66 yr old Woman Needs HELP!

[delamer]

I still would like to know why VPAS would be so adamant about the asset allocation and whether or not they really do not open the door to alternatives to investing such as the SPIA. I had the idea they set the asset allocation in accord with a risk questionnaire and that the result would have to be somewhat flexible. The withdrawal requirement is modest enough that there is no reason on that account for needing to be 40/60 rather than 30/70.

No, actually, I think it's more like a robo advisor, with a personal touch. That's why they charge extra. I had 3 advisors tell me, that I needed to have the 40/60 and I could not lower International. I remember writing to one I was trying to work with at the time, and he emailed me this stock generic email, that didn't even address my concerns. That's when I started having my doubts.

I've thought about the SPIA believe me, in addition to a portfolio but I need so much direction. I guess I could do a 35/65 myself, distribute into my checking every month, or go to PAS.

Anxiety about these kind of financial decisions is very normal. But on one hand you are saying that you “need so much direction” and on the other hand you don’t like the suggestions you were given by the PAS advisors.

To be blunt, it seems that PAS or any other advisor would be a mistake for you. You’d pay the fee but then end up withdrawing your assets as soon as you were unhappy with the results.

Remember that even if the advisor gives you someone to blame if things go sour, you are still the one who has to live with the consequences. So take the responsibility on yourself, go with your 30/70 plan, and live within the constraints of the results.

[In a taxable account, qualified dividends (from stocks) are taxed at a lower rate than interest (from bonds). The only thing that matters is the type of income being taxed, not whether it comes from an account that you manage or one that PAS does.]

If you have $10,000 or so of credit card debt on fairly low expenses, you can relieve some of your anxiety by doing a detailed budget and cutting back (not to mention paying off the debt).

Good luck.

[MillaBurg]

I agree with those who have said there is no need to rush.

You said your health is poor and you only expect to live 20 years or less. Even if you never earn another penny in interest, dividends or gains, your accounts would give you almost $39K per year for 20 years. This is more than you currently take per year (but inflation eating into earning power could be a future problem).

So, first take a deep breath.

Second, pat yourself on the back for the great job you did in amassing a paid-off home and almost $800k in liquid assets. Many people could never have done that.

Third, you need to get a better idea of your actual spending needs, including those paid monthly, yearly and only occasionally. It’s hard to make a hit a goal when you don’t know what that goal is. If you are comfortable sharing some of those numbers here, the advice given will be that much better.

Next, think about your home as another source of income. Can you rent out a room? Given your health, do you expect to continue to live there? If so, as has already been suggested, a reverse mortgage might be an option to increase your current cash flow. While there are potential issues with reverse mortgages, they can be a very valuable tool for some homeowners and might be a better option for you than a SPIA.

Once you have a better handle on your spending needs and wants and other options such as a reverse mortgage, then you will be in a better position to decide how much of your nest egg you need to invest in the stock market through mutual funds.

Thank you so much SuzBanyan for your kindly response. I am considering all suggestions mentioned but that's my problem, it's way confusing for me so I run. After posting practically all morning, I feel so drained that I had to run out to get some fresh air. I am going to go over all responses slowly and thoughtfully. I just don't have what it takes to be in the market. It's a daunting decision for sure.

I have thought of selling but honestly, the thought of moving away without my late husband, makes me hesitant in so many ways. I have considered the reverse mortgage for years now, along with SPIAs. It's just making that final decision that I have trouble with. Making no decision at all, is worse than making the wrong one. Indecisiveness is my worst enemy. Thanks so much!

[MillaBurg]

This is what I just this minute read online, ok?

https://www.aol.com/article/finance/201 ... /23371324/

[Christine_NM]

If I put all my money in Target Income Fund or Wellesly or 50/50, would I have the same tax implications that I would if I went with a PAS advisor?? If the tax savings wouldn't be that much with PAS, I would gladly place 600k in Target Income and/or Wellesly Income today. Seriously. The only reason I haven't is because I always see how taxable in these funds is not a good idea, but then again, i'm in the low tax bracket. Thanks again~

A PAS advisor has no impact on your tax status. This is 700k in a taxable account, right? The distributions from the fund(s) you buy will be taxable with any advisor. Hope I am understanding you correctly.

