Retiree Portfolio Review

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Retiree Portfolio Review

Post by Sammy_M » Fri May 12, 2017 5:23 am

May I please have your thoughts on the following investment portfolio for a recently retired couple with about 80% of income needs addressed through inflation adjusted pensions and social security. Little need to take risk, but there is ability and willingness to take reasonable risks to achieve portfolio growth for heirs and charitable interests. Desire is to keep his and her taxable account separate for estate planning purposes. Fed tax rate of 25% and not in a high state income tax state.


Cash 7%
CD 31%
Munis 1%
Other Nominal 8%
TIPS 15%

US Large 20%
US Sm Value 7%
Intl Large 9%
Intl Small 2%
Intl Value 1%

BREAKDOWN: (*means significant cap gain)

Her Taxable
31% Direct Bank CD Ladder with 5 annual rungs
10% Vanguard Inflation-Protected Securities Fund Admiral Shares
14% Vanguard 500 Index Fund Admiral Class*
2% Vanguard Mid-Cap Value Index Fund Admiral Shares*
3% Vanguard Small Cap Value Index Fund Admiral Shares*
6% Vanguard Total International Stock ETF
2% Vanguard FTSE All Wd Ex US Small Cap ETF

His Taxable
7% Savings @ 1%
1% Individual Muni Bond, maturing 2019
1% Microsoft Corporation*
4% Vanguard Total Stock Market ETF
2% Vanguard Small-Cap Value ETF
2% Vanguard MSCI EAFE ETF*
1% iShares MSCI EAFE Value Index ETF (.4 ER)
1% Vanguard Emerging Markets Stock Index Fund Admiral Shares

3% Vanguard High-Yield Corporate Fund Investor Shares

Her Roth
2% Vanguard High-Yield Corporate Fund Investor Shares

5% Vanguard Inflation-Protected Securities Fund Admiral Shares
4% Vanguard Short-Term Corporate Bond Index Fund Admiral Shares

His Roth (plan to move to Short-Term Corporate Bond eventually)
0.2% American Funds The Growth Fund of America® Class A, 0.66 ER
1% American Funds Investment Company of America® Class A, 0.59 ER

100% TOTAL

1. I think the corporate bonds make sense in light of significant portion of fixed income in CDs, and short-term exposes to less interest rate risk. Thoughts?
2. The above represents about 30% exposure to International, and 25% exposure to Small/Value on both the domestic and international side of equities. Reasonable and prudent?
3. Any reason to add REITS or Intl Bonds given limited tax advantaged space?
4. Any reason to annuitize a portion of fixed income? I'm thinking no, particularly since inflation adjusted annuities don't seem to be attractively priced.
5. Any other suggestions welcomed.

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David Jay
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Re: Retiree Portfolio Review

Post by David Jay » Fri May 12, 2017 10:27 am

4. An Annuity provides an income stream and longevity insurance. It does not seem like either of those 2 goals are what you are after, you seem to be seeking estate growth.

Obviously, adjusting your Asset Allocation towards equities should favor long term gains. A quick addition suggests you are about 38% equities.

We have similar goals (we will be covering all normal living expenses after start of SS and only withdrawing from our portfolio for one-time needs like a replacement vehicle or a new roof). We plan to simplify into a single Lifestrategy fund (LS Moderate, which is 60% stocks and 40% bonds).

I like this chart as I evaluate risk and reward of various allocations: ... llocations
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Retiree Portfolio Review

Post by carolinaman » Sat May 13, 2017 6:58 am

Since you have 80% of income covered with COLA based pension and SS, there is no need to annuitize anymore. In fact, this works against your objective of growing your estate for heirs and charity.

If primary AA objective is to grow your estate, I suggest you consider increasing your equity exposure. A 50/50 or 60/40 equity/fixed would seem more appropriate.

You might consider simplifying your portfolio by consolidating some accounts. Some of your accounts hold only 1% or 2% of your assets, so they really do not have much affect on your portfolio. I realize that you have capital gain issues, so you will have to decide whether or not to deal with that. But again, if something is 1% of your portfolio, how much could capital gains be?

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Re: Retiree Portfolio Review

Post by SimplicityNow » Sat May 13, 2017 7:23 am

Looks like you are in good shape, especially with most of your assets in taxable. This will keep your RMD smaller.

Not sure of your ages, what percentage of your portfolio you need to withdraw to make up the other 20% and when you plan to claim SS but it might make sense to wait until 70 and bridge that gap by withdrawing from your portfolio.

Your tilt to small value is reasonable and your international equity percentage is within the range of what most here suggest.

I agree with the other posters in that you don't seem to benefit from an annuity.

If your needs are met, you have a sufficient emergency fund, you have a plan in place for long term care either thru insurance or self funding then you may want to consider holding a higher percentage in equity to gain the potential of more growth for your heirs.

Also realize that when one of you pass your social security will decrease and your tax bracket may be higher. Also is their survivorship with the pension?

You might want to run those numbers and see what percentage are still covered in those circumstances.

I'm not a fan of international bonds although many here are (and Vanguard recommends them). You could add a REIT fund but I think simplicity is your friend here. You may want to consolidate more rather then add more funds.

Enjoy your retirement! I am retiring later this year and am very much looking forward to it.

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