Simplifying Portfolio as I head into retirement?

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BarbBrooklyn
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Simplifying Portfolio as I head into retirement?

Post by BarbBrooklyn » Tue Oct 02, 2018 5:44 am

I'm 65 years old and eligible for retirement from my NYC gov job; I've decided to pull the plug and retire on December 1, 2018. At that time, I'll be eligible for a 57K or so pension (which will be 100% joint for DH if I predecease). I will have guaranteed health insurance for life, currently at very little cost. We are recommended to buy the optional benefit rider which is $200/month which provides prescription coverage. City reimburses our Medicare Part B payments (I am only on Medicare A right now, as I'm still working) Edit: Applying for Medicare B to start in December.

I make 124K. I will max out my 403B (currently 426K, 2/3s in guaranteed 7%; Edit (no ER; I could move the other 1/3 into this if I chose) 1/3 in Equity Fund (ER .108).

I will also max my 457 (currently 15K), which is in 2015 Fund, ER .21. : 51% Fixed Income/ 48.6 Equity funds.
Edit:
Possible alternative choices in the 457 are:
Equity Index ER .05
Bond Index .09
International Equity .32
Stable income .28
There are also mid and small cap funds; I don't think I'm interested in diversifying this along those lines)

I have a Vanguard Rollover IRA (600K)from previous marriage.
About 46% is in Vanguard Target 2020. (280K) ER 0.13
VFIAX 137K Vanguard 500 Index Fund, Adm Shares ER 0.04
VMGMX 11k Vanguard Mid Cap Growth Index fund admiral ER .07%
VIMAX 22k Vanguard Mid cap Index fund, Admiral shares ER .05%
VSIAX 39k Vanguard Small Cap Value Index Fund, Adminral ER .07%

VBTLX 60k Vanguard Total Bond Market Index Fund, Admiral Shares ER .05%
VTABX 10k Vanguard Total International Bond Index Fund Admiral Shares .11%
VICSX 33k Vanguard Intermediate Term Corp Bond Index Fund, Admiral shares ER .07%

VTIPX 5k Vanguard Short term Inflation protected Securities Index Fund, Investor Shares ER .15%
VMFXX 5k Vanguard Federal Money Market Fund, ER .11%

The way I'm adding this up, I've got 500K in equities, 205K in Bonds. 280K in Fixed 7% guaranteed. 10k in cash.

DH has a stable 50K per year job no significant savings. Not looking to retire any time soon. (Was unemployed from Dec 2008-June 2012, worked in Financial Services Industry; hard to get re-employed when you're over 55; used his 401K to fund some training, pay debt, etc. He's a spender, and I like to say that we're married but our money is not--second marriage for us both)

Inherited about 175K over the course of this year; have been living on take home of 33.6K with about 14K in withdrawals from the inheritance (my idea is to use the inheritance money to fund the tax deferred accounts)

No debt other than 141K mortgage at 3.5% on coop which is currently worth about 750K

My question here is, is it advisable for me to get rid of the 2020 Fund and try to simplify into a three fund portfolio, which I would set to 60/40, so as to balance out my 403b. This would keep me 50/50 in equities and stocks. Edit: I'm now also thinking of ditching the 457 2015 fund (rather high ER and go with some mix of Equity/Bonds, if only to reduce costs.

Is there a downside to simplifying in this way? My problem right now with these Target Date funds is that they seem to get much more conservative than I am comfortable with, given my (thank the City of NY) pension and fixed funds situation.
Last edited by BarbBrooklyn on Wed Oct 03, 2018 4:35 pm, edited 1 time in total.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

lessismoreinvestor
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Re: Simplifying Portfolio as I head into retirement?

Post by lessismoreinvestor » Tue Oct 02, 2018 7:24 am

Simplifying is a great way to go. There is no problem with changing to that portfolio split you mentioned.

At first, I was going to recommend you roll your 403b over to vanguard once you retire, but if you can keep getting that guaranteed 7% that is a pretty good deal. Perhaps roll over the rest of the money except that guaranteed 7% part?

You would be getting social security also right?

