390 per year. Your rep would charge 1.5% (01.5000) or $4500 off the top on that fund and there is probably also a fund fee. Vanguard has the lowest fees in the industry in my opinion. Good luck Wolfman you are in the right place.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Bidwell » Sun Apr 13, 2014 9:51 pm

Ps Wolf, take your time to read, absorb and understand.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by pjstack » Sun Apr 13, 2014 10:03 pm

Browse our Wiki, it has a lot of good info and explanations. (The link is on the very top bar, right hand side.)
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Watty
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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Watty » Sun Apr 13, 2014 10:35 pm

I became disenamored with her when I discovered the seemingly insignificant 1.5% cost would be measured in thousands of dollars a year.
That 1.5% would have only been the beginning, She would have likely put you into investments that would have cost you a lot more in loads and annual fees too.

You could write volumes about it but people have done studies and the "safe withdrawal rate" for someone that just retired is somewhere around 4% so by her wanting you to pay 1.5% she was asking you to give here over a third of your income each year.

See this wiki for information on what to do with a windfall.

http://www.bogleheads.org/wiki/Managing_a_windfall

The most important thing to do is to take your time while you learn more. It will not pay a lot but putting most of the money into an insured 6 month CD would not be an unreasonable thing to do while you learn more and feel more comfortable with your choices.

AlaskanWolf wrote:I am retired, disabled, almost 64, and have about $1400 a month income from SSDI. I figure I need about $2500 a month to live. I should have about $270,000 to $280,000 total to invest by Summer. And I expect to start receiving an additional $21,500 a year for the next five years.

If I understand it right then that $21,500 a year will provide about $1,790 a month which with your $1,400 a month would be a total of $3,190. If that is correct then you will be fine for the next five years without having to dip into your nest egg.

It was not clear what your income would be in six years though so that would be good to let us know so that we would have an idea how much income you will need to generate through your investments.

It would also be useful to know what your housing situation is and what housing costs in your area to either rent or buy. It could be that paying off any mortgage or buying an inexpensive place might make sense if that would reduce your monthly costs.

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AlaskanWolf
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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by AlaskanWolf » Sun Apr 13, 2014 11:43 pm

Thanks folks!

I do not want to live off of the $21,500 a year payment. It's how I'm being paid my share of my Fathers pension and I intend to put it toward my investment capital. I have ONLY my $1400 a month SSDI for income now and am renting a house. My rent is just under $1000 a month. Rent here in Anchorage is VERY expensive and I am paying what an apartment would go for but have a 2 bedroom 2 story HOUSE. If it's 4AM and I feel the need for Led Zeppelin at 100DB no problemo...

A question, just what WOULD be a reasonable percentage to expect an investment into one of these funds would produce? I gather there is NO guarantee of course. But if I had say $150,000 invested into one of these what could I expect? Is it paid quarterly, annually?

If I placed $150,000 into a fund I would still have well over $100,000 in cash. I have been told I should keep a six month supply of CASH. That would amount to about $15,000.

Thanks again all!

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by White Coat Investor » Sun Apr 13, 2014 11:59 pm

AlaskanWolf wrote:OK!

At this moment I have a tad over $160,000 in my checking account earning ZERO. And I am expecting at least another $100,000 to be sent me this month.

I have been reading, watching videos, and the TV trying to learn about investing for at least 5 hours every day for the past week.

I have been especially interested in the Vanguard LifeStrategy Income and the Vanguard Wellington Funds.

I am retired, disabled, almost 64, and have about $1400 a month income from SSDI. I figure I need about $2500 a month to live. I should have about $270,000 to $280,000 total to invest by Summer. And I expect to start receiving an additional $21,500 a year for the next five years.

I WAS hooked up with a Morgan Stanley VP in Chicago who specifically got her license to work with me here in Alaska. I became disenamored with her when I discovered the seemingly insignificant 1.5% cost would be measured in thousands of dollars a year. Bear in mind I haven't had this kind of money before and am HIGHLY unlikely to get this type of boon again.

Can you folks give me some of your thoughts on WHICH Vanguard Funds to invest in? My head hurts...
Well, I can't pass up helping a fellow Alaskan. First, you need to answer the question of whether your portfolio can actually support what you say you need to live on. You say you need $2500 a month. $1400 of that will be provided by Social Security, which is indexed to inflation. So you need at least $1100 more per month from your portfolio. $1100 per month x 12 months = $13,200 per year. Using the 4% rule, you need a portfolio of $13,200/0.04=$330,00 to support that. Well, you're at $275K, and you expect another $105K, so you should have enough. Congratulations! (Although there isn't much leeway there.)

