Info Overload?

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Topic Author
BellTower
Posts: 2
Joined: Sat Jun 29, 2019 9:50 am

Info Overload?

Post by BellTower »

I am in paralysis over investing for years now, and need to do something to optimize return on savings and an IRA. I have the money parked at Schwab, but am not interested in paid advisors. Schwab recommends their "robo advisors premium" which included an CFP. With this route we have little control.

The situation:
65, married and retired. About 800K in cash, 450K in IRA also in cash. We need this income on top of our SS to make it happen for the next 32 years or so. We are risk averse for sure, and had hoped the market would correct and we'd achieve some discount on buy-in. It just has not happened. Realize some stocks may mitigate inflation risk. Dividends may be nice as well. Understand some diversity is good. Also have gotten advise to "keep it simple as possible" with just a few funds, likely low cost ETFs. What would ya'll recommend in this crazy market? Thanks for the help!

UPDATE:
Thanks everyone for your responses. Here's some additional info:
State: Texas - No state income tax
Federal tax: 22%
SS income: $49,200. No pension.
Annual cost of living: $77,000 (incl insurance, dental, vision).
Emergency fund: Yes, 6 months
No debt
Married, filing jointly
Current portfolio: All in cash
Desired asset allocation: Traditional IRA - not sure but want some growth
Savings - we're very conservative and need income now - maybe 20% stocks and 70% bonds? 5% International? 5% CD's?

Your recommendations for both the IRA and savings portfolios would be greatly appreciated. Thanks!
Last edited by BellTower on Wed Feb 26, 2020 10:24 am, edited 2 times in total.
retired@50
Posts: 3470
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Info Overload?

Post by retired@50 »

BellTower wrote: Wed Feb 12, 2020 11:19 am I am in paralysis over investing for years now, and need to do something to optimize return on savings and an IRA. I have the money parked at Schwab, but am not interested in paid advisors. Schwab recommends their "robo advisors premium" which included an CFP. With this route we have little control.

The situation:
65, married and retired. About 800K in cash, 450K in IRA also in cash. We need this income on top of our SS to make it happen for the next 32 years or so. We are risk averse for sure, and had hoped the market would correct and we'd achieve some discount on buy-in. It just has not happened. Realize some stocks may mitigate inflation risk. Dividends may be nice as well. Understand some diversity is good. Also have gotten advise to "keep it simple as possible" with just a few funds, likely low cost ETFs. What would ya'll recommend in this crazy market? Thanks for the help!
You could likely set up a portfolio before the market closes today!
See the wiki page on the Three-Fund Portfolio. https://www.bogleheads.org/wiki/Three-fund_portfolio

If it were me, I'd use the following. Adjust to your own personal risk tolerance. Hold the bonds in your tax-deferred account.

45% SWTSX - Total Stock Market Index
15% SWISX - International Stock Index
40% SWAGX - Total Bond Index

Regards,
Last edited by retired@50 on Wed Feb 12, 2020 11:47 am, edited 1 time in total.
This is one person's opinion. Nothing more.
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ruralavalon
Posts: 19469
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Info Overload?

Post by ruralavalon »

Welcome to the forum :)

BellTower wrote: Wed Feb 12, 2020 11:19 am I am in paralysis over investing for years now, and need to do something to optimize return on savings and an IRA. I have the money parked at Schwab, but am not interested in paid advisors. Schwab recommends their "robo advisors premium" which included an CFP. With this route we have little control.

The situation:
65, married and retired. About 800K in cash, 450K in IRA also in cash. We need this income on top of our SS to make it happen for the next 32 years or so. We are risk averse for sure, and had hoped the market would correct and we'd achieve some discount on buy-in. It just has not happened. Realize some stocks may mitigate inflation risk. Dividends may be nice as well. Understand some diversity is good. Also have gotten advise to "keep it simple as possible" with just a few funds, likely low cost ETFs. What would ya'll recommend in this crazy market? Thanks for the help!
More information is needed. Please see this for information needed and format: "Asking Portfolio Questions". Also how much are your annual Social Security benefits and any pension income? How much are your annual living expenses in retirement?

