portfolio help

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ostfrisian
Posts: 6
Joined: Tue Nov 22, 2016 2:47 pm

portfolio help

Post by ostfrisian » Tue Jul 10, 2018 5:56 pm

looking for advice with current allocation of retirement funds/assets.
We are a couple both 65, wife is retired with a STRS pension of $3500 per month, I am considering taking my SS later this year when I reach 66, will receive $1320/month.
Currently have $150,000 in cash, and $350,000in 401k and $60,000 in Roth
we have a 15 year home loan on primary residence of $120,000 @ 3% with about 11years remaining before its payed of.
Also own 3 rental properties
1. Duplex...valued at $380,000 / loan amount $195K
2. Duplex....valued at $350,000/ loan amount $150k
3. single family home valued at $145,000 / loan amount $85k
the rental generate about $1000 in cash flow

we have no other debt.

tax rate is 15% Fed, 9% state

currently invested
37.3% US Stocks...Vanguard Total Stock Market Index Fund
22.9 % US Bonds....Vanguard Total Bond Market Index Fund
22.6% international Stocks....Vanguard Total International Stock Index
13.5% International Bonds....Vanguard TotalInternational Bond Index

I'm worried that the US Stock fund is so heavy in financials and technology, any ideas for moving some money into small cap stocks/companies, should I move some money out of international bonds and stocks. What about some alternative investments such as REIT of metals/

averagedude
Posts: 160
Joined: Sun May 13, 2018 3:41 pm

Re: portfolio help

Post by averagedude » Tue Jul 10, 2018 6:23 pm

ostfrisian wrote:
Tue Jul 10, 2018 5:56 pm
looking for advice with current allocation of retirement funds/assets.
We are a couple both 65, wife is retired with a STRS pension of $3500 per month, I am considering taking my SS later this year when I reach 66, will receive $1320/month.
Currently have $150,000 in cash, and $350,000in 401k and $60,000 in Roth
we have a 15 year home loan on primary residence of $120,000 @ 3% with about 11years remaining before its payed of.
Also own 3 rental properties
1. Duplex...valued at $380,000 / loan amount $195K
2. Duplex....valued at $350,000/ loan amount $150k
3. single family home valued at $145,000 / loan amount $85k
the rental generate about $1000 in cash flow

we have no other debt.

tax rate is 15% Fed, 9% state

currently invested
37.3% US Stocks...Vanguard Total Stock Market Index Fund
22.9 % US Bonds....Vanguard Total Bond Market Index Fund
22.6% international Stocks....Vanguard Total International Stock Index
13.5% International Bonds....Vanguard TotalInternational Bond Index

I'm worried that the US Stock fund is so heavy in financials and technology, any ideas for moving some money into small cap stocks/companies, should I move some money out of international bonds and stocks. What about some alternative investments such as REIT of metals/
Your stock fund represents only 37 percent of your portfolio and this asset class has had a remarkable 150 year history of solid returns. You are extremely diversified and obviously since you are in a low tax bracket, you have a good handle on your expenses. Perhaps you should buy a new pillow, because you should be sleeping with no worries.

delamer
Posts: 5125
Joined: Tue Feb 08, 2011 6:13 pm

Re: portfolio help

Post by delamer » Tue Jul 10, 2018 6:27 pm

We all have different perceptions of risk.

You have a high level of cash, which seems conservative.

Yet you also are heavily invested in one sector with a high level of debt — that being your real estate holdings. That seems pretty risky.

Your non-cash liquid portfolio actually seems to be well invested. By moving to more small cap, REITs, or metals, you’d be making it more aggressive. The total stock fund invests based on market capitalization, so it reflects the value of each sector in the overall market.