So now that you have a goal, you need a reasonable asset allocation. Perhaps something like 50% stocks and 50% bonds, although one could argue for both a less aggressive and a more aggressive portfolio. You could keep it very simple by using a Vanguard Life Strategy Fund. The Moderate Growth is 60/40 and the conservative Growth is 40/60. Perhaps you could just do 50% of each to get your 50/50. Another good option would be the Vanguard Target Retirement Fund. The 2015 flavor is about 52% stock, so that should do.

If you are not so concerned about leaving money behind at death, you might consider using $100K or so to buy an inflation indexed SPIA, which at your age, would guarantee you an inflation-indexed return of around 5% from now until death. Keep an emergency fund in cash, and put the rest into a simple portfolio and get on with your life. You certainly shouldn't need to spend 20 hours a week on investing ever again.
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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Bidwell » Mon Apr 14, 2014 11:52 am

Wolf, did you move your funds out of Morgan Stanley. If not, All you have to do is open an account with Vanguard or another. And at the same time fill out a transfer form which can pull your money out in kind then once in Vanguard you can sell those funds and or keep them

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Jack FFR1846 » Mon Apr 14, 2014 12:03 pm

Do you have a credit union available to you?

For immediate needs, you could open an account at a credit union and then put money into various timed CDs. For example, put in enough for $1100 per month into a money market account, for $13200. This covers your first year. Then another $13200 in a 1 year CD, same in a 2 year etc. This gives you access each year to a lump that can be dumped into your money market to use. There is no risk with this. Go out at least 5 years. Beyond that, choose an index or life strategy fund as others have recommended.
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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Aptenodytes » Mon Apr 14, 2014 12:22 pm

The way I read your numbers you have very low need for risk. A return of around 2% is probably enough to last you more or less forever. Taxes aren't likely to matter much at your income level. You shouldn't need to pay anyone for advice, because you don't need a complicated fund. One of the funds targeted at people in retirement will be fine.

I'll also second the SPIA recommendation. If you took your $430K savings and bought an SPIA you'd generate more cash flow than you need, guaranteed for life. You can do lots of fun things with the extra, if you wish, or make charities and relatives very happy, or set it aside for worst case scenarios.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Watty » Mon Apr 14, 2014 7:42 pm

One thing that I have not seen mentioned is what your options are when you start receiving a social security retirement benefit instead of SSDI at your full retirement age.

I am not a social security expert but it would be good to find out what all your options are so you can decide what is best for you. One thing that would be good to look into is to see if when you reach your full retirement age if you could suspend your social security retirement benefit until you are 70 to get a larger social security benefit then. For each year you delay I think you would get an 8% increase so after four years it would grow to about $1,900 a month and that would be inflation adjusted.

48 months at $1,400 is about $67,000 that this would cost you and that seems like a pretty good return since you would then only need to fund $600 a month after that to reach your $2,500 a month goal.

If you were widowed after any length of marriage or if you were divorced after being married for 10 years then you may be able to collect a spousal benefit during this gap too.

This would be very much like buying an inflation adjusted single premium immediate annuity that is a lot better than one you could buy yourself.

It might be good to talk to the social security people to find out the details of what your options are and to get the numbers on them to figure out if any are right for your or not.

If you are not familiar with them a single premium immediate annuity, SPIA, is like buying a pension and it is the only type of annuity that most people should consider. If your disability or health is such that your life expectancy is statistically reduced there are medically underwritten ones that will take that into account and cost less but to get these you will need to have a physical and have your health records reviewed.

The biggest problem with this is that most are not inflation adjusted so if get one now you live to be 90 it will not be worth much by then. If a SPIA annuity is right for you it might make sense to buy several smaller ones with different options when you are at different ages for diversification

Insurance companies and many financial planners will also try to sell you all sort so junk with the word “annuity” in the name but these are totally different products that have huge commissions and fees.

With your level of assets you could also get Vanguard to help you set up a financial plan for $250 if you move some of your money there.

https://investor.vanguard.com/what-we-o ... t-a-glance

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by AlaskanWolf » Mon Apr 14, 2014 9:16 pm

Well, I can't pass up helping a fellow Alaskan.

