61 year old female Divorcee - how am I doing?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
bushy9277
Posts: 2
Joined: Wed Jun 24, 2020 8:57 pm

61 year old female Divorcee - how am I doing?

Post by bushy9277 »

Emergency funds: Have 18K in Federal Money Market

Debt: No Debt

Tax Filing Status: Single

Tax Rate: 24% Federal, 5% State

State of Residence: MA

Age: 61

Desired Asset allocation: 100% stocks for now
Desired International allocation: No international stocks per John Bogle's advice

Currently on a teacher salary of $80K and also received $2,900 in alimony a month for the next four year. Was divorced about a decade ago - received a house in the proceedings and ended up to downsize and sell it for $620K (all invested now). Also received traditional ira listed below as well. Combined net worth is approximately $1.2 million. Also expect to receive a large inheritance in next decade or so.

Current retirement assets

Taxable
$7K cash
$517,000 Vanguard Total Stock Market (VTSAX) (.04%)
$138,000 Akre Focus Fund (AKREX) (1.32%)

Her Roth IRA at Vanguard
$187,000 Vanguard Total Stock Market (VTSAX) (.04%)

Her Traditional IRA at Vanguard
$328,000 Vanguard Total Stock Market (VTSAX) (.04%)
_______________________________________________________________

Contributions

New annual Contributions
$6,500 her IRA/Roth IRA - max it out
$6,000 taxable in VTSAX

Also have a Massachusetts Teachers Retirement System Pension that is accumulating. Don't know much about it but it has approx $50K in it I believe?

Contributions Combined net worth: Approx. $1.2M

Questions:
1. I had recently sold my house within the last two years to downsize. I invested the entire $620K I received in the market. Should I be in the market to buy again? I want to potentially move somewhere for a job for the next 4-5 years before I potentially retire. Should I look at into buying a house there and if so, what should be my range/budget? I am also thinking of moving closer to home after 5 years as well and may want to live there permanently - should I buy a place there instead in 5 years and just rent until then? What case in my scenario would it make sense to buy?

2. Any other just overall comments on my portfolio and any advice?
Last edited by bushy9277 on Fri Jun 26, 2020 6:50 pm, edited 1 time in total.
User avatar
David Jay
Posts: 9397
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: How Am I Doing?

Post by David Jay »

Welcome to the forum!

I have to say that 100% stocks is a very high-risk portfolio. I would begin to move some of those assets towards bonds in anticipation of retirement (I presume you are anticipating retiring in a few years). I would move, say, 5% to 10% per year between now and your retirement date.

No money that will be needed within 5-7 years should be in the market. The recent "V" shaped recovery (rapid fall, rapid return) is not typical, many bear markets last for several years.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
bushy9277
Posts: 2
Joined: Wed Jun 24, 2020 8:57 pm

Re: How Am I Doing?

Post by bushy9277 »

David Jay wrote: Fri Jun 26, 2020 12:19 pm Welcome to the forum!

I have to say that 100% stocks is a very high-risk portfolio. I would begin to move some of those assets towards bonds in anticipation of retirement (I presume you are anticipating retiring in a few years). I would move, say, 5% to 10% per year between now and your retirement date.

No money that will be needed within 5-7 years should be in the market. The recent "V" shaped recovery (rapid fall, rapid return) is not typical, many bear markets last for several years.
Thanks! I expect to retire in about 5 years, I thought I could afford the all stocks option since I expect to receive a large inheritance soon.

Any thoughts on my house question?
Engaging in sloth
Posts: 40
Joined: Sun Aug 11, 2019 5:38 pm

Re: 61 year old female Divorcee - how am I doing?

Post by Engaging in sloth »

Hopefully you can find out how much monthly income you'll receive from your pension. That pension will really help. I would not count on a set $ figure for an inheritance because unexpected situations could occur.

If you reduce your equity holdings I recommend cash CD's over bonds at this point.

I'd need more info on your housing situation to offer any advice.

Good luck to you.
User avatar
Stinky
Posts: 5562
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: 61 year old female Divorcee - how am I doing?

Post by Stinky »

Welcome to the Forum!

I wouldn’t count on any inheritance until I have it in my hands. Both the timing and the amount of any inheritance are uncertain. I have no idea of what your situation is, but I’ve heard enough horror stories about inheritances falling through that I’d be cautious about it until received.