So the question is — what is your goal with your investments? What level of risk are you willing to accept?

megabad
Posts: 287
Joined: Fri Jun 01, 2018 4:00 pm

Re: portfolio help

Post by megabad » Tue Jul 10, 2018 6:43 pm

I am personally a fan of your fund selection so I probably wouldn't change anything there. If you are nervous of potential market volatility, then maybe increase your bond allocation a little. I would sell all the rental properties (stay under 20% capital gains limit though) and then dump everything into your allocation and funds you have listed. Then I would delay SS to 70. You will hit 70 with $60k+ every year in COLA pension and SS and close to a $1 million portfolio to boot. I think you would be set at that point.

ostfrisian
Posts: 6
Joined: Tue Nov 22, 2016 2:47 pm

Re: portfolio help

Post by ostfrisian » Wed Jul 11, 2018 4:56 pm

I'm a little new to this forum and how to respond to individual messages so please excuse the bulk reply
To megabad
Then I would delay SS to 70. You will hit 70 with $60k+ every year in COLA pension and SS and close to a $1 million portfolio to boot.
I don't understand this part of your advise. I could delay SS until I hit 70 but it will only give me about $21k per year, what is the COLA pension. Is your figure of a $1 million portfolio based on selling rental property real estate?
Thanks,

ostfrisian
Posts: 6
Joined: Tue Nov 22, 2016 2:47 pm

Re: portfolio help

Post by ostfrisian » Wed Jul 11, 2018 5:10 pm

to delamer,

My goal with investments is to generate some income. I am invested in rental properties since they give me cash flow which is better than the income from stock/mutual fund part of investments. Hold cash so I can use it to fund real estate loans. I am not risk adverse and would like to generate some more passive income.

ExitStageLeft
Posts: 507
Joined: Sat Jan 20, 2018 4:02 pm

Re: portfolio help

Post by ExitStageLeft » Wed Jul 11, 2018 6:20 pm

ostfrisian wrote:
Wed Jul 11, 2018 4:56 pm
I'm a little new to this forum and how to respond to individual messages so please excuse the bulk reply
...
There are always at least two square-shaped "buttons" in the upper right corner of each message. If you click on the right-most one, it will quote that message in reply in the comment box. This is very useful in that the person you quoted gets a notification of your reply, increasing the likelihood of getting a timely response.

User avatar
TheTimeLord
Posts: 5284
Joined: Fri Jul 26, 2013 2:05 pm

Re: portfolio help

Post by TheTimeLord » Wed Jul 11, 2018 6:29 pm

ostfrisian wrote:
Tue Jul 10, 2018 5:56 pm
tax rate is 15% Fed, 9% state
I am thinking 15% was your marginal tax rate last year not your effective tax rate. So I would expect that to drop to 12% this year. Folks please chime in on if you agree or disagree with me on this.

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IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

delamer
Posts: 5125
Joined: Tue Feb 08, 2011 6:13 pm

Re: portfolio help

Post by delamer » Wed Jul 11, 2018 8:19 pm

ostfrisian wrote:
Wed Jul 11, 2018 5:10 pm
to delamer,

My goal with investments is to generate some income. I am invested in rental properties since they give me cash flow which is better than the income from stock/mutual fund part of investments. Hold cash so I can use it to fund real estate loans. I am not risk adverse and would like to generate some more passive income.
Most — although not all — Bogleheads investors want to maximize the total return (appreciation plus dividends/interest) on their investments (at their preferred risk level) rather than maximizing income.

That is one issue with investing in rentals. You can’t turn the total return into cash as easily as you can with stocks/bonds.

In any case, you can’t withdraw more than about 4% (inflation adjusted) of your non-cash liquid assets each year in order to have a high probability of those assets not being depleted over the course pf your retirement. This is known as the “safe withdrawal rate.” It is a concept with which you should familiarize yourself.

User avatar
dratkinson
Posts: 4243
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: portfolio help

Post by dratkinson » Thu Jul 12, 2018 8:52 pm

BH portfolio help.
ostfrisian wrote:
Tue Jul 10, 2018 5:56 pm
looking for advice with current allocation of retirement funds/assets.
We are a couple both 65, wife is retired with a STRS pension of $3500 per month, I am considering taking my SS later this year when I reach 66, will receive $1320/month.
Currently have $150,000 in cash, and $350,000in 401k and $60,000 in Roth
we have a 15 year home loan on primary residence of $120,000 @ 3% with about 11years remaining before its payed of.
Also own 3 rental properties
1. Duplex...valued at $380,000 / loan amount $195K
2. Duplex....valued at $350,000/ loan amount $150k
3. single family home valued at $145,000 / loan amount $85k
the rental generate about $1000 in cash flow

we have no other debt.