Is the mortgage in both of your names or just yours? How much longer until it is paid off? Not having a mortgage is something to possible strive for or maybe pay it off in the next couple of years.

How much do you expect to spend during retirement? travel?

If you have a current portfolio of 1 million, you can pull 4% or $40,000 off a year and that nest egg should last 30 years or more. If you want to be conservative then do 3% or $30,000. I do like the 50/50 equities to bonds for your retirement. Nice asset allocation.

Do read some on the sequence of return risk. Especially considering you are retiring with this bull market. Basically, the first 5 years are very important for your retirement portfolio. If the market would drop you may just adjust your withdrawals slightly, but do read a little bit on that.

You are in amazing shape! Great job saving over your career!

lessismoreinvestor

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ruralavalon
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Re: Simplifying Portfolio as I head into retirement?

Post by ruralavalon » Tue Oct 02, 2018 5:38 pm

BarbBrooklyn wrote:
Tue Oct 02, 2018 5:44 am
I'm 65 years old and eligible for retirement from my NYC gov job; I've decided to pull the plug and retire on December 1, 2018. At that time, I'll be eligible for a 57K or so pension (which will be 100% joint for DH if I predecease). I will have guaranteed health insurance for life, currently at very little cost. We are recommended to buy the optional benefit rider which is $200/month which provides prescription coverage. City reimburses our Medicare Part B payments (I am only on Medicare A right now, as I'm still working)
Those are excellent employment benefits, you are very fortunate.

Most retirees without those benefits find that health insurance and health care costs become substantial spending items during retirement.

I agree that $200/month for drug coverage is probably wise.

BarbBrooklyn wrote:I make 124K. I will max out my 403B (currently 419K, 2/3s in guaranteed 7%; 1/3 in Equity Fund. I will also max my 457 (currently 13K), which is in 2015 Fund, ER .26. : 51% Fixed Income/ 48.6 Equity funds.

I have a Vanguard Rollover IRA (600K)from previous marriage.
About 46% is in Vanguard Target 2020. (280K) ER 0.13
VFIAX 137K Vanguard 500 Index Fund, Adm Shares ER 0.04
VMGMX 11k Vanguard Mid Cap Growth Index fund admiral ER .07%
VIMAX 22k Vanguard Mid cap Index fund, Admiral shares ER .05%
VSIAX 39k Vanguard Small Cap Value Index Fund, Adminral ER .07%

VBTLX 60k Vanguard Total Bond Market Index Fund, Admiral Shares ER .05%
VTABX 10k Vanguard Total International Bond Index Fund Admiral Shares .11%
VICSX 33k Vanguard Intermediate Term Corp Bond Index Fund, Admiral shares ER .07%

VTIPX 5k Vanguard Short term Inflation protected Securities Index Fund, Investor Shares ER .15%
VMFXX 5k Vanguard Federal Money Market Fund, ER .11%

The way I'm adding this up, I've got 500K in equities, 205K in Bonds. 280K in Fixed 7% guaranteed. 10k in cash.
I would analyze that as $500k equities and $495 fixed income, or an asset allocation of about 50/50.

In my opinion an asset allocation of 50/50 is within the range of what is reasonable for someone about to retire and in retirement.

BarbBrooklyn wrote:DH has a stable 50K per year job no significant savings. Not looking to retire any time soon. (Was unemployed from Dec 2008-June 2012, worked in Financial Services Industry; hard to get re-employed when you're over 55; used his 401K to fund some training, pay debt, etc. He's a spender, and I like to say that we're married but our money is not--second marriage for us both)

Inherited about 175K over the course of this year; have been living on take home of 33.6K with about 14K in withdrawals from the inheritance (my idea is to use the inheritance money to fund the tax deferred accounts)
I agree that it's wise to draw from the inheritance for living expenses in order to enable you to make the maximum annual contributions to your work-based plans.


BarbBrooklyn wrote:No debt other than 141K mortgage at 3.5% on coop which is currently worth about 750K
It's good to see that you are debt free other than the mortgage note.

I don't know anything about New York real estate, so will not comment on whether you should consider using some of the $175k inheritance to pay off the mortgage.


