Investing During Retirement

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Helpmebogle
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Investing During Retirement

Post by Helpmebogle »

Good Evening, Bogleheads!

I am approaching 66, and plan to retire at the end of this year. Rather than pay 1-2% fees using a financial advisor, I've decided to manage my own investments during retirement. My investment style is more on the conservative side.

My plan is to roll over my 401k into my Fidelity account. Can members in this forum provide me with a recommended portfolio? My preference would be to invest in no transaction fee funds (...or, is this an unreasonable expectation on my part?). Also, a portfolio that requires minimum maintenance would be desirable as well.

Thoughts?

John
UpperNwGuy
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Re: Investing During Retirement

Post by UpperNwGuy »

I recommend the three fund portfolio: Total Stock, Total International, and Total Bond. Depending on your risk tolerance, you would likely want your stock/bond ratio to be 60/40, 50/50, or 40/60. The international share of your stock should be between 20 and 40 percent.
hawkfan55
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Re: Investing During Retirement

Post by hawkfan55 »

Welcome to the forum John! You'll find lots of people willing to help. My wife and I are newly retired within the past couple years. I've learned so much with the forum and am able to help others as well.

You will get more specific, usable advice if you post your situation as described by the "Asking Portfolio Questions" topic at the top of this page. Also the Investment Planning link will be useful to you.

My advice would be to review the wiki, click on link at the top of page. Asset Allocation and recommended asset locations are important topics covered.

Again, welcome!
Forum Library of Investing Advice: https://www.bogleheads.org/wiki/Main_Page
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MN-Investor
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Re: Investing During Retirement

Post by MN-Investor »

Start by reading the Boglehead Wiki page on a Three-Fund Portfolio. They even suggest Fidelity funds to check out for such a portfolio.
The key to success - Save early, save often, invest well.
Ron Scott
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Re: Investing During Retirement

Post by Ron Scott »

I prefer the advice of Jack Bogle and suggest a 2 fund portfolio. Total US stock market and Total US bond market. No international needed.

I also suggest you keep your age in bonds, i.e., 2/3rds of your portfolio in bonds. If you’re portfolio is sizable and you are risk tolerant, drop 60% to bonds.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.
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patrick013
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Re: Investing During Retirement

Post by patrick013 »

Fidelity has a CD ladder option which will renew CD ladders
automatically at very good rates. You can designate these
CD's as spendable or renewable when they mature. No market
gain or loss problem when withdrawals need to be made annually.
Or depending how rates go zero coupon bonds in a 3 to 5 year
ladder in the 401k/IRA are another way to budget future annual
withdrawals.

Those and a TSM stock fund would be a simple and excellent
2-fund portfolio for a moderate or conservative AA (25%-50% stocks).

If your marginal tax rate at 70 is going to be higher than today
when including pensions, SS, annuities, and other investment
income then Roth conversion may be helpful before 70. Staying
in the lower tax bracket is important as well as not going over
an equal marginal tax rate when doing the conversions each year.
Will reduce RMD's and is an excellent place to put stocks. May
be helpful to reduce long term taxes when done before 70.
age in bonds, buy-and-hold, 10 year business cycle
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Toons
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Re: Investing During Retirement

Post by Toons »

Vanguard Lifestrategy Conservative Growth
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Skyflyerman
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Re: Investing During Retirement

Post by Skyflyerman »

May I respectfully disagree (gasp!) with many of my fellow Bogleheads on selecting a bond fund or individual bonds at this particular juncture in the economic cycle? Instead of putting a portion (20%, 40%, 60%) of your money in bonds or a bond fund (short term or not), put your risk off money in short term CD's, which are guaranteed (with certain reasonable restrictions). Since we know that the Powell has virtually assured that he will raise rates and bonds and bond fund values are inversely affected by that, why would anyone be recommending putting one's hard-earned cash in bonds or bond funds at this time? If there ever was a time that we know the BND fund value will be going down over the next year or so, it is now.