tax rate is 15% Fed, 9% state

currently invested
37.3% US Stocks...Vanguard Total Stock Market Index Fund
22.9 % US Bonds....Vanguard Total Bond Market Index Fund
22.6% international Stocks....Vanguard Total International Stock Index
13.5% International Bonds....Vanguard TotalInternational Bond Index

I'm worried that the US Stock fund is so heavy in financials and technology, any ideas for moving some money into small cap stocks/companies, should I move some money out of international bonds and stocks. What about some alternative investments such as REIT of metals/


TSM. Vanguard’s total stock market index fund is a recommended holding. Why? It holds 5000+ companies, no one of which represents more than 5% of its total holdings. Some are always up, some are always down. No one can predict the future.



The 3-fund portfolio. TSM is at the heart of the 3-fund portfolio. The 3-fund portfolio is recommended for all account types (self-employed, employer, personal; tax-free, tax-deferred, and taxable). It can be replicated in each account, or spread across all guided by your investment options’ availability/costs. However you get to an age-appropriate 3-fund portfolio is fine: individual funds/ETFs, or an all-in-one fund.

See Wiki topic: https://www.bogleheads.org/wiki/Three-fund_portfolio
See forum discussion: viewtopic.php?f=10&t=88005



Tax efficiency. Funds should be place into your investment accounts for tax efficiency.

See Wiki topic: https://www.bogleheads.org/wiki/Princip ... _placement



REIT. You would not want REIT as you already own rental property. Besides, TSM contains ~3% REIT, so until you learn more, that should be enough additional exposure for now.

But if you did invest in REIT, it is tax inefficient so would be placed in a tax-advantaged account (tax-deferred 401k or tax-free Roth IRA).



Asset Allocation (AA, stock/bond ratio). It appears your current AA is 63%/36%. The typical advice is “age in bond” (conservative) or “age in bonds - 10” (aggressive). So your recommended AA would be 35/65 (conservative) or 45/55 (aggressive).

Data points. Since the 40/60 AA was reported to last longest in retirement under withdrawal pressures, but more recent studies suggest 30/70 might be better today, then you could use 35/65 as a good enough target AA.



Rental property. Do you really want to be messing with rentals when you are 70-80-90? Will your health allow you to manage them? Do you have a succession plan? (RQ: rhetorical question.)



Return on investments. I don’t know how to figure this so bear with me.

You are receiving $1K/mo on $430K (=$195K + $150K + $85K) in loans. So ~2.7%/yr (=1/430/mo * 12mos/yr). That doesn’t seem like much return for a lot of work. Why? An investment is TSM should return a little over 2%/yr in 100% QDI (qualified dividend income) with no effort on your part.

QDI is taxed at 0% in the 15% fed tax bracket. So more TSM would seem to be better for you than more rentals if your return on them is less than your loan rate.

Question. Is the $1K/mo you make off your rentals only going to pay your loan interest?



Home mortgage. Going into retirement with a mortgage seems like it would be a financial drain. Most recommend being mortgage-free by retirement.



Case if you sold your rental properties.

What would your life look like if you sold your properties and removed all of your debts?

$875K, proceeds from sales (= 380K + 350K + 145K)
-$550K, loans paid off (= 195K + 150K + 85K + 120K)
$325K

Giving you a retirement nest egg of:
$475K, cash (=150K + 325K)
$350K, 401k (assume this is a traditional account so RMDs apply.)
$ 60K, Roth IRA
$885K, retirement nest egg



RMDs. To estimate your RMDs, see IRS worksheet: https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

What will be the amount of your RMDs? Why? An inflation-indexed answer that works today should also work 4yrs from today.



Retirement benefits

$42K, wife’s pension (=$3500/mo x 12mos/yr) (I assume this is indexed for inflation.)
$15K, your SS at age 66 (=$1320/mo * 12mos/yr) (This is indexed for inflation.)
$57K, annual inflation-indexed* retirement benefits now

$42K, wife’s pension
$21K, your SS if delayed until age 70
$63K, annual inflation-indexed* retirement benefits if you wait until age 70.

