Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

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Topic Author
GR8FUL-D
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Joined: Wed May 30, 2018 12:14 pm

Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by GR8FUL-D » Sun Mar 10, 2019 1:08 pm

I made the decision to retire a year ago (at 50 yrs old) in order to care for elderly parents who otherwise would have soon needed to be moved into an assisted living facility.

Due to my upbringing I am extremely risk-averse. While I intellectually understand & agree with the Boglehead approach of investing, I have a huge emotional disconnect which thus far has prevented me creating any kind of even quasi-intelligent investing plan.

I do not have children and I’m not concerned with leaving an inheritance; my primary concerns are:
  • Preservation of capital.
  • Growing it enough to protect myself from reduced purchasing power due to inflation.
For the purposes of this discussion, please keep in mind that:

1) I will not need to withdraw money from my investments portfolio below for 10 years (beginning in 2029), after which it will be my sole source of income. I do not have a pension nor a 401K, and I do not want to factor Social security benefits into this discussion.
2) Beginning 2029 assume annual expenses of $50,000/year (adjusted for inflation).

My goal is to create the most risk-aversive, passive-investment portfolio possible that will provide for the highest probability of me not out-living my money.

Emergency funds: 12+ months (in addition to money listed below)
Debt: Zero debt
Tax Filing Status: Single, no children
Tax Rate: 12% Federal, 0% State
State of Residence: Florida
Age: 51
Desired Asset allocation: unknown
Desired International allocation: unknown

FIDELITY
Taxable: $514,000
94% Fidelity Money Market FZDXX 0.37%
4% Fund*X Upgrader Fund FUNDX 1.89%
2% American Century All Cap Growth Investor TWGTX 1.00%
ROTH: Total $57,479
45% Fidelity Money Market Fund FZDXX 0.37%
2% Invesco Global Small & Midcap Growth CL A AGAAX 1.36%
7% Fidelity Advisor Equity Income FEIRX 1.15%
8% Fund*X Upgrader Fund FUNDX 1.89%
30% Columbia Seligman Communications & Info SLMCX 1.23%
8% Invesco American Franchise Fund 1.01%
Traditional IRA: $11,143
100% Fidelity Money Market Fund FZDXX 0.37%

VANGUARD
Taxable: $604,422

78% Vanguard Prime Money Market Fund VMMXX 0.16%
22% Vanguard Federal Money Market Fund 0.11%
Traditional IRA: $26,605
100% Vanguard Prime Money Market Fund VMMXX 0.16%
ROTH IRA: $5,817
100% Vanguard Prime Money Market Fund VMMXX 0.16%

Charles Schwab:
Taxable: $329,168

100% Schwab Value Advantage Money Fund SWVXX 0.34%

I hate dealing with anything related to money, taxes, investments, etc., so I very much desire a “Set it & forget it” approach to my investments. Any & all investments above that are not in M.M. funds I bought years ago on the advice of commissioned brokers or based on something stupid I read.

Additional questions:

1) I would appreciate advice on how to protect my portfolio from myself as I age and become mentally-impaired and susceptible to bad advice from others. In watching my grandparents, parents, and others age, I have witnessed the proclivity of the elderly to both fall prey to financial scams and to make financially-devastating, fear-based investment decisions. Presumably buying an annuity is one answer, but it’s doubtful I am going to be willing to do that. What financial safeguards can those of us without children put in place now to assist and protect ourselves as we age?

2) Should I move money in my traditional IRAs into ROTH IRAs via a backdoor contribution?

3) Currently my expenses are extremely low and I actually live well on less than $50,000 year. When my parents die I will inherit their house & property, which I can then either continue to live in, or sell and use the proceeds to buy housing elsewhere. Based upon my current spending habits $50,000/year would cover my expenses, but I am not factoring in health-care costs, and I can't help but wonder if I vastly underestimating what my healthcare costs will be in my later years.

Thanks in advance to all of you who are so generous and with your time and advice. This site is an invaluable resource for those of us who are just beginning our financial education.