If you are not so concerned about leaving money behind at death, you might consider using $100K or so to buy an inflation indexed SPIA, which at your age, would guarantee you an inflation-indexed return of around 5% from now until death. Keep an emergency fund in cash, and put the rest into a simple portfolio and get on with your life. You certainly shouldn't need to spend 20 hours a week on investing ever again.[/quote]

Thanks Doc! Could I ask if you are in Anchorage and if so do you work at Hospital A or Hospital P? I ask as I have spent an inordinate amount of time in Hospital P's ER these past months.

What I am going to have as of the end of the month is likely to be something like $265,000. That will rise maybe another $20,000 or so when a checking account is finally closed. And as I mentioned I am expecting an annual payment of $21,500 for five years although it's not set up yet and I don't know the start date, possibly next year...

I'm told I should keep six months cash liquid so I plan on keeping at least $15,000 in cash. Probably park some of it in an Ally Savings Account.

So what I think I actually HAVE in two weeks or less time is $250,000. You think putting $125,000 in both the Conservative Growth and the Moderate Growth funds would be smart?

The difference in the monthly payment on a SPIA as opposed to one adjusted for inflation is pretty steep. But if inflation does what is expected it would pay off ten years or so down the road. A difference between $566 a month and $406 a month with an inital $100,000 premium at a 6.80% rate.

Also I have begun a conversation with an DFA advisor. He's paid a flat 1% quarterly. Despite my best efforts to educate myself I've found that as when I got my Microsoft System Engineering Cert it's one thing to have "Book Larning" another to have twenty years experience. I've been pretty impressed by this fellow. And he does give me access to Dimensional's Funds. But at 1%...

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by clubby » Mon Apr 14, 2014 9:37 pm

AlaskanWolf wrote: Also I have begun a conversation with an DFA advisor. He's paid a flat 1% quarterly. Despite my best efforts to educate myself I've found that as when I got my Microsoft System Engineering Cert it's one thing to have "Book Larning" another to have twenty years experience. I've been pretty impressed by this fellow. And he does give me access to Dimensional's Funds. But at 1%...
No offense, but you don't seem to have enough money to play that game. You seem to keep finding ways to get other people's hands on your money and then you immediately regret the decision. How about you just cut out the middle man in the future?

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by sdpfoj239 » Mon Apr 14, 2014 9:49 pm

AlaskanWolf wrote: Also I have begun a conversation with an DFA advisor. He's paid a flat 1% quarterly. Despite my best efforts to educate myself I've found that as when I got my Microsoft System Engineering Cert it's one thing to have "Book Larning" another to have twenty years experience. I've been pretty impressed by this fellow. And he does give me access to Dimensional's Funds. But at 1%...
That shoudl be criminal. 1% quarterly is essentially the same as your entire safe withdrawal rate of 4% per year - you're giving him all of your money in the long term. I'm "impressed" with his ability to get you to like him while he takes all of your money!
One more vote for 50-50 those two funds, or an SPIA (though I don't understand the latter and am suspicious of anything with "annuity" in the name, or anything that makes "guarantees" of payment).

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by AlaskanWolf » Mon Apr 14, 2014 10:01 pm

sdpfoj239 wrote:
AlaskanWolf wrote: Also I have begun a conversation with an DFA advisor. He's paid a flat 1% quarterly. Despite my best efforts to educate myself I've found that as when I got my Microsoft System Engineering Cert it's one thing to have "Book Larning" another to have twenty years experience. I've been pretty impressed by this fellow. And he does give me access to Dimensional's Funds. But at 1%...
That shoudl be criminal. 1% quarterly is essentially the same as your entire safe withdrawal rate of 4% per year - you're giving him all of your money in the long term. I'm "impressed" with his ability to get you to like him while he takes all of your money!
One more vote for 50-50 those two funds, or an SPIA (though I don't understand the latter and am suspicious of anything with "annuity" in the name, or anything that makes "guarantees" of payment).

I think it's 1% ANNUALLY paid quarterly...

And THANK YOU for your comment regarding the two funds. I think that IS what I'm going to do with $200,000. But I'm still weighing options.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Ged » Tue Apr 15, 2014 8:45 am

AlaskanWolf wrote:But at 1%...
Too much. You should be able to get into DFA funds for 0.25%.