Perhaps when we see a longer term reversal of bond rates going down (not likely for some years to come), investing a portion of your portfolio in bonds will make sense, but certainly not now. Even a cash money market is better than bonds or a bond fund in the short term (12-24 months).

With a duration of about 6.1 on the BND fund, if Powell raises rates 1% (which are virtually guaranteed) that means your investment in BND, for instance will go DOWN, 6.1%, almost a given. Why would any intelligent investor be long in an investment that he knows with almost 100% assurity will go down in value? Just a thought.
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galeno
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Re: Investing During Retirement

Post by galeno »

If you are willing to hold BND for its average duration then the interest rate changes are immaterial. Sure the NAV goes down. But the yield goes up.
Skyflyerman wrote: Wed Oct 17, 2018 12:59 pm May I respectfully disagree (gasp!) with many of my fellow Bogleheads on selecting a bond fund or individual bonds at this particular juncture in the economic cycle? Instead of putting a portion (20%, 40%, 60%) of your money in bonds or a bond fund (short term or not), put your risk off money in short term CD's, which are guaranteed (with certain reasonable restrictions). Since we know that the Powell has virtually assured that he will raise rates and bonds and bond fund values are inversely affected by that, why would anyone be recommending putting one's hard-earned cash in bonds or bond funds at this time? If there ever was a time that we know the BND fund value will be going down over the next year or so, it is now.

Perhaps when we see a longer term reversal of bond rates going down (not likely for some years to come), investing a portion of your portfolio in bonds will make sense, but certainly not now. Even a cash money market is better than bonds or a bond fund in the short term (12-24 months).

With a duration of about 6.1 on the BND fund, if Powell raises rates 1% (which are virtually guaranteed) that means your investment in BND, for instance will go DOWN, 6.1%, almost a given. Why would any intelligent investor be long in an investment that he knows with almost 100% assurity will go down in value? Just a thought.
KISS & STC.
delamer
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Re: Investing During Retirement

Post by delamer »

hawkfan55 wrote: Tue Oct 16, 2018 10:17 pm Welcome to the forum John! You'll find lots of people willing to help. My wife and I are newly retired within the past couple years. I've learned so much with the forum and am able to help others as well.

You will get more specific, usable advice if you post your situation as described by the "Asking Portfolio Questions" topic at the top of this page. Also the Investment Planning link will be useful to you.

My advice would be to review the wiki, click on link at the top of page. Asset Allocation and recommended asset locations are important topics covered.

Again, welcome!
The more we know about your specific situation (like portfolio size, Social Security benefits, expenses), the better advice we can give.

Here are several options for lazy portfolios — low-cost portfolios based on index funds: https://www.bogleheads.org/wiki/Lazy_portfolios

You might want to read through one if these books for an overview: https://www.bogleheads.org/RecommendedReading.php
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
WhiteMaxima
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Re: Investing During Retirement

Post by WhiteMaxima »

One fund approach. Vanguard Balanced Index Admiral Fund. You don't have to manage it. It will automatically rebanlaned to 60/40 and very low cost to you. Time is more precious than money. Enjoy your retirement.
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Phineas J. Whoopee
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Re: Investing During Retirement

Post by Phineas J. Whoopee »

Hi OP.

You'll receive far better advice if you post in our Asking Portfolio Questions format. Without that information we're guessing, not advising.

PJW
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patrick013
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Re: Investing During Retirement

Post by patrick013 »

Skyflyerman wrote: Wed Oct 17, 2018 12:59 pmInstead of putting a portion (20%, 40%, 60%) of your money in bonds or a bond fund (short term or not), put your risk off money in short term CD's, which are guaranteed (with certain reasonable restrictions).
It's the day when a 2 year CD followed by another 2 year CD at maturity
will beat a 4 year CD bought today. :)
age in bonds, buy-and-hold, 10 year business cycle
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Artsdoctor
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Re: Investing During Retirement

Post by Artsdoctor »

Skyflyerman wrote: Wed Oct 17, 2018 12:59 pm May I respectfully disagree (gasp!) with many of my fellow Bogleheads on selecting a bond fund or individual bonds at this particular juncture in the economic cycle? Instead of putting a portion (20%, 40%, 60%) of your money in bonds or a bond fund (short term or not), put your risk off money in short term CD's, which are guaranteed (with certain reasonable restrictions). Since we know that the Powell has virtually assured that he will raise rates and bonds and bond fund values are inversely affected by that, why would anyone be recommending putting one's hard-earned cash in bonds or bond funds at this time? If there ever was a time that we know the BND fund value will be going down over the next year or so, it is now.