HEDGEFUNDIE
Posts: 2768
Joined: Sun Oct 22, 2017 2:06 pm

Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by HEDGEFUNDIE » Sun Mar 10, 2019 5:28 pm

It would help if you described exactly what you mean when you say that you are “extremely risk-averse”.

If the answer is you can’t bear to see any of your investments decline in value, then I guess you already have your answer with your 95% money market allocation. Not sure what else you’re looking for from the board.

I also find it interesting that you say you have seen others fall prey to “fear-based” decision making. Have you considered whether you might be describing yourself?

fujiters
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by fujiters » Sun Mar 10, 2019 5:55 pm

Consider buying SPIAs as you retire, annuitizing a bit more every 5-10 years. This would allow a greater effective withdrawal, and you wouldn't have to concern yourself with your portfolio.
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

Ferdinand2014
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by Ferdinand2014 » Sun Mar 10, 2019 6:11 pm

You might consider in all in one fund. A fidelity example would be FIKFX (Fidelity Freedom Index Income Fund).
This is essentially the end of the road target date index fund designed for individuals late in retirement. It's where all the target date Fidelity funds migrate to over time. It's very conservative, well diversified and should keep ahead of inflation and a bit extra. An all in one fund would reduce complication and help avoid your concern about managing it later in life.

FIKFX (Fidelity Freedom Index Income Fund) ER 0.14
It has the following in a fixed ratio:

14% Total U.S. Stock Index Fund
6% Total International Stock Index Fund
45% Total U.S. Investment Grade Index Bond fund
2 % Long Term U.S. Treasury Index Bond Fund
25% U.S. Short Term Treasury Bill Index Fund
8% U.S. Treasury TIPS (Inflation Protected) Index Fund

Essentially 20% equities, 55% bonds, 25% cash

I am not as familiar with Vanguard, but would imagine they have something similar.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Topic Author
GR8FUL-D
Posts: 40
Joined: Wed May 30, 2018 12:14 pm

Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by GR8FUL-D » Sun Mar 10, 2019 9:03 pm

HEDGEFUNDIE wrote:
Sun Mar 10, 2019 5:28 pm
It would help if you described exactly what you mean when you say that you are “extremely risk-averse”.

Unlike most people my age, I don't have a job, I don't have a pension or 401K, and I don't have any children, so I am going to have to SOLELY rely on my current savings to see me through the end of my life. If in fact I don't have enough money to do that, than clearly I need to either a) choose an investment strategy that entails more risk but is more likely to meet my investment goal of not running out of money before I die, or b) go back to work. Those are both options. IF however (and that's a bit "if") I have enough money now to meet all my future needs, I see no reason to take on any unnecessary or additional market risks in order to make "more".

If the answer is you can’t bear to see any of your investments decline in value, then I guess you already have your answer with your 95% money market allocation. Not sure what else you’re looking for from the board.

What I am specifically looking for is the safest investment strategy that will enable me to withdraw $50,000 (adjusted for inflation) for when I am 61 to 100 years old. I'm willing to take on market risk if that is the only reasonable way of achieving my goal. However, if there is a safer alternative, I'd prefer that option, even if it's virtually guaranteed that I'll make less money.

Maybe my Investment Plan (and I'm just pulling this out of the air) should be 20% stocks, 40% in bonds, and 40% in CD ladders and/or TIPS. I am consciously aware that I don't have the knowledge to make this decision, thus the reason I am asking for advice from those on this board.


I also find it interesting that you say you have seen others fall prey to “fear-based” decision making. Have you considered whether you might be describing yourself?

Sincerely--thank you for pointing that out, and I have zero doubt I am. Even more concerning is the likelihood that I will get even more fearful as I age, which is why I asked question #1 at the end of my original post.

EnjoyIt
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by EnjoyIt » Sun Mar 10, 2019 9:28 pm

Based on what I see, you have $1,548,634 in savings. If you follow traditional thinking that you can withdraw 4% a year in retirement That would give you $61,945k a year. Unfortunately those calculation expect something in the order of a 60% stock / 40% bond portfolio which I think is outside your comfort zone of risk aversion. Since you are looking to do 50k/yr that is a 3.23% withdrawal rate. That tells me you will need a portfolio of close to 40% equities.