* An inflation-indexed solution that works today, should also work several years from now.



Cost of living in retirement. You need to determine this. It will be much less once you stop managing rentals and pay off all your loans.



Putting the pieces together.

Assuming you sold all rentals and paid off all loans, then your retirement nest egg must supply X---the missing income to cover your living expenses.
--Before you take SS: X = cost of living - $42K (wife’s pension).
--If you take SS at age 66: X = cost of living - $42K (wife’s pension) - 15K (your SS).
--If you take SS at age 70: X = cost of living - $42K (wife’s pension) - $21K (your SS) - 401k RMDs.



Safe withdrawal rate.

A safe withdrawal rate (SWR) of 4% from your retirement nest egg should last 30 years. So you could withdraw $35K (=885*4%, indexed for inflation) from your retirement nest egg each year, and it will be depleted 30 years later.

On the other hand, a SWR of <=2.5% ($22K=885*2.5%, indexed for inflation) is reported to never deplete our retirement nest egg as withdrawals are expected to be offset by growth.

Recall assumption for both cases may have been that retirement AA was 50/50. (But double-check this, as my memory is faulty. Search forum/internet for “Trinity Study”.)

If a 4% SWR is larger than your needed annual X, then you have a workable retirement solution.



Wife’s SS.

Question. Does your wife qualify for SS benefits? If not on her own then she should qualify for spousal benefits under your work history. That information is another piece of your retirement puzzle.

Recall SS use to allow you to file-for and suspend your SS benefits at FRA (full retirement age). This would then allow your wife to claim her spousal benefits when she’s eligible, while you delay SS until age 70. Don’t know if this provision of the SS system still exists (it may have been withdrawn/modified). Double-check SS “file and suspend”.



Suggested book.

How to Make Your Money Last, by Jane Bryant Quinn: structuring your retirement for success.

It’s information-dense. Can skim the sections that don’t apply to you, but read in detail those that do. Can start with the section on SS benefits and plans for claiming them.

Get the book from your local library.



The logical structure of your retirement nest egg for withdrawals

Many retirees report keeping 5yrs of liquid living expenses (savings, CDs, safe bonds, stable value fund, …and some purchase an annuity) to avoid a sequence of return risk (SoRR). Why? Assuming a stock crash recovers within 4yrs, then keeping 5yrs liquid means retirees should never need to sell stocks during a crash. (Search forum for SoRR for other thoughts/solutions.)

The logical structure of above is:
--Liquidity (as much as 5yr in insured saving, CDs,…).
--Stability (safe bond fund, stable value fund, …small principle fluctuations expected).
--Growth (safe stock funds, larger principle fluctuations expected).

Some retirees use the bucket system of money management.
--Bucket #1: cash equivalents (liquidity, insured, guaranteed principle, …annuity).
--Bucket #2: traditional retirement accounts (safe bond/stable value funds). Withdraw RMD first to avoid penalty.
--Bucket #3: Roth accounts (growth).



Bottom line.
--Withdrawals from your retirement nest egg (X) must make up the shortfall in your retirement livings expenses not covered by your wife's pension, your SS benefit, RMDs, and your wife's SS benefit (her own, or spousal benefits based on your work history).
--Your SS benefit can be increased by delaying taking it until age 70. You can use temporarily increased withdrawals (X) from your retirement nest egg to get to age 70 to claim SS. I don't believe your wife's spousal benefit can be increased by delaying, so better to take as soon as possible.
--It’s better to not have any loans (including a home mortgage) in retirement.



Lather, rinse, repeat above with your numbers to get a better picture of your retirement.



It would help the forum offer better suggestions if you would identify the contents of each: taxable, 401k, Roth IRA.

We need to know
--Where you have the accounts (Fidelity, Vanguard, Charles Schwab,…)
--What funds you have in each account.
--The percentage of your total investments ($885K = $325K from property sale, $150K in cash, $350K in 401k, $60K in Roth) represented by each fund. Percentages should total to 100%.
--The expense ratio of each fund.



