Investment advice for 58 year old.

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kenoryan
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Investment advice for 58 year old.

Post by kenoryan » Tue Sep 12, 2017 7:25 pm

OK Here is my story
Age 58. Wife 53.
Taxable account savings 4.2 M (1.7 M in SPY and 2.5 M in cash)
Pretax savings in multiple accounts total 2.4 M (all in SPY and DIA and QQQ)
IRA 50k (all SPY)
Properties worth 2 M (mostly farmland)
My question is with regard to taxable account which has 2.5 M in cash

I'm thinking retirement in 4 years. Wife will work till she's 60.

Where would you suggest I invest the 2.5 M in cash? Markets are the highest they have ever been. Interest rates are low and bonds are also the highest they have ever been. I'm risk averse.

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David Jay
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Re: Investment advice for 58 year old.

Post by David Jay » Tue Sep 12, 2017 8:37 pm

Welcome to the forum.

We don't know anything about your living expenses your retirement and after your wife's retirement. If the two of you can live on $175,000 a year or so then you can leave it all in cash and you will be fine. Drop it all in TIPS (for inflation protection) and call it good.

If your lifestyle requires 300,000 or 400,000 a year then you need a more aggressive allocation.

If all comes down to need, willingness and ability to take risk.
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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David Jay
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Re: Investment advice for 58 year old.

Post by David Jay » Tue Sep 12, 2017 8:42 pm

To get a feel for Bogleheads (and so we don't talk past each other), here is a link to the BH Wiki for the "Startup Kit":
https://www.bogleheads.org/wiki/Boglehe ... art-up_kit
Last edited by David Jay on Tue Sep 12, 2017 9:11 pm, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

livesoft
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Re: Investment advice for 58 year old.

Post by livesoft » Tue Sep 12, 2017 8:48 pm

I'll propose 3 possible investments. You can use one, two, or all three of them:

1. VTSAX Total US Stock
2. VTIAX Total Int'l Stock
3. VWIUX Intermediate-Term Tax-Exempt Fund

For being risk averse, you have $4+ million in risky equity funds, so I find that incongruous.

You can also leave your cash alone.
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kenoryan
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Re: Investment advice for 58 year old.

Post by kenoryan » Tue Sep 12, 2017 8:55 pm

I was thinking of investing that money in SPY and live off the dividends. We have a very simple lifestyle. I think 120k would be more than enough. I would hate to leave 2.5 M in cash and see it depreciate over several years. Is there a particular TIPS where one can put such a large amount? What is the yield?

My goal is to live off dividends, interest and rental income in addition to social security. I want to leave the principal for my kids.

MotoTrojan
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Re: Investment advice for 58 year old.

Post by MotoTrojan » Tue Sep 12, 2017 9:38 pm

kenoryan wrote:
Tue Sep 12, 2017 8:55 pm
My goal is to live off dividends, interest and rental income in addition to social security. I want to leave the principal for my kids.
Dangerous thought process. All that matters is Total Return. Other than tax implications, ignore dividends. They are not free money, they take aware from the "principal".

Also SPY is enormously risky. Pick an AA (40-60% equity is reasonable) and then put the bonds in TIPS, tax-exempt bonds, of Total Bond within your tax-advantaged space. Also consider some international equity exposure to increase diversification.

Grt2bOutdoors
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Re: Investment advice for 58 year old.

Post by Grt2bOutdoors » Tue Sep 12, 2017 9:51 pm

kenoryan wrote:
Tue Sep 12, 2017 8:55 pm
I was thinking of investing that money in SPY and live off the dividends. We have a very simple lifestyle. I think 120k would be more than enough. I would hate to leave 2.5 M in cash and see it depreciate over several years. Is there a particular TIPS where one can put such a large amount? What is the yield?

My goal is to live off dividends, interest and rental income in addition to social security. I want to leave the principal for my kids.
Is the $120K the sum you believe you need to live on? Or, is it the sum you'd like to take from rental income, dividends and interest and is in addition to that of Social Security income?
Suggest you review last two years of actual living expenses, then add a buffer of 25% for miscellaneous items such as taxes, new car, vacation travel or new roof. That will be your best guessestimate of what you actually need to live on.