In any case the other approaches being discussed here, SPIA or Vanguard Funds are more appropriate for your needs.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by runner9 » Tue Apr 15, 2014 8:57 am

http://www.bogleheads.org/forum/viewtop ... &p=2009636

Don't forget all the advice you've been give on your previous THREE threads, later combined by LadyGeek.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by pkcrafter » Tue Apr 15, 2014 11:01 am

Wolf, you said you did not want to spend down the 21,500/year, but it would seem to be your best strategy. You are getting 1400/month and need another 1100, so take it from the 21,500. Doing that still leaves you with 8300/year you can add to your retirement account. Doing it this way allows your portfolio to grow for 5 years plus another 41k added puts you over 300k. This greatly expands your options.

In five years you can consider a SPIA (single payout immediate annuity) for some of your assets. At 70 the payout rate would be above 7%. Also, your acceptable withdrawal rate from the portfolio would be 5-5.5%. You could use the two funds you mentioned, but I would keep the overall equity allocation at no more than 40% to protect against a market downturn. There are other possibilities as well considering this is all taxable.

One other thing--you don't need 6 months in an emergency fund, but you do need some of your assets not tied up in the two retirement funds because it needs to be more accessible. But if there is a big emergency, the only place it can come from is your total retirement holdings. Emergency funds are primarily for covering temporary loss of income that's related to employment.

Your post title sends out a distress signal, so that is the first thing you need to deal with. You have time to get educated and comfortable with managing your own account--especially if use the 21,500 for current living expenses. An advisor is also an acceptable option, but you have to research that as well. DFA is definitely much better option than MS, but there are also a few good advisory firms firms out there with lower costs.

Work on the big decisions first -- on your own or an advisor. If you use an advisor, you will still want a low allocation to equity.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by Aptenodytes » Tue Apr 15, 2014 11:23 am

"spending down the 21,500" is a red herring. Money comes in, returns are generated, expenses must be paid. It is all the same ball of wax. You can put 21,500 in a fund and take out what your need for expenses, or you can reserve what you need for expenses and put the remainder in in a fund. All the same.

There are two things you can do wrong here, with the widest imaginable space of no-regret options in the middle. You can keep everything in cash because you are immobilized, and then you lose to inflation. Or you can invest in something too risky, and then you might suffer a big loss at the wrong time. In the middle is a wide expanse.

The middle is wide because your need for risk is so incredibly low. Your need for risk is low because of the relationship between your assets and your expenses.

You could put everything in the ultra-conservative Vanguard LifeStrategy Income Fund, for example, and be set for life. Or you could buy an SPIA and be set for life. Or you could do a little of each. Or pick some other conservative fund.

If I were you I'd probably just put it all in a conservative fund. Gives you more protection against inflation than a common SPIA, and flexibility to change things up down the line if you wish.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by HomerJ » Tue Apr 15, 2014 1:09 pm

AlaskanWolf wrote:I am retired, disabled, almost 64, and have about $1400 a month income from SSDI. I figure I need about $2500 a month to live. I should have about $270,000 to $280,000 total to invest by Summer. And I expect to start receiving an additional $21,500 a year for the next five years.
So for the next 5 years, you've got $3200 a month coming in... And $2500 a month going out... That's good.

If I were you:

$20,000 in one 5-year CD (emergency fund)
$200,000 in another 5-year CD
$50,000 in the Vanguard Total Stock Market Index Fund
$700 a month extra into a checking account for the next 5 years ($42,000 - you can spend SOME of this for fun, like travel)

In 5 years when the $21,500 a year stops coming in, I'd take the $200,000 in the CD (probably worth $220,000 by then), and buy a SPIA (Single Premium Immediate Annuity - the only "good" annuity) that should pay you at least $1100 a month (maybe more) for the rest of your life (Note the $220k is gone... but the income stream is for as long as you live).

That should get you back to the $2500/month income you need.

Plus you'll still have $40,000 - $50,000 in cash for emergencies and extra expenses, and $50,000 in stock market (that will probably have grown bigger, but maybe smaller at this point).

This is a very safe way to make sure you have your base needs covered no matter how long you live, and you keep a decent pile of cash/stocks for emergencies/extra expenses/occasional vacations.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by HomerJ » Tue Apr 15, 2014 1:21 pm

Do not use an advisor... You cannot afford one... 1% of your money every year will be a HUGE drain.

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Re: Mother Of Bog! I'm Uncertain/Frightened To Buy Fund

Post by LadyGeek » Tue Apr 15, 2014 4:02 pm

runner9 wrote:http://www.bogleheads.org/forum/viewtop ... &p=2009636

Don't forget all the advice you've been give on your previous THREE threads, later combined by LadyGeek.
It's now four. I merged the latest thread into here.

OP - Please try to keep your information in one thread. It really does help us by keeping everything together.
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