Enough for now. I’ve made several suggestions (and assumptions) and you’ll need to decide what fits your situation and discard those that do not.

The devil is in the details. A clearer picture of your financial situation would get better suggestions from those more knowledgeable. Otherwise, all we can suggest is...

Patient: Doc, it hurts when I do this.
Doc: Don't do that.



Welcome.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

User avatar
dratkinson
Posts: 4243
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: portfolio help

Post by dratkinson » Sat Jul 14, 2018 6:56 pm

Forgot something. What? Once you've paid off your mortgage, if you need to, you can get a reverse mortgage to help make ends meets.

My neighbor had a reverse mortgage. Believe she received ~50% of the home's appraised value and took the money as a monthly payment---like withdrawing from a HELOC.

Quinn's book talks about reverse mortgages.



So your retirement sources of income to pay for your retirement cost of living appear to be:
--Wife's pension.
--Wife's SS spousal benefit (taken as early a possible).
--Your SS benefit (taken as late as possible).
--RMDs (taken from your traditional 401K at age 70.5).
--Reverse mortgage (taken whenever you need it).
--Additional withdrawals (above RMDs) from your retirement nest egg (if needed).
--Delay withdrawing from your Roth IRA to give tax-free growth more time to work (works better with stocks than bonds).

I believe you have enough pieces from which to construct a workable retirement living solution.

But if you like, can put numbers to all of the pieces (retirement cost of living,... ) and the smarter folks can take another look and maybe offer better suggestions.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

ostfrisian
Posts: 6
Joined: Tue Nov 22, 2016 2:47 pm

Re: portfolio help

Post by ostfrisian » Mon Jul 16, 2018 4:34 pm

delamer wrote:
Wed Jul 11, 2018 8:19 pm
ostfrisian wrote:
Wed Jul 11, 2018 5:10 pm
to delamer,

My goal with investments is to generate some income. I am invested in rental properties since they give me cash flow which is better than the income from stock/mutual fund part of investments. Hold cash so I can use it to fund real estate loans. I am not risk adverse and would like to generate some more passive income.
Most — although not all — Bogleheads investors want to maximize the total return (appreciation plus dividends/interest) on their investments (at their preferred risk level) rather than maximizing income.

That is one issue with investing in rentals. You can’t turn the total return into cash as easily as you can with stocks/bonds.

In any case, you can’t withdraw more than about 4% (inflation adjusted) of your non-cash liquid assets each year in order to have a high probability of those assets not being depleted over the course pf your retirement. This is known as the “safe withdrawal rate.” It is a concept with which you should familiarize yourself.
Thanks for your insight

ostfrisian
Posts: 6
Joined: Tue Nov 22, 2016 2:47 pm

Re: portfolio help

Post by ostfrisian » Mon Jul 16, 2018 5:15 pm

dratkinson wrote:
Thu Jul 12, 2018 8:52 pm
BH portfolio help.
ostfrisian wrote:
Tue Jul 10, 2018 5:56 pm
looking for advice with current allocation of retirement funds/assets.
We are a couple both 65, wife is retired with a STRS pension of $3500 per month, I am considering taking my SS later this year when I reach 66, will receive $1320/month.
Currently have $150,000 in cash, and $350,000in 401k and $60,000 in Roth
we have a 15 year home loan on primary residence of $120,000 @ 3% with about 11years remaining before its payed of.
Also own 3 rental properties
1. Duplex...valued at $380,000 / loan amount $195K
2. Duplex....valued at $350,000/ loan amount $150k
3. single family home valued at $145,000 / loan amount $85k
the rental generate about $1000 in cash flow

we have no other debt.

tax rate is 15% Fed, 9% state

currently invested
37.3% US Stocks...Vanguard Total Stock Market Index Fund
22.9 % US Bonds....Vanguard Total Bond Market Index Fund
22.6% international Stocks....Vanguard Total International Stock Index
13.5% International Bonds....Vanguard TotalInternational Bond Index

I'm worried that the US Stock fund is so heavy in financials and technology, any ideas for moving some money into small cap stocks/companies, should I move some money out of international bonds and stocks. What about some alternative investments such as REIT of metals/


TSM. Vanguard’s total stock market index fund is a recommended holding. Why? It holds 5000+ companies, no one of which represents more than 5% of its total holdings. Some are always up, some are always down. No one can predict the future.