A $4mm portfolio could kick off 3.5% without too much difficulty, that's about $140K before tax. But to leave your assets undiversified could be very costly in a market downdraft, holding SPY, QQQ is not a diversified portfolio. Take fellow Livesoft's suggestion, a 3 fund portfolio will be low cost, extremely well diversified and depending on how you structure it, you could be much less risky than you are today. $4MM in equities, that is very risky. A bad sequence of returns could severely upset your retirement plans. Look up 3 Fund Portfolio in the wiki.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

kenoryan
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Re: Investment advice for 58 year old.

Post by kenoryan » Tue Sep 12, 2017 9:54 pm

Thanks for the replies. I'm glad I came on this forum when I did. So here are some follow up questions.

1. How is SPY different from VTSAX? They are both index stock funds, right. Can you see any situation where one will tank and the other won't? Dividends are exactly the same, too.

2. Can you name a TIPS that I can buy?

3. The SPY in my taxable account has a unrealized gain of 300k. So to reallocate to vtsax would be expensive. What's your suggestion?

Grt2bOutdoors
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Re: Investment advice for 58 year old.

Post by Grt2bOutdoors » Tue Sep 12, 2017 10:00 pm

kenoryan wrote:
Tue Sep 12, 2017 9:54 pm
Thanks for the replies. I'm glad I came on this forum when I did. So here are some follow up questions.

1. How is SPY different from VTSAX? They are both index stock funds, right. Can you see any situation where one will tank and the other won't? Dividends are exactly the same, too.
SPY holds the 500 largest corporations by market capitalization, it's all large cap stock. VTSAX holds 3,000+ securities, representing all of the 500 largest companies or roughly 70-75% of total domestic equity, the remaining 20-25% is composed of mid cap and small cap equities. Think of the small caps as tomorrow's mid caps, and today's mid caps as the ones seeking to grab the reigns of the existing 500 largest companies.
2. Can you name a TIPS that I can buy?
Take a look at www.treasurydirect.gov, look at TIPs data. You want to buy a TIP that comes due when you need the money, don't go longer than you have to or be enticed by coupon. Read up on how TIPS work at the treasury website.
3. The SPY in my taxable account has a unrealized gain of 300k. So to reallocate to vtsax would be expensive. What's your suggestion?
You can use market hiccups to tax loss harvest shares, if and when it occurs.
I'm sure others will have some advice.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

tibbitts
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Re: Investment advice for 58 year old.

Post by tibbitts » Tue Sep 12, 2017 10:00 pm

I'm thinking retirement in 4 years. Wife will work till she's 60.
If it were my wife you'd have to figure in a divorce during one of those three years when she's still working and you aren't. Maybe in the first week.

tibbitts
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Re: Investment advice for 58 year old.

Post by tibbitts » Tue Sep 12, 2017 10:03 pm

kenoryan wrote:
Tue Sep 12, 2017 9:54 pm
Thanks for the replies. I'm glad I came on this forum when I did. So here are some follow up questions.

1. How is SPY different from VTSAX? They are both index stock funds, right. Can you see any situation where one will tank and the other won't? Dividends are exactly the same, too.

2. Can you name a TIPS that I can buy?

3. The SPY in my taxable account has a unrealized gain of 300k. So to reallocate to vtsax would be expensive. What's your suggestion?
It doesn't matter if you invest in SPY or VTSAX. No, there are no times when one will "tank" and the other won't.

I wouldn't buy TIPS I'd just buy a TIPS fund if that's what you want.

kenoryan
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Re: Investment advice for 58 year old.

Post by kenoryan » Tue Sep 12, 2017 10:09 pm

Haha she's a workaholic. I'll find plenty to do. Bike, fish, golf, garden, hunt and brew beer. In addition to college sports and Packers!