Please 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
Pierre Delecto
Posts: 298
Joined: Tue Jan 28, 2020 9:45 pm

Re: Info Overload?

Post by Pierre Delecto »

BellTower wrote: Wed Feb 12, 2020 11:19 am I am in paralysis over investing for years now, and need to do something to optimize return on savings and an IRA. I have the money parked at Schwab, but am not interested in paid advisors. Schwab recommends their "robo advisors premium" which included an CFP. With this route we have little control.

The situation:
65, married and retired. About 800K in cash, 450K in IRA also in cash. We need this income on top of our SS to make it happen for the next 32 years or so. We are risk averse for sure, and had hoped the market would correct and we'd achieve some discount on buy-in. It just has not happened. Realize some stocks may mitigate inflation risk. Dividends may be nice as well. Understand some diversity is good. Also have gotten advise to "keep it simple as possible" with just a few funds, likely low cost ETFs. What would ya'll recommend in this crazy market? Thanks for the help!
You need to take action as longevity risk is High and getting higher by the year. I believe the chances of a 65 year old living past 95 are now something like 1 in 3. If you don’t do anything and stay in cash inflation will just eat away your nest egg. I’d recommend you create a written plan as to how you are going to re-enter the markets and stick to it. Maybe even hire a fee for service adviser to help out and give you some piece of mind with your plan.
deikel
Posts: 1134
Joined: Sat Jan 25, 2014 7:13 pm

Re: Info Overload?

Post by deikel »

I would strongly suggest you think about the 'three bucket money model' - I think that kind of thinking will help you vs the asset allocation model (its ultimately the same, but the way of thinking might help)

Your bucket one is already filled and ready (cash to spent for the next 12-36 months, you could improve slightly with some 1-2 year CDs here)

Bucket two is money you will need from year 3-10, should be in CDs, bonds. This is he first shift you should start now since bonds are relatively cheap right now (since stocks are high) and you start a CD ladder with some of the money in bucket 1.

Bucket three is what you will need in 10+ years - this should be (has to be) stock funds. You don't care what those do in the near term, but in 10 years you should see an increase.

You fill the buckets down each year as needed and possible. If it was a good year, fill them down from 3 to 2 to 1 (mentally, not necessarily in actual doing, although you want to sell stocks above and beyond dividends if the market is good)

It might help you getting over the investment paralysis and the (understandable) reluctance to get in now, when it feels high (but it's really not, compared to what you will see in 10 years - if you believe in the stock market at all).
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
jebmke
Posts: 11436
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Info Overload?

Post by jebmke »

retired@50 wrote: Wed Feb 12, 2020 11:46 am If it were me, I'd use the following. Adjust to your own personal risk tolerance. Hold the bonds in your tax-deferred account.

45% SWTSX - Total Stock Market Index
15% SWISX - International Stock Index
40% SWAGX - Total Bond Index
If I were starting from scratch, this is what I'd do. I might substitute Intermediate Bond or Treasuries for Total Bond but the difference would be minor.
When you discover that you are riding a dead horse, the best strategy is to dismount.
magicrat
Posts: 1068
Joined: Sat Nov 29, 2014 7:04 pm

Re: Info Overload?

Post by magicrat »

BellTower wrote: Wed Feb 12, 2020 11:19 am had hoped the market would correct and we'd achieve some discount on buy-in. It just has not happened.
The market corrected a little over a year ago. Why didn't you take action then?
Dottie57
Posts: 9198
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Info Overload?

Post by Dottie57 »

retired@50 wrote: Wed Feb 12, 2020 11:46 am
BellTower wrote: Wed Feb 12, 2020 11:19 am I am in paralysis over investing for years now, and need to do something to optimize return on savings and an IRA. I have the money parked at Schwab, but am not interested in paid advisors. Schwab recommends their "robo advisors premium" which included an CFP. With this route we have little control.