The 3-fund portfolio. TSM is at the heart of the 3-fund portfolio. The 3-fund portfolio is recommended for all account types (self-employed, employer, personal; tax-free, tax-deferred, and taxable). It can be replicated in each account, or spread across all guided by your investment options’ availability/costs. However you get to an age-appropriate 3-fund portfolio is fine: individual funds/ETFs, or an all-in-one fund.

See Wiki topic: https://www.bogleheads.org/wiki/Three-fund_portfolio
See forum discussion: viewtopic.php?f=10&t=88005



Tax efficiency. Funds should be place into your investment accounts for tax efficiency.

See Wiki topic: https://www.bogleheads.org/wiki/Princip ... _placement



REIT. You would not want REIT as you already own rental property. Besides, TSM contains ~3% REIT, so until you learn more, that should be enough additional exposure for now.

But if you did invest in REIT, it is tax inefficient so would be placed in a tax-advantaged account (tax-deferred 401k or tax-free Roth IRA).



Asset Allocation (AA, stock/bond ratio). It appears your current AA is 63%/36%. The typical advice is “age in bond” (conservative) or “age in bonds - 10” (aggressive). So your recommended AA would be 35/65 (conservative) or 45/55 (aggressive).

Data points. Since the 40/60 AA was reported to last longest in retirement under withdrawal pressures, but more recent studies suggest 30/70 might be better today, then you could use 35/65 as a good enough target AA.



Rental property. Do you really want to be messing with rentals when you are 70-80-90? Will your health allow you to manage them? Do you have a succession plan? (RQ: rhetorical question.)



Return on investments. I don’t know how to figure this so bear with me.

You are receiving $1K/mo on $430K (=$195K + $150K + $85K) in loans. So ~2.7%/yr (=1/430/mo * 12mos/yr). That doesn’t seem like much return for a lot of work. Why? An investment is TSM should return a little over 2%/yr in 100% QDI (qualified dividend income) with no effort on your part.

QDI is taxed at 0% in the 15% fed tax bracket. So more TSM would seem to be better for you than more rentals if your return on them is less than your loan rate.

Question. Is the $1K/mo you make off your rentals only going to pay your loan interest?



Home mortgage. Going into retirement with a mortgage seems like it would be a financial drain. Most recommend being mortgage-free by retirement.



Case if you sold your rental properties.

What would your life look like if you sold your properties and removed all of your debts?

$875K, proceeds from sales (= 380K + 350K + 145K)
-$550K, loans paid off (= 195K + 150K + 85K + 120K)
$325K

Giving you a retirement nest egg of:
$475K, cash (=150K + 325K)
$350K, 401k (assume this is a traditional account so RMDs apply.)
$ 60K, Roth IRA
$885K, retirement nest egg



RMDs. To estimate your RMDs, see IRS worksheet: https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

What will be the amount of your RMDs? Why? An inflation-indexed answer that works today should also work 4yrs from today.



Retirement benefits

$42K, wife’s pension (=$3500/mo x 12mos/yr) (I assume this is indexed for inflation.)
$15K, your SS at age 66 (=$1320/mo * 12mos/yr) (This is indexed for inflation.)
$57K, annual inflation-indexed* retirement benefits now

$42K, wife’s pension
$21K, your SS if delayed until age 70
$63K, annual inflation-indexed* retirement benefits if you wait until age 70.

* An inflation-indexed solution that works today, should also work several years from now.



Cost of living in retirement. You need to determine this. It will be much less once you stop managing rentals and pay off all your loans.



Putting the pieces together.

Assuming you sold all rentals and paid off all loans, then your retirement nest egg must supply X---the missing income to cover your living expenses.
--Before you take SS: X = cost of living - $42K (wife’s pension).
--If you take SS at age 66: X = cost of living - $42K (wife’s pension) - 15K (your SS).
--If you take SS at age 70: X = cost of living - $42K (wife’s pension) - $21K (your SS) - 401k RMDs.