Perhaps when we see a longer term reversal of bond rates going down (not likely for some years to come), investing a portion of your portfolio in bonds will make sense, but certainly not now. Even a cash money market is better than bonds or a bond fund in the short term (12-24 months).

With a duration of about 6.1 on the BND fund, if Powell raises rates 1% (which are virtually guaranteed) that means your investment in BND, for instance will go DOWN, 6.1%, almost a given. Why would any intelligent investor be long in an investment that he knows with almost 100% assurity will go down in value? Just a thought.
Just a few thoughts on this.

Remember, when you're 66, you're still going to be investing for decades so there's plenty of long-term planning involved in addition to providing spending money for the relatively short-term (I would agree with you that money that you're going to need in the short term shouldn't be invested in bonds with a longer maturity than what you're going to need).

Plans that exist now may not be exercised. A lot can change.

As the Fed increases short-term rates, are you sure that intermediate- and long-term rates will increase accordingly? Are you positive that the yield curve won't invert? There are plenty of times in financial history when short-term rates are increasing faster than longer term rates.

No guarantees here. There are plenty of people who really made some major mistakes over the past decade investing in short-term bonds because it was a "sure thing" that interest rates were increasing.

(And don't forget, if "Powell raises rates 1%," that does not necessarily mean that BND will decrease 6.1%.)
MotoTrojan
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Re: Investing During Retirement

Post by MotoTrojan »

Skyflyerman wrote: Wed Oct 17, 2018 12:59 pm May I respectfully disagree (gasp!) with many of my fellow Bogleheads on selecting a bond fund or individual bonds at this particular juncture in the economic cycle? Instead of putting a portion (20%, 40%, 60%) of your money in bonds or a bond fund (short term or not), put your risk off money in short term CD's, which are guaranteed (with certain reasonable restrictions). Since we know that the Powell has virtually assured that he will raise rates and bonds and bond fund values are inversely affected by that, why would anyone be recommending putting one's hard-earned cash in bonds or bond funds at this time? If there ever was a time that we know the BND fund value will be going down over the next year or so, it is now.

Perhaps when we see a longer term reversal of bond rates going down (not likely for some years to come), investing a portion of your portfolio in bonds will make sense, but certainly not now. Even a cash money market is better than bonds or a bond fund in the short term (12-24 months).

With a duration of about 6.1 on the BND fund, if Powell raises rates 1% (which are virtually guaranteed) that means your investment in BND, for instance will go DOWN, 6.1%, almost a given. Why would any intelligent investor be long in an investment that he knows with almost 100% assurity will go down in value? Just a thought.
Hmm... do you really think that the smart holders of BND aren't adjusting for the Feds telegraphed rate increases? It is not almost a given, all knowledge is priced in just like the stock market.
MotoTrojan
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Re: Investing During Retirement

Post by MotoTrojan »

OP, if all you have is a 401k I would use a fund-of-funds such as a Target Retirement or Lifestrategy fund (Lifestrategy gets my vote as the AA doesn't change annually). These will rebalance daily; all you have to do is sell/withdraw when you want cash-money :).

What withdrawal rate do you intend to use, pre-tax?