My advise would be to pool all your assets into Vanguard or Fidelity, purchase one fund that is 40% equities and 60% bonds in each of the 3 categories (taxable, IRA, and Roth) and just move on with life.

HEDGEFUNDIE
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by HEDGEFUNDIE » Sun Mar 10, 2019 10:57 pm

GR8FUL-D wrote:
Sun Mar 10, 2019 9:03 pm
HEDGEFUNDIE wrote:
Sun Mar 10, 2019 5:28 pm
It would help if you described exactly what you mean when you say that you are “extremely risk-averse”.

Unlike most people my age, I don't have a job, I don't have a pension or 401K, and I don't have any children, so I am going to have to SOLELY rely on my current savings to see me through the end of my life. If in fact I don't have enough money to do that, than clearly I need to either a) choose an investment strategy that entails more risk but is more likely to meet my investment goal of not running out of money before I die, or b) go back to work. Those are both options. IF however (and that's a bit "if") I have enough money now to meet all my future needs, I see no reason to take on any unnecessary or additional market risks in order to make "more".

If the answer is you can’t bear to see any of your investments decline in value, then I guess you already have your answer with your 95% money market allocation. Not sure what else you’re looking for from the board.

What I am specifically looking for is the safest investment strategy that will enable me to withdraw $50,000 (adjusted for inflation) for when I am 61 to 100 years old. I'm willing to take on market risk if that is the only reasonable way of achieving my goal. However, if there is a safer alternative, I'd prefer that option, even if it's virtually guaranteed that I'll make less money.

Maybe my Investment Plan (and I'm just pulling this out of the air) should be 20% stocks, 40% in bonds, and 40% in CD ladders and/or TIPS. I am consciously aware that I don't have the knowledge to make this decision, thus the reason I am asking for advice from those on this board.


I also find it interesting that you say you have seen others fall prey to “fear-based” decision making. Have you considered whether you might be describing yourself?

Sincerely--thank you for pointing that out, and I have zero doubt I am. Even more concerning is the likelihood that I will get even more fearful as I age, which is why I asked question #1 at the end of my original post.
Here is my suggestion.

1. Spend $600k on a single payment deferred annuity that begins payments in 10 years. This will pay out $50k/year for the rest of your life.

2. Put the rest of your portfolio into a low cost 30/70 balanced fund. Something like Vanguard Target Retirement Income Fund. This will return 4-5%/yr with moderate drawdown risk.

Topic Author
GR8FUL-D
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by GR8FUL-D » Mon Mar 11, 2019 6:46 pm

Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total Bond Market Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?

I imagine that most here on this forum feel that there is no need to pay Vanguard the extra 0.15% in PAS fees, but for investment neophytes like myself, if a little hand-holding helps me to take action and then "stay the course", I imagine it will be money well spent.

Thanks again for everyone's thoughtful replies.
Last edited by GR8FUL-D on Mon Mar 11, 2019 7:24 pm, edited 1 time in total.

Daryl
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Location: Malvern, PA (I like to sleep near my money!)

Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by Daryl » Mon Mar 11, 2019 6:54 pm

Someone above mentioned an annuity. This is actually a really great solution for a lot of people, and doesn't get enough respect. You basically guarantee yourself an "allowance" for the rest of your life,with zero chance of out-living your savings.

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WoodSpinner
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by WoodSpinner » Mon Mar 11, 2019 7:14 pm

GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total International Bond Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?

I imagine that most here on this forum feel that there is no need to pay Vanguard the extra 0.15% in PAS fees, but for investment neophytes like myself, if a little hand-holding helps me to take action and then "stay the course", I imagine it will be money well spent.

Thanks again for everyone's thoughtful replies.
Is there a typo in the bond fund recommendations?

Dandy
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by Dandy » Mon Mar 11, 2019 7:17 pm

I would consider at age 60 looking at what investment amount for an immediate annuity would generate the 50k per year you are looking for. That would give you a base of income and what assets remain would be invested conservatively e.g. 30/70 to offset moderate inflation.

