Age 60, about to retire

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capazian
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Age 60, about to retire

Post by capazian » Thu Nov 10, 2016 2:22 pm

I am about 60, have $1 million in a 401k (SP 500 index) and another $4 million in post-tax cash from the sale of a business. I am done with risk taking and business building, I did that for 20 years. I would like to make this money give me ~$125k post taxes annually, without losing much to inflation, the need to constantly be in a state of panic, or frequently juggle investments. I don't have an overwhelming need to leave it all to my heirs either, so there can be some degradation in principal. What are your investment thoughts?

Chadnudj
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Re: Age 60, about to retire

Post by Chadnudj » Thu Nov 10, 2016 2:54 pm

$5 million in a 60/40 stocks/bonds portfolio (VTSAX/VBTLX) should kick off almost $100k in dividends alone per year. Sell a bit of whatever is up to keep the 60/40 balance, tax loss harvest when possible, and delay Social Security until 70 (or really whenever), and I'd think you'd be golden with a huge likelihood of leaving plenty to heirs.

livesoft
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Re: Age 60, about to retire

Post by livesoft » Thu Nov 10, 2016 2:59 pm

My thoughts are that you would probably want to read Jane Bryant Quinn's How to Make Your Money Last and some other books. I recommend books by Larry Swedroe or Rick Ferri or Bill Bernstein and others.

Are you seriously considering risking your retirement assets based on what you read on the internet? :)

Welcome to the forum, too.
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BL
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Re: Age 60, about to retire

Post by BL » Thu Nov 10, 2016 3:07 pm

Agree with reading Jane Bryant Quinn's book. (She also has a blog and writes on AARP.)

You are a bit young yet, but perhaps consider a SPIA (single premium immediate annuity-no other kind) in 10-20 years for fixed income to cover basic needs. You don't need a SPIA with that amount of assets, but it would be a great sleep-well portfolio.

Meanwhile, delaying SS to FRA or age 70 would buy you a great COLA-enhanced annuity; the best one available for any price.

Don't forget to enjoy life while you are young enough to get around easily!

NoVa Lurker
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Re: Age 60, about to retire

Post by NoVa Lurker » Thu Nov 10, 2016 3:58 pm

BL wrote:You are a bit young yet, but perhaps consider a SPIA (single premium immediate annuity-no other kind) in 10-20 years for fixed income to cover basic needs. You don't need a SPIA with that amount of assets, but it would be a great sleep-well portfolio.


I would edit this to simply say, "You don't need a SPIA with that amount of assets."

Obviously, the nice thing with the $4m post-tax is that you've already paid income tax on that money, so now you're only paying tax on the further gains. Even with _zero_ real earnings, it would take you 32 years to burn through $4m at $125k/yr. And if you delay till 70, that's only 10 years away - so you'll be getting a considerable SS check thereafter. That's all ignoring the $1m in the 401(k). So you're in very good shape! I'd keep the investments safe and focus on enjoying life.

btenny
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Re: Age 60, about to retire

Post by btenny » Thu Nov 10, 2016 3:59 pm

Like Chad said I think you are good to go. But I would cut your asset allocation and risk to 40% stock and 60% bonds. This conservative stock allocation will reduce any losses due to a market downturn and minimize your worries. But this will also provide enough growth over the years to protect against inflation. I suggest a big chunk of tax free muni bonds and maybe some tax managed stock funds in your taxable accounts and taxable bonds and regular stock funds in your IRA. Do that now and then take 3% or so withdrawals per year from your taxable account and you will be fine. In fact I am pretty sure you will have a ton left over and have to decide who to give it too when you get much older.

Good Luck.

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Watty
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Re: Age 60, about to retire

Post by Watty » Thu Nov 10, 2016 9:27 pm

capazian wrote:I would like to make this money give me ~$125k post taxes annually......

What are your investment thoughts?


Rethink through how much income you might need at different ages because it will change a lot as you age so you can't just use one target number.

I have seen relatives naturally slow down by their mid 70's even though they were in relatively good health. Their spending really decreased because they didn't travel much and even things like shopping or going out to diner became much less frequent even though they could have afforded to. They lived in a paid off house in a low cost of living area so there were many months when they barely spent their Social Security check.

Unless you live in a very expensive area your expenses might even go down if you had to move into a nursing home.