Also if you have a particularly good 401k you are allowed to stay put, although transferring to an IRA is also an option and will get you more funds (sometimes 401k's have special funds like a stable value fund which are worth sticking around for).
Skyflyerman
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Re: Investing During Retirement

Post by Skyflyerman »

What I do know is that I am watching the BND fund go down, down, down while my non-equity portion is making a nice 2.5-3.25% a year for the next 2-3 years. If it isn't being caused by increasing short term rates, what's causing it? I'll stay in cash and CD's and merely suggest it as a viable (and guaranteed) alternative to BND for now.
jvini
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Re: Investing During Retirement

Post by jvini »

Hopefully you will be around for a long time. I wouldn't worry about bond funds going down right now. If you look at Vanguard white papers, they show that a total bond fund often doesn't fall much if at all when rates go up, and over the next 3-5 years, you'll be better off.

At Fidelity, I'd invest in ITOT, the no transaction blackrock Ishares total US market fund, ixus (international), and AGG (total bond). Personally I'd stay at 60/40 equities to bonds with 15% of my equity portion going to international.

A simple three fund portfolio that you can rebalance once a year. If you want to be more conservative, 50/50 would be fine as well. You don't want to be so heavily invested in bonds that inflation is eating heavily into your savings.
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celia
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Re: Investing During Retirement

Post by celia »

Helpmebogle wrote: Tue Oct 16, 2018 9:57 pm My preference would be to invest in no transaction fee funds (...or, is this an unreasonable expectation on my part?).
When you buy a fund managed by the custodian, there rarely are any transaction fees. That is, you should buy Fidelity funds if the account is at Fidelity, Schwab funds if the account is held at Schwab, Vanguard funds for money held at...you guessed it...Vanguard. If you buy funds managed by another company, there may or may not be transaction fees.

In addition, a fund of funds, such as Fidelity Freedom funds or Vanguard's Target Retirement funds will give you simplicity, but at the expense of being difficult to re-balance and not tax-efficient as it could be. See https://www.bogleheads.org/wiki/Tax-efficient Fund Placement for how to make your overall holdings more tax-efficient.
Topic Author
Helpmebogle
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Re: Investing During Retirement

Post by Helpmebogle »

hawkfan55 wrote: Tue Oct 16, 2018 10:17 pm Welcome to the forum John! You'll find lots of people willing to help. My wife and I are newly retired within the past couple years. I've learned so much with the forum and am able to help others as well.

You will get more specific, usable advice if you post your situation as described by the "Asking Portfolio Questions" topic at the top of this page. Also the Investment Planning link will be useful to you.

My advice would be to review the wiki, click on link at the top of page. Asset Allocation and recommended asset locations are important topics covered.

Again, welcome!
_________________

Thanks so much for the wonderful information. It is quite helpful!

The following is additional information regarding my retirement situation:

(1) I am 66, and plan on retiring in March of 2019.
(2) At retirement, my 401k will be valued at $1MM.
(3) I currently have an active account at Fidelity.
(4) My wife and I carry no debt, and we own our home.
(5) My wife and I will be collecting 2 Social Security payments (hers and mine).
(6) I will collect a pension from my employer.
(7) Rather than pay an advisor for investing advice, I plan on managing the 401k rollover myself.
(8) My wife and I are more on the conservative side.

So, I have the following questions:

(1) Is the three-fund portfolio still my best option?
(2) If so, should I invest only in no transaction fee Fidelity funds?
(3) If so, are the following Fidelity funds the most appropriate?
    Fidelity Total Market Index Fund (FSKAX)
      Fidelity Total International Index Fund (FTIHX)
        Fidelity U.S. Bond Index Fund (FXNAX)

        or...
          Fidelity ZERO Total Market Index Fund (FZROX)
            Fidelity ZERO International Index Fund (FZILX)
              Fidelity U.S. Bond Index Fund (FXNAX)

              (4) Would a different Fidelity investment mix be better?
              (5) Lastly, what % should be allocated to each fund?

              Again, thanks so much for any advice you can provide. It's amazing how stressful retirement decisions are!