My largest fund is a balanced fund in a taxable account. It pays me $22,000/yr in cash distributions. Roughly half of that 22k is taxable at my ordinary tax rate, the other half at my capital-gains (qualified dividend) rate. The tax bite is not a deal-breaker for me. It is more important to have the right allocation.

[JoeRetire]

This is what I just this minute read online, ok?

https://www.aol.com/article/finance/201 ... /23371324/

Stop reading such panic-inducing articles, if they bother you.

[JoeRetire]

I am considering all suggestions mentioned but that's my problem, it's way confusing for me so I run. After posting practically all morning, I feel so drained that I had to run out to get some fresh air. I am going to go over all responses slowly and thoughtfully. I just don't have what it takes to be in the market. It's a daunting decision for sure.

I have thought of selling but honestly, the thought of moving away without my late husband, makes me hesitant in so many ways. I have considered the reverse mortgage for years now, along with SPIAs. It's just making that final decision that I have trouble with. Making no decision at all, is worse than making the wrong one. Indecisiveness is my worst enemy. Thanks so much!

And this is why you need calm, professional assistance, rather than reading a bunch of blogs, forums, and articles online.
You don't need to tackle this alone - get qualified help.

[Christine_NM]

... you need calm, professional assistance, rather than reading a bunch of blogs, forums, and articles online.
You don't need to tackle this alone - get qualified help...

It's tempting to believe this. But, sorry, most advisors are no better than this forum, and a lot are worse. Ultimately it is OP's decision, whether it is framed as which advisor to follow or which funds to buy. Life is not always easy.

[MillaBurg]

All the advisors I spoke with at PAS say 40/60 portfolio...and they won't budge on that...OR the International allocation. They told me that if I want a 30/70 allocation, I would have to do it myself. I was thinking of doing a very simple portfolio of 30-35 total stock and the rest total bond? And I was thinking of an immediate annuity for 10 yrs, which would give me close to 1k/mos(not much, but something)..See, I'm all over the place. I just want to have a plan by this week. I've waited too long. I'm thinking that the market will crash the day I invest it all.

You know, I've read everything but the more I read, the more confused and anxious I get. I need Boglehead advice, because they keep it simple.

You have already read a bunch of internet stuff and just gotten confused and anxious. Reading more online is unlikely to change that.

What you need is to sit down with a competent fee-only financial adviser. You need to spend a bit of time and a little money figuring out what your real goals are, and coming up with a financial plan to get there.

A good adviser will listen, analyze, and explain. A good adviser will not tell you what you must do, but will help carry out your (educated) wishes. And a good adviser will keep checking in periodically to make sure you are still comfortable.

Start here: https://www.napfa.org/. Look for a CFP. Schedule an interview.
Then relax and talk. Try not to be so worried. It will work out just fine.

I think you're right, Joe...Just have to find someone I feel safe with. Thank you!

[MillaBurg]

I still would like to know why VPAS would be so adamant about the asset allocation and whether or not they really do not open the door to alternatives to investing such as the SPIA. I had the idea they set the asset allocation in accord with a risk questionnaire and that the result would have to be somewhat flexible. The withdrawal requirement is modest enough that there is no reason on that account for needing to be 40/60 rather than 30/70.

No, actually, I think it's more like a robo advisor, with a personal touch. That's why they charge extra. I had 3 advisors tell me, that I needed to have the 40/60 and I could not lower International. I remember writing to one I was trying to work with at the time, and he emailed me this stock generic email, that didn't even address my concerns. That's when I started having my doubts.

I've thought about the SPIA believe me, in addition to a portfolio but I need so much direction. I guess I could do a 35/65 myself, distribute into my checking every month, or go to PAS.

Anxiety about these kind of financial decisions is very normal. But on one hand you are saying that you “need so much direction” and on the other hand you don’t like the suggestions you were given by the PAS advisors.