Safe withdrawal rate.

A safe withdrawal rate (SWR) of 4% from your retirement nest egg should last 30 years. So you could withdraw $35K (=885*4%, indexed for inflation) from your retirement nest egg each year, and it will be depleted 30 years later.

On the other hand, a SWR of <=2.5% ($22K=885*2.5%, indexed for inflation) is reported to never deplete our retirement nest egg as withdrawals are expected to be offset by growth.

Recall assumption for both cases may have been that retirement AA was 50/50. (But double-check this, as my memory is faulty. Search forum/internet for “Trinity Study”.)

If a 4% SWR is larger than your needed annual X, then you have a workable retirement solution.



Wife’s SS.

Question. Does your wife qualify for SS benefits? If not on her own then she should qualify for spousal benefits under your work history. That information is another piece of your retirement puzzle.

Recall SS use to allow you to file-for and suspend your SS benefits at FRA (full retirement age). This would then allow your wife to claim her spousal benefits when she’s eligible, while you delay SS until age 70. Don’t know if this provision of the SS system still exists (it may have been withdrawn/modified). Double-check SS “file and suspend”.



Suggested book.

How to Make Your Money Last, by Jane Bryant Quinn: structuring your retirement for success.

It’s information-dense. Can skim the sections that don’t apply to you, but read in detail those that do. Can start with the section on SS benefits and plans for claiming them.

Get the book from your local library.



The logical structure of your retirement nest egg for withdrawals

Many retirees report keeping 5yrs of liquid living expenses (savings, CDs, safe bonds, stable value fund, …and some purchase an annuity) to avoid a sequence of return risk (SoRR). Why? Assuming a stock crash recovers within 4yrs, then keeping 5yrs liquid means retirees should never need to sell stocks during a crash. (Search forum for SoRR for other thoughts/solutions.)

The logical structure of above is:
--Liquidity (as much as 5yr in insured saving, CDs,…).
--Stability (safe bond fund, stable value fund, …small principle fluctuations expected).
--Growth (safe stock funds, larger principle fluctuations expected).

Some retirees use the bucket system of money management.
--Bucket #1: cash equivalents (liquidity, insured, guaranteed principle, …annuity).
--Bucket #2: traditional retirement accounts (safe bond/stable value funds). Withdraw RMD first to avoid penalty.
--Bucket #3: Roth accounts (growth).



Bottom line.
--Withdrawals from your retirement nest egg (X) must make up the shortfall in your retirement livings expenses not covered by your wife's pension, your SS benefit, RMDs, and your wife's SS benefit (her own, or spousal benefits based on your work history).
--Your SS benefit can be increased by delaying taking it until age 70. You can use temporarily increased withdrawals (X) from your retirement nest egg to get to age 70 to claim SS. I don't believe your wife's spousal benefit can be increased by delaying, so better to take as soon as possible.
--It’s better to not have any loans (including a home mortgage) in retirement.



Lather, rinse, repeat above with your numbers to get a better picture of your retirement.



It would help the forum offer better suggestions if you would identify the contents of each: taxable, 401k, Roth IRA.

We need to know
--Where you have the accounts (Fidelity, Vanguard, Charles Schwab,…)
--What funds you have in each account.
--The percentage of your total investments ($885K = $325K from property sale, $150K in cash, $350K in 401k, $60K in Roth) represented by each fund. Percentages should total to 100%.
--The expense ratio of each fund.



Enough for now. I’ve made several suggestions (and assumptions) and you’ll need to decide what fits your situation and discard those that do not.

The devil is in the details. A clearer picture of your financial situation would get better suggestions from those more knowledgeable. Otherwise, all we can suggest is...

Patient: Doc, it hurts when I do this.
Doc: Don't do that.



Welcome.
Thank you great information -

To answer your question regarding rental properties, the income generated is actual cash flow after mortgage and all expenses. If I figure in depreciation and the mortgage interest deduction cash flow is higher-$1500 per month. As rents continue to climb cash flow will also increase.

My wife does qualify for SS however it is offset by her teachers retirement system and she receives about $250 per month. Enough to cover some of medicare costs.

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