What's a good TIPS fund to buy?

J295
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Re: Investment advice for 58 year old.

Post by J295 » Tue Sep 12, 2017 10:24 pm

Spouse and I are same age as you and also plan to leave $$ for kids/grandkids. Retired at 53. Strongly recommend you create an Investment Policy Statement that can guide you with emotion free financial decisions over the balance of your investing life. Most would consider our IPS "conservative." Good luck.

JBTX
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Re: Investment advice for 58 year old.

Post by JBTX » Tue Sep 12, 2017 10:26 pm

kenoryan wrote:
Tue Sep 12, 2017 10:09 pm
Haha she's a workaholic. I'll find plenty to do. Bike, fish, golf, garden, hunt and brew beer. In addition to college sports and Packers!

What's a good TIPS fund to buy?
https://personal.vanguard.com/us/funds/ ... IntExt=INT

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Misenplace
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Re: Investment advice for 58 year old.

Post by Misenplace » Tue Sep 12, 2017 11:47 pm

Put the TIPs in one of your tax advantaged accounts. There is a wiki on this (oh, how I love the wiki- thank you moderators):
https://www.bogleheads.org/wiki/Tax-eff ... _placement

livesoft
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Re: Investment advice for 58 year old.

Post by livesoft » Wed Sep 13, 2017 12:02 am

I get the sense that some folks believe a TIPS fund won't lose money.

A TIPS fund can lose money.
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CyclingDuo
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Re: Investment advice for 58 year old.

Post by CyclingDuo » Wed Sep 13, 2017 1:31 am

kenoryan wrote:
Tue Sep 12, 2017 8:55 pm
I would hate to leave 2.5 M in cash and see it depreciate over several years.
Why not in a CD ladder?

Image
kenoryan wrote:
Tue Sep 12, 2017 8:55 pm
We have a very simple lifestyle. I think 120k would be more than enough.
Heck. Just buy a SPIA (or a SPIA ladder targeting various ages) and be done with it! Leave the rest to your heirs.

Grt2bOutdoors
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Re: Investment advice for 58 year old.

Post by Grt2bOutdoors » Wed Sep 13, 2017 6:30 am

livesoft wrote:
Wed Sep 13, 2017 12:02 am
I get the sense that some folks believe a TIPS fund won't lose money.

A TIPS fund can lose money.
Exactly! Which is why I advised the OP to go on Treasury Direct website and learn in depth about how these securities work.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

desiderium
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Re: Investment advice for 58 year old.

Post by desiderium » Wed Sep 13, 2017 6:47 am

I think you would benefit from some professional financial planning, including
-investment philosophy and vehicles
-Tax strategy
-Gifting to your heirs
-Estate planning if you haven't addressed this.

You could find an independent fee-only financial planner in your area. Allan Roth has been mentioned here a number of times and might be a good fit for you. The money you spend would be worthwhile IMO

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dwickenh
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Re: Investment advice for 58 year old.

Post by dwickenh » Wed Sep 13, 2017 8:06 am

desiderium wrote:
Wed Sep 13, 2017 6:47 am
I think you would benefit from some professional financial planning, including
-investment philosophy and vehicles
-Tax strategy
-Gifting to your heirs
-Estate planning if you haven't addressed this.

You could find an independent fee-only financial planner in your area. Allan Roth has been mentioned here a number of times and might be a good fit for you. The money you spend would be worthwhile IMO
+1 I agree an hourly fee planner would be well worth the time and effort. Do not go to someone charging a percentage of your assets unless you are sure you can't handle this.

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

sschullo
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Re: Investment advice for 58 year old.

Post by sschullo » Wed Sep 13, 2017 8:23 am

desiderium wrote:
Wed Sep 13, 2017 6:47 am
I think you would benefit from some professional financial planning, including
-investment philosophy and vehicles
-Tax strategy
-Gifting to your heirs
-Estate planning if you haven't addressed this.