To be blunt, it seems that PAS or any other advisor would be a mistake for you. You’d pay the fee but then end up withdrawing your assets as soon as you were unhappy with the results.

Remember that even if the advisor gives you someone to blame if things go sour, you are still the one who has to live with the consequences. So take the responsibility on yourself, go with your 30/70 plan, and live within the constraints of the results.

[In a taxable account, qualified dividends (from stocks) are taxed at a lower rate than interest (from bonds). The only thing that matters is the type of income being taxed, not whether it comes from an account that you manage or one that PAS does.]

If you have $10,000 or so of credit card debt on fairly low expenses, you can relieve some of your anxiety by doing a detailed budget and cutting back (not to mention paying off the debt).

Good luck.

Thank you, delamer...I appreciate your honesty and your suggestions

[MillaBurg]

... you need calm, professional assistance, rather than reading a bunch of blogs, forums, and articles online.
You don't need to tackle this alone - get qualified help...

It's tempting to believe this. But, sorry, most advisors are no better than this forum, and a lot are worse. Ultimately it is OP's decision, whether it is framed as which advisor to follow or which funds to buy. Life is not always easy.

Thank you, Christine...what you said is so true...I realize JoeRetire is just trying to help

[MillaBurg]

... you need calm, professional assistance, rather than reading a bunch of blogs, forums, and articles online.
You don't need to tackle this alone - get qualified help...

It's tempting to believe this. But, sorry, most advisors are no better than this forum, and a lot are worse. Ultimately it is OP's decision, whether it is framed as which advisor to follow or which funds to buy. Life is not always easy.

That's what I'd feel comfortable doing: Putting all savings in one fund like Target Income, but wasn't sure about tax implications that everyone warns about for taxable. I should just set it and forget it. Thank you for your perspective...I like it~!

[Nestegg_User]

OP

you are at a low enough draw, along with SS, to not have any significant federal tax- - MA tax might be more of a challenge ( not familiar with their exclusions for age 65+ but I know in my state there are state deductions for medical costs and that SS isn’t taxable)

the current interest rate environment isn’t the best for SPIA’s but if they increase a bit they might become better for you in a few years (between 70-75) as the “mortality credits” give a higher return and the SPIA won’t expire...you can have higher confidence in maintaining cash flow.

i do agree with others:
- -get your credit cards under control- don’t have high interest debt ruin your plan
- - determine what your real costs are (all costs)
you are likely in the “red zone” so may need that SPIA to insure that you can withstand a larger correction
- - you probably wouldn’t be helped by an advisor if you keep defeating your plan. also the advisor doesn’t have any tax magic- capital gains are there regardless as is interest. It’s up to you to tax manage for long term gains (which should be tax free to the feds at your income)
- -stay away from the talking heads and away from the wrong advisors, especially any that might push an indexed annuity (“ it’s guaranteed not to lose money “...) {single premium immediate annuity “SPIA” only!} while you might think you have only 20 years... it could end up much longer, and that’s what the SPIA is there for- longevity insurance.

while 40/60 might be best for you relative to potential growth at lower risk, your risk adversity seems to push you to 30/70. therefore even more need to reduce your costs, or as you said, relocate to an area with lower costs than MA. there’s loads of threads out there on that.. I would suspect that you would be better off in a lower cost condo with low HOA as that would free up some of your current home equity.

[JoeRetire]

... you need calm, professional assistance, rather than reading a bunch of blogs, forums, and articles online.
You don't need to tackle this alone - get qualified help...

It's tempting to believe this. But, sorry, most advisors are no better than this forum, and a lot are worse. Ultimately it is OP's decision, whether it is framed as which advisor to follow or which funds to buy. Life is not always easy.

I don't know about most advisers. I personally know about three.
None of them were as "all over the place" as this forum.

One was simply bad. In retrospect, this was no more than a "salesman". Glad I got out of that one quickly.
One was okay, and has since passed away. Got some good advice, some decent education, but not optimal.
The adviser I use right now is very, very good.