If you have not already gotten professional estate planning advice then it would be good to get it. If you are not already above the net worth where estate taxes are an issue you could be if your money is invested for a couple of decades before someone inherits it.

itstoomuch
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Re: Age 60, about to retire

Post by itstoomuch » Fri Nov 11, 2016 4:12 am

So how much risk are you personally willing to take in either or both equity/bond markets?
For how long?
There are a series of questions that advisors use just like medical professional use.
YMMV
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tennisplyr
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Re: Age 60, about to retire

Post by tennisplyr » Fri Nov 11, 2016 7:52 am

If I were you, I would feel comfortable withdrawing 4%, taking SS and adjust as you go....but then again I'm not you. Enjoy your life, it goes very fast :beer
Those who move forward with a happy spirit will find that things always work out.

carolinaman
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Re: Age 60, about to retire

Post by carolinaman » Fri Nov 11, 2016 9:41 am

livesoft wrote:My thoughts are that you would probably want to read Jane Bryant Quinn's How to Make Your Money Last and some other books. I recommend books by Larry Swedroe or Rick Ferri or Bill Bernstein and others.

Are you seriously considering risking your retirement assets based on what you read on the internet? :)

Welcome to the forum, too.


I highly recommend the Jane Quinn book. The other authors are good too, but if you read just one, read Ms. Quinn's. You have already won the game, so you may choose a more conservative portfolio than the 60/40 suggested earlier. You can afford to be somewhat aggressive but there is no need to unless you want to do so. The first thing is to educate yourself from these book(s) and the forum wiki. Once you are comfortable with all of that, you should have a better idea of your investment options and strategy. A good starting point is to develop an Investment Plan. Congratulations and best wishes.

blastoff
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Re: Age 60, about to retire

Post by blastoff » Fri Nov 11, 2016 9:43 am

5 million / 0.125million a year = 40 years.

If you only invested in CD's, you'd probably be OK.

The 60/40-40/60 suggestions are probably good, but only you can decide.

Or, something like a larry swedroe portfolio might even be a better fit for you... 30% riskier equities, and 70% bonds.

A final thought. Let's assume a 3.5-4% withdrawal rate is safe. You could conservatively invest ~3.5 million in a 50/50 (or even 40/60 or 30/70) type portfolio. That should cover you. The remaining 1.5 million, you could elect to be riskier with if you wanted to and view that as "extra money". Not encouraging more risk than you want to take, just throwing out a different way to look at it. Obviously, could modify assumptions to be 3%, and thus ~4 million in a conservatively invested portfolio.

Mitchell777
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Re: Age 60, about to retire

Post by Mitchell777 » Fri Nov 11, 2016 10:52 am

If I understand, it is $125K after tax. If you have $2M in stock, the question is how will you handle it if and when we have another 50% drop in the market. I know the last time it happened I realized I was not comfortable with the amount of loss but that is just me. Only you can answer that question for you.

Dandy
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Re: Age 60, about to retire

Post by Dandy » Sat Nov 12, 2016 10:31 pm

It appears that you have "enough". Dr. Bernstein says when you have enough stop playing the game. That seems to be your philosophy. He suggests putting 20 to 25 years of drawdown in "safe" products e.g. Individual TIPS, CDs, Short Term bond funds, etc. and the rest invest anyway you want -- even 100% in equities. If you do this I would add taking some of all of the yearly drawdown from the "risk" part of your portfolio when it does well rather than just withdrawing from the "safe" portfolio only.

I have far less assets and much lower yearly drawdown than you and implemented that approach. I still don't like when the stock market goes down but know that it really has little impact on funding my retirement. No retirement investment/withdrawal approach is fool proof.

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patrick013
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Re: Age 60, about to retire

Post by patrick013 » Sat Nov 12, 2016 11:08 pm

and the options are...

S&P 500 - always want some capital gains, 30% allocation

HDV - value heavy dividend fund

VPU - utility defensive fund with a high payout ratio

CD ladder 5 year, ST corp(ticker vcsh)

I'd also say a 2% Agency bond 7 year but the 5 year CD pays
just as much.

In a low rate cycle nothing is a great investment. You don't
want an excessive % in the 500 and waiting till next year the
CD or bond yield should increase. So safety is your best concern.
age in bonds, buy-and-hold, 10 year business cycle

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