Most recommend not buying a single annuity from one company. Using several highly rated companies and spacing the purchases out will likely generate more income and probably take fewer asset dollars. I think you will be more comfortable with a regular payment each month for life as opposed to trying to manage your portfolio especially as you age and start to lose competency. Any Social Security will also fight inflation and hopefully be there for life.

Topic Author
GR8FUL-D
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by GR8FUL-D » Mon Mar 11, 2019 7:26 pm

WoodSpinner wrote:
Mon Mar 11, 2019 7:14 pm
GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total International Bond Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?

I imagine that most here on this forum feel that there is no need to pay Vanguard the extra 0.15% in PAS fees, but for investment neophytes like myself, if a little hand-holding helps me to take action and then "stay the course", I imagine it will be money well spent.

Thanks again for everyone's thoughtful replies.
Is there a typo in the bond fund recommendations?
Yes there was, thanks for pointing that out. I have corrected it in the above post, but the 3rd line should have read
"Vanguard Total Bond Market Index Fund Admiral Shares"

miket29
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by miket29 » Mon Mar 11, 2019 7:30 pm

GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?
Given that you are primarily in money market now, this sounds far from your comfort range. It might be a decent allocation, but if you see it lose 1/5 its value, then another 1/5, you might panic and sell before its all gone. That would lock in losses.

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Wiggums
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by Wiggums » Mon Mar 11, 2019 7:35 pm

Daryl wrote:
Mon Mar 11, 2019 6:54 pm
Someone above mentioned an annuity. This is actually a really great solution for a lot of people, and doesn't get enough respect. You basically guarantee yourself an "allowance" for the rest of your life,with zero chance of out-living your savings.
I agree. SPIA is the only type you should consider.

Also the Vanguard 3-4 fund portfolio is a good alternative. You also find these funds in the life strategy all in one funds.

Independent George
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by Independent George » Mon Mar 11, 2019 7:41 pm

GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total Bond Market Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?
That is a reasonable portfolio for someone who isn't as risk-averse as you seem to be. Normally, $1.5M in a 50/50 portfolio at your age would more than enough - but given what you've stated, I just can't see you relaxing with more than 40% in stocks. At the next big downturn (which, as a pessimist, I can't help but feel is overdue), I can easily see you panic selling and locking in your losses instead of riding it out. It really comes down to two big risks you need to balance: how much can you tolerate in equity losses so that you won't cash out, versus the inflation risk in your 'safe' money.

Can you live on $50k/year? When do you expect to collect social security, and how much payment do you expect? Is your home paid for?

dbr
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by dbr » Mon Mar 11, 2019 8:51 pm

Based on what you say about your objectives an SPIA or several SPIAs are the instrument that meets your statements.

A serious drawback to the SPIA is inflation which requires finding a true inflation indexed SPIA or holding back money in investments that can pace or outrun inflation and then buy a series of SPIAs over time.

A second serious drawback is the money put into an SPIA is gone forever. That means one must retain a significant fraction of assets to allow for contingencies and other unexpected needs.

Even so, the purpose of the SPIA is just precisely that of insuring against longevity risk and doing so by pooling that risk with other annuitants.

Note an irony is that the SPIA also removes all worry about maintaining the principal as from the beginning it is unvaryingly fixed at zero.

Grt2bOutdoors
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by Grt2bOutdoors » Mon Mar 11, 2019 8:59 pm

dbr wrote:
Mon Mar 11, 2019 8:51 pm
Based on what you say about your objectives an SPIA or several SPIAs are the instrument that meets your statements.

A serious drawback to the SPIA is inflation which requires finding a true inflation indexed SPIA or holding back money in investments that can pace or outrun inflation and then buy a series of SPIAs over time.

A second serious drawback is the money put into an SPIA is gone forever. That means one must retain a significant fraction of assets to allow for contingencies and other unexpected needs.

Even so, the purpose of the SPIA is just precisely that of insuring against longevity risk and doing so by pooling that risk with other annuitants.