Some feel comfortable taking advice from random internet strangers on a forum with a wide variety of conflicting opinions. Some feel comfortable taking robo-advice based on answering a few questions. Others feel comfortable interviewing and ultimately selecting real, human advisers who can really get to know you.

You are right in that there is no free lunch. There is little consensus here, and for many questions it will be difficult if not impossible to pick among the responses. And interviewing and choosing among potential advisers can be difficult.

There is no doubt in my mind that you can find an adviser to meet your needs. It all comes down to educating yourself and making an informed decision. There's no escaping that.

[ColoRetiredGirl]

Their reluctance to not using the 70/30 vs 60/40 (?) maybe due to her written risk tolerance. If the document shows she is risk adverse but orally states she wants a aggressive portfolio, they can be in a lot of trouble if her account is audited.

[Northern Flicker]

I’ve never used PAS but my understanding is that they meet with you to understand your needs and risk tolerance, and provide a recommended portfolio, but leave it to you to execute the transactions to invest in the portfolio.

I also understand that you can turn PAS on or off on a quarterly basis.

One strategy would be to delay social security to age 70 and spend down some of the cash on living expenses between now and then. You may still be able to suspend your benefit to make that happen.

PAS service is just investment advice and management. A financial planner can offer a more comprehensive plan, for instance running numbers to evaluate the cost and benefit of delaying social security.

Another strategy a planner can evaluate is using some of the assets to purchase an income annuity (SPIA). These are products offered by insurance companies that provide a guaranteed income for life. Conceptually, it is like buying into a lifetime pension payout. Income annuities may be inflation-indexed with cost of living adjustments.

An established way to address having adequate income when you have significant concerns about riskier assets not delivering the returns you will require is a technique called income flooring. With this method, you evaluate your spending needs, and hold assets that generate that level of income in a safe, stable, and inflation-adjusted manner. Social security, inflation-indexed income annuities, I-bonds, and TIPs bonds are the tools for implementing this.

Once you establish a stable income stream to cover your expenses (your income floor), any remaining assets may be invested more aggressively without concern for whether the markets will return the results required to cover your needs.

I would suggest asking potential planners if they can put together a plan based on income flooring. Whether or not you choose to use such a strategy, the conversation about it will help you avoid engaging with planners who are just going to make a cookie cutter recommendation spit out by some software to which they input your information. I would recommend only considering fee-for-service planners.

Edit: the above certainly may also be implemented without soliciting the services of a planner

[jpsc]

Personally, I think total stock market ETF fund or total bond market ETF fund
is just buying crap. The total market has the good, the bad all combine into one.
What you see and hear DOW, SP500 or NASDAQ-100 are selective stocks to be in those
index. I have those total stock market funds in my company 401K fund, and they do so so
when compare to a DOW, SP500 or NASDAQ100 fund.

If I have 700K like your mom - I would do cost average and buy VIG, SPY, DIA, QQQ for the first 400K
and buy the rest in US TIPs for the rest. I wouldn't want to touch any bonds funds if the interest
rate is rising

[Northern Flicker]

If I have 700K like your mom - I would do cost average and buy VIG, SPY, DIA, QQQ for the first 400K
and buy the rest in US TIPs for the rest. I wouldn't want to touch any bonds funds if the interest
rate is rising

Dividend stocks incorporate some interest rate term exposure in that they tend to overperform when rates fall and underperform when rates rise. The stock portfolio you propose thus incorporates a healthy dose of what you don't wish to touch. Because of that, TIPs are appropriate to offset the inflation and interest rate risk of the dividend stocks.

But holding TIPs directly in a taxable account is very problematic. The inflation correction applied to the principal is taxed as it accrues but only realized as income when the TIPs bond matures. Currently, TIPs yields are so low that they may have negative cash flow after taxes, that is, the interest earned may/will not be enough even to pay the taxes due on the interest (that you receive when realized) and inflation correction (that you do not receive until the bond matures). TIPs funds distribute as income the inflation correction when it is realized which works better in a taxable account, and i-bonds are fully tax-deferred.