BarbBrooklyn wrote:My question here is, is it advisable for me to get rid of the 2020 Fund and try to simplify into a three fund portfolio, which I would set to 60/40, so as to balance out my 403b. This would keep me 50/50 in equities and stocks.

Is there a downside to simplifying in this way?
Yes you can easily simplify. I see no downside.

In my opinion you could even further simplify your rollover IRA, and more simply use just 3-4 funds:
1) Vanguard 500 Index Fund Admiral Shares (81%
of U.S. stock market) (VFIAX) ER 0.04%;
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%;
3) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%,
OR
Vanguard Intermediate-term Bond Index Fund Admiral Shares (VBILX) ER 0.07%
(both are very good intermediate-term bond funds, I see no need to use both); and
4) Vanguard Short-term Inflation Protected Securities Index Fund Investor Shares (VTIPX) ER 0.15%.

You didn't say what investments you use in your 457 plan. What investments are you using there?

What is the "Equity Fund" you are using in your 403b account? What is the "guaranteed 7%" fund in your 403b account?

Please give fund names, tickers and expense ratios.

It's often better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio, rather that allocate each account separately.

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

BarbBrooklyn
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Location: NYC

Re: Simplifying Portfolio as I head into retirement?

Post by BarbBrooklyn » Wed Oct 03, 2018 4:35 pm

I've edited my original post to reflect ERs as requested. Thanks! Barbara
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

Kennyt7
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Re: Simplifying Portfolio as I head into retirement?

Post by Kennyt7 » Wed Oct 03, 2018 5:10 pm

simplify with 5-7 vanguard stock and bond funds and reits

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ruralavalon
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Re: Simplifying Portfolio as I head into retirement?

Post by ruralavalon » Wed Oct 03, 2018 5:12 pm

BarbBrooklyn wrote:
Wed Oct 03, 2018 4:35 pm
I've edited my original post to reflect ERs as requested. Thanks! Barbara
Those are nice low expense ratios on the funds offered in your 457 plan, so they may be good funds to use. That is very helpful.

In your 457 plan materials or on the 457 plan website there will be a short fact sheet (perhaps just 1-2 pages) that describes each fund givng:
1) the name of the company managing the fund (like BlackRock, State Street, Vanguard, etc.);
2) the investment strategy, including index or benchmark used;
3) the expense charged the plan participant; and
4) a comparison of fund performance to the index or benchmark used.

Can you post links the fact sheets for each of these funds offered in your 457 plan?:
Equity Index, ER 0.05%;
Bond Index, ER 0.09%; and
International Equity, ER 0.32%.

If not please state the name of the fund company managing each fund, and the index or benchmark used by each fund.

Also please link the fact sheets for the Equity Fund ER 0.108% and Fixed Income 7% guaranteed fund in your 403b.

What is the rate of return currently being paid on the Stable Income Fund offered in your 457 plan?

Again you can simply add this to your original post, so that all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

krow36
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Re: Simplifying Portfolio as I head into retirement?

Post by krow36 » Wed Oct 03, 2018 5:58 pm

Have you considered the special catch-up contributions allowed in 457 plans during the 3 years prior to retirement age? You could possibly double the standard 18.5k for 2018?
https://www.irs.gov/retirement-plans/pl ... ion-limits

BarbBrooklyn
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Re: Simplifying Portfolio as I head into retirement?

Post by BarbBrooklyn » Thu Nov 08, 2018 6:21 am

krow36 wrote:
Wed Oct 03, 2018 5:58 pm
Have you considered the special catch-up contributions allowed in 457 plans during the 3 years prior to retirement age? You could possibly double the standard 18.5k for 2018?
https://www.irs.gov/retirement-plans/pl ... ion-limits
Alas, I wish I'd known about that last year!

I have 13 more days of work left! Visited with our very low cost (thanks to the City of NY--$25!) Financial Planner last night. All is well; I'm going to simplify out of the Vanguard Target Date Fund and into a 3 or 4 fund portfolio at year's end when I have more time.

Much thanks to you all!
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

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