              John
              hawkfan55
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              Re: Investing During Retirement

              Post by hawkfan55 »

              Helpmebogle,
              (1) Is the three-fund portfolio still my best option?
              A three fund portfolio may be right for you. Only you can decide after reading up on the benefits. An all-in-one fund may work for you as well.
              (2) If so, should I invest only in no transaction fee Fidelity funds?
              (3) If so, are the following Fidelity funds the most appropriate? Fidelity Total Market Index Fund (FSKAX) Fidelity Total International Index Fund (FTIHX) Fidelity U.S. Bond Index Fund (FXNAX)

              or...
              Fidelity ZERO Total Market Index Fund (FZROX) Fidelity ZERO International Index Fund (FZILX) Fidelity U.S. Bond Index Fund (FXNAX)

              (4) Would a different Fidelity investment mix be better?
              (5) Lastly, what % should be allocated to each fund?
              I do not have any funds at Fidelity so someone else may be able to give you their thoughts.
              As far as Asset Allocation, read the AA topic in the wiki and you can search the forum above to see what others are doing.
              Asset allocation is both the process of dividing an investment portfolio among different asset categories, and the resulting division over stocks, bonds, and cash [1][note 1]. This process of determining which mix of assets to hold in a portfolio is a personal one. The asset allocation that works best at any given stage in an investor's life will depend largely on the need, ability and willingness of the investor to take risk. These depend on the investment time horizon and on both the investor's financial capacity and emotional capacity to tolerate risk and to stay the course.
              In the end, only you can decide what AA is best for you. Usually somewhere between 25-75% stock fund(s) are acceptable for retirements. I've chosen a 45/55 stock/bond AA and consider myself conservative. AA's are very personal so you should develop your own AA after reading and learning more.
              You've added more information about your assets and income sources. You may find the Optimal Retirement Calculator, Extended Version helpful to figure your optimal yearly spending amount depending on your assets, sources of income and planned length of retirement. www.i-orp.com Do you have any Roth IRA or Roth 401k assets? With nearly a million in your 401k, if mostly tax deferred, you may find Roth Conversions helpful to reduce your tax burden in retirement? Many with a pension, SS and significant tax deferred assets find that they can be forced into higher tax brackets with Required Minimum Distributions when turning 70.
              Other retirement calculators can be found in wiki. Good Luck!
              Forum Library of Investing Advice: https://www.bogleheads.org/wiki/Main_Page
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              Godot
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              Re: Investing During Retirement

              Post by Godot »

              Skyflyerman wrote: Wed Oct 17, 2018 12:59 pm If there ever was a time that we know the BND fund value will be going down over the next year or so, it is now.
              Over the next year or so? Really? This would be more actionable if you could provide an exact date.
              "The day you die is just like any other, only shorter." | ― Samuel Beckett
              sailaway
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              Re: Investing During Retirement

              Post by sailaway »

              I hope OP means that they intend to roll the 401k over to an IRA at Fidelity. To roll it over to their Fidelity brokerage account would create a tax situation that may not be favorable.
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              tennisplyr
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              Re: Investing During Retirement

              Post by tennisplyr »

              Check out this Vanguard web tool as a broad guide to developing an asset allocation:

              https://retirementplans.vanguard.com/VG ... -YYA4-CW3H
              “Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
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              LadyGeek
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              Re: Investing During Retirement

              Post by LadyGeek »

              New member CatMad has a question which I've moved to a new thread. See: Investing During Retirement - recommendation for 2023?

              (This thread is from 2018.)
              Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
              tibbitts
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              Re: Investing During Retirement

              Post by tibbitts »

              It's interesting to read the bond market timing comments in this thread, in light of what's transpired, so I'm glad the thread was resurrected.
              smooth_rough
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              Re: Investing During Retirement

              Post by smooth_rough »

              If you don't have confidence to construct your own portfolio, vanguard is well known for two different funds that might be fit: Wellington, Wellesley.

              You only need to pick one. Wellington has more stocks. Wellesley has more bonds. They are actively managed funds so they have slightly higher fees than index funds. There would be tax consequences that you want to think about if you keep them in taxable account. But they retain popularity with long history.
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