You could find an independent fee-only financial planner in your area. Allan Roth has been mentioned here a number of times and might be a good fit for you. The money you spend would be worthwhile IMO
Agree with desiderium about benefit of some professional financial planning.

The fact that you said you are risk averse, and you have a lot of money both a very risky allocation and in cash, tells me you need some help constructing a boglehead type portfolio. Looks like you are searching for the best investments instead of creating a diversified and balanced between stocks and bonds portfolio with the risk that you understand and can tolerate.

FWIW: The Garrett Planning Network (http://www.garrettplanningnetwork.com/) consists of fee-only fiduciary financial advisers, but be careful what the planner charges under Assets Under Management (AUM). Use him or her for a year or two, until you know what you are doing. I think you are well on your way. Good luck!

Steve
Raised on a small farm near Cumberland!
My nephew and his wife have had a HUGE farm operation for decades, and one of the shrewdest people I know.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

NotWhoYouThink
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Re: Investment advice for 58 year old.

Post by NotWhoYouThink » Wed Sep 13, 2017 9:52 am

desiderium wrote:
Wed Sep 13, 2017 6:47 am
I think you would benefit from some professional financial planning, including
-investment philosophy and vehicles
-Tax strategy
-Gifting to your heirs
-Estate planning if you haven't addressed this.

You could find an independent fee-only financial planner in your area. Allan Roth has been mentioned here a number of times and might be a good fit for you. The money you spend would be worthwhile IMO
At the risk of piling on...

I don't think you are ready to schedule a meeting with a fee-only planner. Not because you can't benefit from some personalized planning help, but because there are so many sharks out there you need some skills to be able to articulate what help you need, and what "help" you don't need and don't need to plan for. Most financial planners are going to try to put you into expensive investments and charge an Assets Under Management (AUM) fee. Note that even the Labor department's proposed rule only applies to retirement accounts, not to after-tax accounts.

So ask a few more questions and float a few more ideas here, and see what response you get. Once you feel confident with this group, you'll be ready to call in a professional if you still want to.

advice789
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Re: Investment advice for 58 year old.

Post by advice789 » Wed Sep 13, 2017 10:25 am

First, congrats. You and your spouse have done well to build weath. In terms of next steps, can see value in a fee only fin planner. I used a Garrett planner many years ago. Recommend you interview him/ her and others and then make a choice. Most have an no fee intro session. Before you contact a fee only planner, one of the prior posts recommended that you create a investment Finance Policy. There are wiki references. This policy statement will force you and your wife to think about your goals and risk levels via an allocation approach. Once done, ask a someone you trust and respect to read it and provide feedback. The feedback will test your thinking. Then you can Better leverage the planner as his/ her key questions will be answered by your Invest Policy.

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nedsaid
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Re: Investment advice for 58 year old.

Post by nedsaid » Wed Sep 13, 2017 10:35 am

kenoryan wrote:
Tue Sep 12, 2017 7:25 pm
OK Here is my story
Age 58. Wife 53.
Taxable account savings 4.2 M (1.7 M in SPY and 2.5 M in cash)
Pretax savings in multiple accounts total 2.4 M (all in SPY and DIA and QQQ)
IRA 50k (all SPY)
Properties worth 2 M (mostly farmland)
My question is with regard to taxable account which has 2.5 M in cash

I'm thinking retirement in 4 years. Wife will work till she's 60.

Where would you suggest I invest the 2.5 M in cash? Markets are the highest they have ever been. Interest rates are low and bonds are also the highest they have ever been. I'm risk averse.
You have won the game. If you and your wife can't make it on $8.6 million, there is no hope for the rest of us. With US Stocks at all time highs, and seeing that you have won the game, I have zero enthusiasm for recommending that you throw $2.5 million in cash at the markets.

I would probably put the $2.5 million into a Vanguard short-term treasury fund. You might consider muni-bonds through low cost Vanguard funds if your tax bracket justifies it. Or you could open a Treasury Direct account and buy treasury instruments. Or both. You really don't need to take additional risk. I think you are just fine.
A fool and his money are good for business.

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