BH Advice for "Little Old Lady" revised
A couple of ideas come to mind.
1. Reverse mortgage.
Since your home is paid for, you should have the option to get a reverse mortgage.
My neighbor used a reverse mortgage, and took it as monthly payments to reduce the withdrawal pressure on her other investments.
Recall she had to pay for a current appraisal, after which I believe she could withdraw 2/3 (?) of the appraised value. Believe a reverse mortgage may also require a hefty fee. Both were taken from the reverse mortgage.
Since your home is worth ~$150K, and assuming similar conditions apply for you, I'm guessing you might be able to withdraw ~$100K by reverse mortgage from your home.
I recall reading a section in the book How to Make Your Money Last
, by Jane Bryant Quinn, that talked about reverse mortgages and how to get one.
The book is quite thick and covers many options to help us pay for our retirement. (Most sections did not apply to me so I only skimmed those sections, but read in depth the sections that did.)
Forum members have also written a book, The Boglehead's Guide to Retirement Planning
, but I have not yet read it. It may provide you with other ideas to extend your money, or provide an alternate understanding of your options.
Get the books from your local library or through inter-library loan.
2. SPIA (single-premium immediate annuity).
I hesitate to mention this option because I know nothing about it. But I've heard forum member speak of using an SPIA to get a guaranteed income stream for the remainder of their life and so reduce the withdrawal pressure on their other investments. I'm certain both books above discuss it. Where would you get the money to buy an SPIA? From (part of) your reverse mortgage.
But I don't know which is the better option: (1) to use a reverse mortgage to reduce the monthly withdrawals from your investments, or (2) to buy an SPIA to do the same thing.
Seem to recall the SPIA may be preferred if we believe we WILL run out of money (will exhaust investments + reverse mortgage), and the reverse mortgage may be preferred if we believe we WILL NOT run out of money.
Before deciding on either option, read both books, search the forum, and ask specific questions of knowledgeable forum members.
Do you want to plan for heirs? Recall:
--Any residual home value, after paying off a reverse mortgage, can go to our heirs.
--But any residual SPIA value remains with the insurance company that sold it to you.
Code: Select all
Cost Market G/L Stocks Bonds
VBTLX Total Bond Market Index, Adm 16792 16298 -494 16298
VDAIX Dividend Appreciation Index, Inv 7009 8269 1260 8269
VGTSX Total International Stock Index, Inv 6551 5830 -721 5830
VTI Total Stock Market ETF 2204 2394 190 2394
VTIBX Total International Bond Index, Inv 5332 5615 283 5615
VTSMX Total Stock Market Index, Inv 20009 25173 5164 25173
VWELX Wellington Income* 3835 4426 591 2213 2213
VWINX Wellesley Income* 3893 4148 255 2074 2074
Totals 6528 45953 26200
* I assumed your financial advisor was trying for a 50/50 split with Wellington and
Wellesley---recall one is 60/40, the other 40/60---so assumed 50/50 stock/bond split.
But for now we are still trying to understand your situation: where your money is---at Vanguard or somewhere else, in a taxable account or IRA, what type of IRA, and which funds are in each account.
--Having VBTLX, an Admiral share class fund, suggests this fund is at Vanguard.
--Having the Investor class funds suggests they are not at Vanguard, since VTSMX should have been upgraded by Vanguard to Admiral share class (VTSAX), but can't be bought outside of Vanguard.
--If the money is in an IRA, it's tax-free to make changes, so we don't need to worry about G/L.
--If the money is in a taxable account, then we must consider G/L before making changes.
--If you have a traditional IRA, then you must make annual RMDs (required minimum distributions). Not an issue since you probably need the money for living expenses. So only real issue is to ensure RMD is made---instead of withdrawing from a taxable account---to avoid IRS penalty for failing to make RMD.
--If you have a Roth IRA, then RMDs are not required.
--What cost basis method are you using in your taxable account(s)? In your IRA account(s)? (“Average cost basis” would be the easier to use and supported by brokerages---one less thing to worry about---but is that the way you set up your accounts?)
Are there are any costs* (loads, fees, taxes) which can be eliminated by moving your money elsewhere? (Taxes on your investments would seem to be the smaller issue.)
So there is still much we don't know about your situation that should be considered before offering advice.
* Disclosure. While house sitting for a neighbor and authorized to open mail and call someone when a bill was received, I discovered her financial advisor was churning her account to earn a $20 fee on every sell and every buy transaction. In one month he would sell one fund and buy two funds ($60). Then next month he would sell two funds and buy one fund ($60). Since the funds were indistinguishable bond funds, the churning was obvious to me, but not to her, until I pointed it out.
She moved her money to Fidelity to stop the churning.