Note an irony is that the SPIA also removes all worry about maintaining the principal as from the beginning it is unvaryingly fixed at zero.
If OP buys the deferred annuity for $600K, the remaining $900K can be invested conservatively, generating enough extra to provide the inflation adjustment, any extra can be reinvested back into the portfolio.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
GR8FUL-D
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by GR8FUL-D » Mon Mar 11, 2019 9:24 pm

miket29 wrote:
Mon Mar 11, 2019 7:30 pm
GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?
Given that you are primarily in money market now, this sounds far from your comfort range. It might be a decent allocation, but if you see it lose 1/5 its value, then another 1/5, you might panic and sell before its all gone. That would lock in losses.
Regarding the fact that the overwhelming percentage of my portfolio is in money markets--while I'm guessing this will be hard for most of you to accept or understand, but that's a result of apathy & ignorance than anything else.

The bulk of my savings was generated over the last 8 years. During this time I was so busy working--coupled with the fact that I was (am) financially uneducated & don't enjoy the investment process--simply made it easy for me to kick this can down the road. I was single, earning $250,000+ a year and saving probably 75% of it...money was the least of my worries. I realize that to many here on this board $250K/year just barely pays the bills, but everything is relative--to me it was an enormous sum. And I had no idea then that I would be retiring so early in life and that that gravy train would soon be ending.

Now that I'm retired I've had time to read & become at least "somewhat" financially literate, so at long last I'm taking the time to try and come up with a reasonably intelligent plan. One thing I do understand is that importance of "staying the course"--and not selling in down markets, thereby locking in losses. I have a cousin who did exactly that in the 2008-2009 market crash, and I've witnessed the havoc it caused (and continues to cause) in his life.
Last edited by GR8FUL-D on Mon Mar 11, 2019 9:41 pm, edited 3 times in total.

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unclescrooge
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by unclescrooge » Mon Mar 11, 2019 9:29 pm

GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total Bond Market Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?

I imagine that most here on this forum feel that there is no need to pay Vanguard the extra 0.15% in PAS fees, but for investment neophytes like myself, if a little hand-holding helps me to take action and then "stay the course", I imagine it will be money well spent.

Thanks again for everyone's thoughtful replies.
That's an okay recommendation.

But I would still put half the money in a SPIA as previously recommended as the first step.

Topic Author
GR8FUL-D
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by GR8FUL-D » Mon Mar 11, 2019 9:31 pm

Independent George wrote:
Mon Mar 11, 2019 7:41 pm
GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total Bond Market Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?
That is a reasonable portfolio for someone who isn't as risk-averse as you seem to be. Normally, $1.5M in a 50/50 portfolio at your age would more than enough - but given what you've stated, I just can't see you relaxing with more than 40% in stocks. At the next big downturn (which, as a pessimist, I can't help but feel is overdue), I can easily see you panic selling and locking in your losses instead of riding it out. It really comes down to two big risks you need to balance: how much can you tolerate in equity losses so that you won't cash out, versus the inflation risk in your 'safe' money.

Can you live on $50k/year? When do you expect to collect social security, and how much payment do you expect? Is your home paid for?
I'm currently living on less than $50K/year.

I sold my home in 2017 to move back to where my parents live in order to take care of them. When they die I will inherit their house/property, which is (rough guess) probably worth around $350K.

The pessimist in my prefers to not take social security benefits into consideration when planning for retirement, but if memory serves me correct my S.S. benefits are projected to be somewhere around $1,200/month.

Topic Author
GR8FUL-D
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by GR8FUL-D » Mon Mar 11, 2019 9:53 pm

unclescrooge wrote:
Mon Mar 11, 2019 9:29 pm
GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total Bond Market Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?

I imagine that most here on this forum feel that there is no need to pay Vanguard the extra 0.15% in PAS fees, but for investment neophytes like myself, if a little hand-holding helps me to take action and then "stay the course", I imagine it will be money well spent.

Thanks again for everyone's thoughtful replies.
That's an okay recommendation.

But I would still put half the money in a SPIA as previously recommended as the first step.
I appreciate your (and others) recommendation of a SPIA--it is definitely something I am going to read up on and consider.