The situation:
65, married and retired. About 800K in cash, 450K in IRA also in cash. We need this income on top of our SS to make it happen for the next 32 years or so. We are risk averse for sure, and had hoped the market would correct and we'd achieve some discount on buy-in. It just has not happened. Realize some stocks may mitigate inflation risk. Dividends may be nice as well. Understand some diversity is good. Also have gotten advise to "keep it simple as possible" with just a few funds, likely low cost ETFs. What would ya'll recommend in this crazy market? Thanks for the help!
You could likely set up a portfolio before the market closes today!
See the wiki page on the Three-Fund Portfolio. https://www.bogleheads.org/wiki/Three-fund_portfolio

If it were me, I'd use the following. Adjust to your own personal risk tolerance. Hold the bonds in your tax-deferred account.

45% SWTSX - Total Stock Market Index
15% SWISX - International Stock Index
40% SWAGX - Total Bond Index

Regards,
Agree.
User avatar
ruralavalon
Posts: 19469
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Info Overload?

Post by ruralavalon »

BellTower wrote: Wed Feb 12, 2020 11:19 am I am in paralysis over investing for years now, and need to do something to optimize return on savings and an IRA. I have the money parked at Schwab, but am not interested in paid advisors. Schwab recommends their "robo advisors premium" which included an CFP. With this route we have little control.

The situation:
65, married and retired. About 800K in cash, 450K in IRA also in cash. We need this income on top of our SS to make it happen for the next 32 years or so. We are risk averse for sure, and had hoped the market would correct and we'd achieve some discount on buy-in. It just has not happened. Realize some stocks may mitigate inflation risk. Dividends may be nice as well. Understand some diversity is good. Also have gotten advise to "keep it simple as possible" with just a few funds, likely low cost ETFs. What would ya'll recommend in this crazy market? Thanks for the help!

UPDATE:
Thanks everyone for your responses. Here's some additional info:
State: Texas - No state income tax
Federal tax: 22%
SS income: $49,200. No pension.
Annual cost of living: $72,000.
Emergency fund: Yes, 6 months
No debt
Married, filing jointly
Current portfolio: All in cash
Desired asset allocation: IRA - not sure but want some growth
Savings - we're very conservative and need income now - maybe 20% stocks and 70% bonds? 5% International? 5% CD's?

Your recommendations for both the IRA and savings portfolios would be greatly appreciated. Thanks!
Is your IRA a traditional IRA or a Roth IRA?

How solid is your $72k number for living expenses? Does it include taxes, medical insurance premiums, dental and vision care?

Please simply add this to your original post using the edit button, so that all of your information is in one place.

You said "We are risk averse for sure" and "we're very conservative".

One possibility to consider is a Single Premium Immediate Annuity (SPIA) for all of part of the $23k annual shortfall. To shop for rates look at www.immediateannuities.com.

Another possibility at Schwab is a portfolio of:
1) 20-30%, Schwab Total Stock Market Index (SWTSX);
2) 70-80%, Schwab US Aggregate Bond Index (SWAGX) and possibly Schwab Tax-Free Bond (SWNTX).

The bond allocation should be held in the IRA as much as possible.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
bryanm
Posts: 333
Joined: Mon Aug 13, 2018 3:48 pm

Re: Info Overload?

Post by bryanm »

Rather than post a suggested course of action, I thought it might be helpful to provide some context. There is a "rule of thumb" in retirement circles that one can withdraw 4% of a portfolio, inflation adjusted, every year and generally be okay. I'm glossing over details here—some say the percentage should be smaller—but 4% seems to be the most common number.

Your expenses after SS are ~$23,000 a year, which about 1.8% of your nest egg. Even the most conservative around here would probably say that's a very low withdrawal rate. Yes, you have to choose what to do with your money. Leaving it in cash probably isn't the right choice. But the bottom line is this: you'll seem like you're in a good position. You're going to be fine. Hope that helps!
Topic Author
BellTower
Posts: 2
Joined: Sat Jun 29, 2019 9:50 am

Re: Info Overload?

Post by BellTower »

Thanks ruralavalon and bryanm.
I've changed cost of living to $77k. The IRA is traditional.
Will check into the SPIA, as well as the index funds, but will probably wait to jump in due to market uncertainty over the coronavirus.
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