Income in retirement questions

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tundratoy
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Income in retirement questions

Post by tundratoy » Sat Jan 20, 2018 11:39 am

I am nearing retirement and would like some advice. I am 61, my wife 60. No debts.

Investing through Vanguard, how would be the best way to withdraw money from my account in retirement. Taking the dividends from my portfolio and my Social Security will leave me around $24,000 short per year. Any suggestions?

Thanks for you help in advance,

dbr
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Re: Income in retirement questions

Post by dbr » Sat Jan 20, 2018 1:33 pm

tundratoy wrote:
Sat Jan 20, 2018 11:39 am
I am nearing retirement and would like some advice. I am 61, my wife 60. No debts.

Investing through Vanguard, how would be the best way to withdraw money from my account in retirement. Taking the dividends from my portfolio and my Social Security will leave me around $24,000 short per year. Any suggestions?

Thanks for you help in advance,
Then you have to sell some shares and withdraw the proceeds. Usually one withdraws first from taxable accounts but at age 70+ you are required to take distributions from 401ks and IRAs. Some people find themselves able to make taxable rollovers to Roth IRAs. Many people make the judgement that SS should be postponed to age 70 and others disagree/prefer to take SS earlier.

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Tyler Aspect
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Re: Income in retirement questions

Post by Tyler Aspect » Sat Jan 20, 2018 2:01 pm

Dividend Income Outdated for Retirement Investing

I know the traditional attitude is to use bond dividend to finance retirement spending, but the tax laws have changed all that. There is a large income range where capital gains and qualified dividends are taxed at 0%. Modern retirement spending in the early retirement is typically funded by stock sales in the taxable account. Sell stocks two times a year to harvest the 0% capital gains. Unused cash in the taxable account is allocated to purchase a replacement stock index. After a while, you won't care about how much your bonds earn in terms of dividend, other than the fact that bond dividends subtract from the amount of possible 0% capital gains. :moneybag

Hold bond for their contribution toward stability, not chasing their yields.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

tundratoy
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Re: Income in retirement questions

Post by tundratoy » Sat Jan 20, 2018 5:02 pm

Thanks for the info.

What about High Yield Corporate Bonds VWEHX? It has a nice consistent yield. I thought if it would yield 4.5% consistently that would reduce the amount of stocks needed to sell for income.

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mickeyd
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Re: Income in retirement questions

Post by mickeyd » Sat Jan 20, 2018 5:08 pm

will leave me around $24,000 short per year
That's a pretty hefty gap between in and out money. I'd rethink retirement and save 100% of income for a couple of years so it can help produce income in the future.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

dbr
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Re: Income in retirement questions

Post by dbr » Sat Jan 20, 2018 5:13 pm

tundratoy wrote:
Sat Jan 20, 2018 5:02 pm
Thanks for the info.

What about High Yield Corporate Bonds VWEHX? It has a nice consistent yield. I thought if it would yield 4.5% consistently that would reduce the amount of stocks needed to sell for income.
It is a mistake to confuse the dividends and interest paid out by various investments with the process of withdrawing income from a portfolio. A portfolio should be selected for the combination of risk and return that the investor wants. Withdrawals can be taken by any combination of withdrawing dividends and interest and selling shares that is required. The outcome terms of how the portfolio survives over time will just depend on the arithmetic of how much is withdrawn relative to the returns earned no matter how the withdrawals are arranged. There are tax consequences to how one is invested in taxable accounts. Generally one does not want a lot of taxable distribution coming from taxable holdings. HY bonds would be an example of a bad investment to hold in taxable.

Some people see HY bonds serving a useful purpose as a component of a diversified portfolio. I don't know about that myself and a lot of people would not complicate a portfolio with that investment.

jebmke
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Re: Income in retirement questions

Post by jebmke » Sat Jan 20, 2018 5:23 pm

mickeyd wrote:
Sat Jan 20, 2018 5:08 pm
will leave me around $24,000 short per year
That's a pretty hefty gap between in and out money. I'd rethink retirement and save 100% of income for a couple of years so it can help produce income in the future.
really no way to know, given the data provided.

Suppose his expenses are $250K, SS of $20K and a portfolio of $10.3 million throwing off 2%. He is still $24K short which is a small draw from his original $10.3 Million.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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David Jay
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Re: Income in retirement questions

Post by David Jay » Sat Jan 20, 2018 5:25 pm

We could provide better advice if we knew your entire picture: Total portfolio size (and how much in what kind account), retirement date, projected expenses in retirement, etc.

Have you worked through the implications of when to file for SS benefits? It can make a big difference in your planning...

[edit] Welcome to the forum! I am 61, with intent to retire in 2019 so I can identify with your decision process. I discovered BH 3 years ago and it is a great resource.
Last edited by David Jay on Sat Jan 20, 2018 6:01 pm, edited 1 time in total.
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grok87
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Re: Income in retirement questions

Post by grok87 » Sat Jan 20, 2018 5:26 pm

tundratoy wrote:
Sat Jan 20, 2018 11:39 am
I am nearing retirement and would like some advice. I am 61, my wife 60. No debts.

Investing through Vanguard, how would be the best way to withdraw money from my account in retirement. Taking the dividends from my portfolio and my Social Security will leave me around $24,000 short per year. Any suggestions?