But with regards to your comment about the Vanguard reps suggested IP, you wrote "That's an okay recommendation". To me the word "okay" falls in between "terrible" and "great", more along the lines of "decent". So if I were to buy a 500K or $600K SPIA (or a series of SPIAs) as you suggested, do you have a better recommendation for the remainder of my portfolio?

I'm assuming the Vanguard reps suggestions fairly closely resembles the standard Boglehead 3-4 fund approach? Any compelling reason to tweak it?

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unclescrooge
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by unclescrooge » Mon Mar 11, 2019 10:54 pm

GR8FUL-D wrote:
Mon Mar 11, 2019 9:53 pm
unclescrooge wrote:
Mon Mar 11, 2019 9:29 pm
GR8FUL-D wrote:
Mon Mar 11, 2019 6:46 pm
Today I had my second telephone consultation with a Vanguard representative regarding their Personal Asset Services (PAS).

While I'm confident that his honest recommendation would be for me to have a larger percentage of my portfolio invested in equities, in trying to find a balance between my risk averse nature AND my financial needs in retirement, he recommended my overall portfolio be based 55% stocks & 45% bonds.

Specifically, he recommended I get my money out of the mutual funds and invest it as follows:

Vanguard Total Stock Market Index Fund Admiral Shares 32%
Vanguard Total International Stock Index Fund Admiral Shares 22%
Vanguard Total Bond Market Index Fund Admiral Shares 32%
Vanguard Total International Bond Index Fund Admiral Shares 14%

Does the above seem reasonable? Any other suggestions or recommended tweeks / changes?

I imagine that most here on this forum feel that there is no need to pay Vanguard the extra 0.15% in PAS fees, but for investment neophytes like myself, if a little hand-holding helps me to take action and then "stay the course", I imagine it will be money well spent.

Thanks again for everyone's thoughtful replies.
That's an okay recommendation.

But I would still put half the money in a SPIA as previously recommended as the first step.
I appreciate your (and others) recommendation of a SPIA--it is definitely something I am going to read up on and consider.

But with regards to your comment about the Vanguard reps suggested IP, you wrote "That's an okay recommendation". To me the word "okay" falls in between "terrible" and "great", more along the lines of "decent". So if I were to buy a 500K or $600K SPIA (or a series of SPIAs) as you suggested, do you have a better recommendation for the remainder of my portfolio?

I'm assuming the Vanguard reps suggestions fairly closely resembles the standard Boglehead 3-4 fund approach? Any compelling reason to tweak it?
Yes, I meant it was fine for your purposes.

There are considerably worse things you could invest in. There are also debatably better things too, such as small cap value funds.

However, the SPIA recommendation will take you to 75% of where you need to be. Optimizing the remaining 25% is an exercise in needless complexity. (And I say this as someone who believes in slicing and dicing with 15 funds in my portfolio).

Based on your needs, maximizing return is less important than minimizing losses and running out of money.

If you wanted to simplify the VPAS suggestion, after the SPIA, I would choose a lifestyle fund. One with maybe 50% stocks. Or, now that your basic needs are covered, maybe you could take more risk and get a lifestyle fund with 70% stocks.

The Wizard
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by The Wizard » Tue Mar 12, 2019 8:49 am

Third letter in SPIA stands for Immediate, meaning monthly income starts the month after you buy this annuity. This is basically what I did at age 63.

The $600,000 amount someone mentioned was for a DEFERRED annuity that doesn't start monthly payouts to the OP for about nine years.
I'm not a big fan of deferred annuities...
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HEDGEFUNDIE
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Re: Investment noob needs help creating an IPS to ensure he doesn't outlive his money.

Post by HEDGEFUNDIE » Tue Mar 12, 2019 12:15 pm

The Wizard wrote:
Tue Mar 12, 2019 8:49 am
Third letter in SPIA stands for Immediate, meaning monthly income starts the month after you buy this annuity. This is basically what I did at age 63.

The $600,000 amount someone mentioned was for a DEFERRED annuity that doesn't start monthly payouts to the OP for about nine years.
I'm not a big fan of deferred annuities...
OP does not need income until 10 years from now. That's exactly the use case a deferred annuity is good for.

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