[naha66]

Hate to recommend a SPIA annuity, but it might the best option for you. You can buy thru Vanguard, 50%(388k) of your 776k would give you over $2000 a month plus $900 SS, thats close to $3000 a month and you still have 388k to invest in case inflation comes back.

I agree with naha66 on this.

Also, if not already suggested, look into something like Vanguard Retirement Income. It is a balanced fund. 30% stock, 70% bonds. The fund only lost 10% in '08.

I agree on Vanguard Retirement Income. I don't own it, but it would be a good choice for OP. No need for ongoing PAS except to talk things over once or twice. But if PAS is more annoyance than help, tell them no thanks. It's difficult for a single person to make decisions when there's no one to discuss the issues with. Ask me how I know. So, BHs to the rescue.

I disagree about the annuity. It sounds like you have plenty of money for your needs. 20 years from now you may be looking at Medicaid, and you don't want an annuity income to dash any eligibility hopes. The thought of giving my life savings to an insurance company gives me chills.

The only way I keep my stock allocation without going crazy is to have plenty of cash between it and me. So I'd put an even $500k in Target Retirement Income (VTINX). Reinvest dividends and capital gains or it won't grow. Keep the rest in MM or CDs and dole it to yourself monthly as you've been doing. Should last quite a while. You can do this.

In most cases I would agree with you, a 3.5 to 4% withdrawal rate would last her 30 year but the OP showed that she has trouble maintaining the course.

[BL]

I have been reading the comments and your responses and I see you are not comfortable.

First, don't feel rushed to decide, but don't wait months either.

It is easy enough to give basic advice, such as a Target or Life Strategy fund, but not really knowing how you will deal with anxiety it is not so easy to suggest something that does not give you anxiety. Maybe you could try out a smaller amount in a fund such as Life Strategy Conservative (60% bonds) and put a bunch into CDs for a while (maybe buying a SPIA in a few years with some of that). I do like the idea of a SPIA for some of your money, but you do gain the longer you wait to buy it. Are you comfortable buying CDs with your bond percentage? That could be an alternative if you find decent rates online or sometimes at a local bank or credit union. You could buy Total Stock Market monthly until you have 30-40% stocks (in 6-12 months, for example). A problem could be the higher highs and lower lows with all stocks than with a balanced single Target fund.

If you find yourself liking the advice of a few particular posters, you might like to know if they have been Bogleheads for a few or many years and post hundreds to thousands of posts. If you are using a computer, it may show on each post, but smaller screens just seem to have the names, which you can click on to get the information as well. Most of us don't know each other here, and anyone can post; however most of us want to help and share as best we can on a volunteer basis, but we are all different in every possible way, and will give different opinions. It is up to you to pick out what makes sense to you and is something you can live with.

I suggest you avoid watching most of the talking heads on TV, as they tend to get us anxious or excited about investing. Ideally it should be as boring as possible. I like Jane Bryant Quinn's book for retirees. She has been writing articles and books for decades and I feel her suggestions are common-sense and easy to read. I bought her book used (I watched for a recent year date) at Amazon and found I could look up any topic rather than read the whole book at once. She writes articles for AARP sometimes, and has a website with personal finance and investing articles. I think most Bogleheads would not disagree with her suggestions. Here is a link to her book for retirees:
https://www.amazon.com/Make-Your-Money- ... +last[url][/url]

I suggest you also read this free 16-page pdf booklet written by a recommended author, Dr. William Bernstein, written for young new investors, and it is a good review for all of us (You would want more bonds than he suggests for young investors):
https://www.etf.com/docs/IfYouCan.pdf

There is a sticky at the top of the Help topics that was first written about 10 years ago but has been updated for important information so it is quite current. Written by Laura, who I believe is now an ambassador to Nicaragua; it has been used for guidance to newcomers for a long time.
viewtopic.php?f=1&t=6211

There is also a Boglehead's book on retirement planning; Amazon has it, and your public library probably has these books as well.