Thanks for you help in advance,
vanguard has a managed payout fund
https://investor.vanguard.com/mutual-fu ... ed-payout/#/
"...people always live for ever when there is any annuity to be paid them"- Jane Austen

Grt2bOutdoors
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Re: Income in retirement questions

Post by Grt2bOutdoors » Sat Jan 20, 2018 5:46 pm

grok87 wrote:
Sat Jan 20, 2018 5:26 pm
tundratoy wrote:
Sat Jan 20, 2018 11:39 am
I am nearing retirement and would like some advice. I am 61, my wife 60. No debts.

Investing through Vanguard, how would be the best way to withdraw money from my account in retirement. Taking the dividends from my portfolio and my Social Security will leave me around $24,000 short per year. Any suggestions?

Thanks for you help in advance,
vanguard has a managed payout fund
https://investor.vanguard.com/mutual-fu ... ed-payout/#/
The Managed Payout fund makes distributions based on the average performance of fund over the last three years, so distributions may be increased in the future, but they can also be reduced. I believe that this function is similar to a Variable Percentage Withdrawal method and this enables the fund to minimize the failure of the portfolio. OP will need to pay special attention to what the prospectus says.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

tundratoy
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Re: Income in retirement questions

Post by tundratoy » Sat Jan 20, 2018 8:33 pm

VPGDX that managed fund from Vanguard sounds like a real possibility, I never knew it existed. It might make things easier for me.

With my work, I have the option to take a Lump Sum or a regular Pension. If I take the regular Pension, my Social Security and invest the remainder in VPGDX I think that would be sufficient for retirement income. Thanks for your help, it is greatly appreciated!

carolinaman
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Re: Income in retirement questions

Post by carolinaman » Sun Jan 21, 2018 6:53 am

tundratoy wrote:
Sat Jan 20, 2018 5:02 pm
Thanks for the info.

What about High Yield Corporate Bonds VWEHX? It has a nice consistent yield. I thought if it would yield 4.5% consistently that would reduce the amount of stocks needed to sell for income.
HY corporate bonds are a hybrid fund, having characteristics of both equity and bonds. HY bonds are riskier and suffer defaults and downgrades, especially during market downturns. For example, VWEHX lost 21% in 2008. HY is a blend of equity and bonds and tends to perform more in line with equity. If you are investing a significant portion of your bond AA in HY, you are taking a lot more risk with that than you probably recognize. Many people on this forum would prefer to invest their fixed income AA in more conservative bonds since a major purpose of bonds is to counter balance the risk of equities.

If you still want to invest in HY, VWEHX is an excellent fund with a good long term record. Just recognize the associated risk.

livesoft
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Re: Income in retirement questions

Post by livesoft » Sun Jan 21, 2018 10:26 am

tundratoy wrote:
Sat Jan 20, 2018 8:33 pm
VPGDX that managed fund from Vanguard sounds like a real possibility, I never knew it existed. It might make things easier for me.

With my work, I have the option to take a Lump Sum or a regular Pension. If I take the regular Pension, my Social Security and invest the remainder in VPGDX I think that would be sufficient for retirement income. Thanks for your help, it is greatly appreciated!
I'd say a lot more research would be needed for me to use the Managed Payout fund or a high-yield bond fund than just a random mention of it on an anonymous internet forum. Actually the whole idea of figuring out how to get $24,000 a year needs careful thought and study including reading a few books I would think along with a few months research on the internet.

One book to at least skim is Jane Bryant Quinn's "How to Make Your Money Last"
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tundratoy
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Re: Income in retirement questions

Post by tundratoy » Mon Jan 22, 2018 11:00 am

Thanks for all your help. I have much to consider and much to learn.

It is nice to get feedback,. I do not want to run out of money in retirement and I do not want to work up until the day I die.

b4real
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Re: Income in retirement questions

Post by b4real » Mon Jan 22, 2018 4:26 pm

I found the book “Unveiling the Retirement Myth” by Jim Otar helpful in understanding where we stood as we were getting close to retirement. In particular, review Otar's zones to help determine how much, if any, of your nest egg should be annuitized. viewtopic.php?t=144663

The wiki has a good overview and discussion about retirement withdrawal methods.
https://www.bogleheads.org/wiki/Withdrawal_methods

You may get more detailed recommendations if you use the format suggested here: https://www.bogleheads.org/wiki/Asking_ ... _questions

Welcome to the forum!

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GerryL
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Re: Income in retirement questions

Post by GerryL » Mon Jan 22, 2018 8:22 pm

tundratoy wrote:
Sat Jan 20, 2018 8:33 pm
VPGDX that managed fund from Vanguard sounds like a real possibility, I never knew it existed. It might make things easier for me.

With my work, I have the option to take a Lump Sum or a regular Pension. If I take the regular Pension, my Social Security and invest the remainder in VPGDX I think that would be sufficient for retirement income. Thanks for your help, it is greatly appreciated!
And don't forget about inflation. It has been very low for quite a few years, but think back to the early 1980s. Inflation can have a serious impact on your income needs in the future, when you options for increasing your income will be much more limited. No need to rush. Read the Jane Bryant Quinn book already recommended and take your time to make these important decisions.

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