Advice for 75 year old

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29rjfa
Posts: 1
Joined: Mon Sep 11, 2017 4:32 pm

Advice for 75 year old

Post by 29rjfa » Mon Sep 11, 2017 6:08 pm

I am looking for advice on how to invest cash from the sale of a rental property. (will also welcome any other thoughts on my current investments) I am married, 75 years old (wife also 75 years old) and primarily interested in preserving capital. We have enough income from pensions, Traditional IRA, and Social Security to live comfortably by withdrawing an additional $30K from taxable savings. My financial profile is the following:
- income from pensions, SS, RMD from IRA is about $250K
- house is worth about $2.5M with $950K mortage at 3.5%
- IRA is currently at $2.8M invested as follows (70% domestic stock, 5% Foreign stock, 10% intermediate bonds, 15% cash)
- Taxable savings is currently $1M invested as follows (10% domestic stock, 0% foreign stock, 10% bonds, 80% cash)
- Combined, the profile is 55% domestic, 5% Foreign, 10% bonds and 30% cash.
- Other than our mortgage, we have no other debt
As I see it, my prime concerns are what to do with the $800K that is in the taxable savings account given a market that is uncomfortably high. Also open to suggestions re: rebalancing in order to preserve capital. I have always made my own investment decisions during my earning years (mostly agressive growth), but now find myself stuck! Thank you for any advice.

Grt2bOutdoors
Posts: 17138
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Advice for 75 year old

Post by Grt2bOutdoors » Mon Sep 11, 2017 7:45 pm

Consider using Target Retirement Income - 30/70. or Lifestrategy Income - 20/80.

Don't try and time the market, if you think stocks are uncomfortably high, they could go higher, how high is anyone's guess. They can also go lower, how much lower? again, anyone's guess. Guessing though is not going to provide you with returns, nor will cash. Cash will slowly erode. You will have to decide what is the ultimate goal for this portfolio - enough for you and spouse, or future estate planning/investing for heirs. I think you will have enough and should not reach for yield, nor stay too long in cash either. Hope it helps. Good Luck!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

btenny
Posts: 4162
Joined: Sun Oct 07, 2007 6:47 pm

Re: Advice for 75 year old

Post by btenny » Mon Sep 11, 2017 8:07 pm

At your age and with that much in assets you do not need to take a lot of risk. I suggest you reduce your IRA asset allocation to 35% US stocks and convert that money to Total Bonds. Then I suggest you buy 25% more US stocks for 35% total in your taxable account and 40% Tax free bonds for 50% total bonds in taxable. These moves will leave you with 15% cash in both accounts. I see this as pretty low risk but still enough stock to keep up with inflation. Plus keeping a good amount of cash around will give you lots of flexibility.

Good Luck.

JW-Retired
Posts: 6471
Joined: Sun Dec 16, 2007 12:25 pm

Re: Advice for 75 year old

Post by JW-Retired » Mon Sep 11, 2017 8:31 pm

29rjfa wrote:
Mon Sep 11, 2017 6:08 pm
- income from pensions, SS, RMD from IRA is about $250K
- house is worth about $2.5M with $950K mortage at 3.5%
- IRA is currently at $2.8M invested as follows (70% domestic stock, 5% Foreign stock, 10% intermediate bonds, 15% cash)
- Taxable savings is currently $1M invested as follows (10% domestic stock, 0% foreign stock, 10% bonds, 80% cash)
- Combined, the profile is 55% domestic, 5% Foreign, 10% bonds and 30% cash.
See https://www.bogleheads.org/wiki/Tax-eff ... _placement

I would reduce the equities in the IRA by a large sum and compensate by investing most of the 80% cash in the taxable account in equities.

If you have most of your equities in your IRA, you are going to eventually be paying tax on stock gains at your full marginal tax rate via higher RMDs. If those equities were in your taxable account instead, any realized gains would only be taxed at 15%.
JW
Retired at Last

delamer
Posts: 3105
Joined: Tue Feb 08, 2011 6:13 pm

Re: Advice for 75 year old

Post by delamer » Tue Sep 12, 2017 5:40 pm

How do the pensions and Social Security payments change for the survivor when the first of you dies? Does the survivor intend to remain in the house? I am leading up to the possibility of using some or part of the $800,000 to pay down the mortgage and refinancing to a lower payment.

Additionally, while eliminating/reducing debt doesn't "preserve principal" in exactly the way you mean, it is a way to receive a guaranteed return on your money.

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