I agree with David Jay that you’re way heavy on stocks, and that you should introduce fixed income into your portfolio.

I wouldn’t buy a house until I live in the place where I’ll stay in retirement.
It's a GREAT day to be alive - Travis Tritt
Rudedog
Posts: 265
Joined: Wed Aug 01, 2018 3:15 pm

Re: 61 year old female Divorcee - how am I doing?

Post by Rudedog »

You are doing well. I wouldn't be in any hurry to buy a house until you are moving to a "permanent" location where you expect to live for several years. Nothing wrong with renting for a while.
Herekittykitty
Posts: 736
Joined: Wed Apr 16, 2014 8:11 pm
Location: Flyover Country

Re: 61 year old female Divorcee - how am I doing?

Post by Herekittykitty »

bushy9277 wrote: Fri Jun 26, 2020 11:03 am
.......Also have a Massachusetts Teachers Retirement System Pension that is accumulating. Don't know much about it but it has approx $50K in it I believe?.......

...... Any other just overall comments on my portfolio and any advice?.......
Yes to other advice:

You will get a pension, so you should know right now what that is projected to be. That information will help you know how you are doing. It looks like the MTRS pension should be very easy to figure out.

Set up an account, go online, and look. There will likely be place you put in a projected retirement date and it should give you the retirement benefit for that retirement date. Repeat for various retirement dates starting with if you retire next month, the date you expect to retire, and a couple in-between. You can also see how much monthly retirement benefit you get for each additional month worked.

In the unlikely event you run into trouble trying to set up an account and figuring out the pension figures online, contact HR and ask them to help you do this.

https://mtrs.state.ma.us/forms/

Also: Do not assume you will get a nickle of inheritance until the last check has cleared your account. Too many people have been certain they will receive an inheritance but they turned out to be mistaken for various reasons.

Best wishes.
I don't know anything.
User avatar
Watty
Posts: 20696
Joined: Wed Oct 10, 2007 3:55 pm

Re: 61 year old female Divorcee - how am I doing?

Post by Watty »

There were a couple of things that were missing from your post.

1) What Social Security you will get and when you plan on starting it. You will need to look into the details of how this works with a divorce and some teachers are paying in their state pension plan instead of Social Security.

2) What your expenses are with and without rent.

3) As others have mentioned you also need to find out the details of your pension plan.
bushy9277 wrote: Fri Jun 26, 2020 11:03 am 1. I had recently sold my house within the last two years to downsize. I invested the entire $620K I received in the market. Should I be in the market to buy again? I want to potentially move somewhere for a job for the next 4-5 years before I potentially retire.
With a likely job change and then retirement in the near future I be extremely cautious about buying a new house now unless you are firmly settled in the area and are sure that you will retire there. Even then once you are retired you will not need to worry about a commute so you will not need to pay a premium price for a house with a good commute.
bushy9277 wrote: Fri Jun 26, 2020 11:03 am Desired Asset allocation: 100% stocks for now
That is insanely high and risky, and you don't have any good reason to be overly risky.

In comparison the Vanguard Target Retirement 2025 is about 60% stocks and 40% bonds.

https://investor.vanguard.com/mutual-fu ... olio/vttvx

It is even worse though since a lot of your money is not general retirement money, it is your house fund to buy a house in roughly 5+ years. The money you want to use for your house should be invested more conservatively.

You can see how Vanguard describes and their Life Strategy funds for different time frames.

https://investor.vanguard.com/mutual-fu ... estrategy/#/

Their Conservative growth fund is 40% stocks and 60% bonds and even that seems a bit aggressive to me for a house fund.

When looking at how much you should have in "bonds" you may want to consider more it more broadly as "fixed income" and include things like CD's in that too. I cannot predict the future but a few months ago I moved most of my bonds to shorter term bonds because I did not feel like the long term bonds were paying enough for the inflation and interest rate risks you are taking, but that is just me.

In your situation I would consider that you have two virtual portfolios.
1) Your house money. (40/60 ????)
2) Your retirement money. (60/40 ????)

Each of those would be invested with an asset allocation that is appropriate for the different goals.

If I was in your situation I would crunch the numbers this weekend to figure out what asset allocation you want to use then change it on Monday. You would also want to figure out what the tax impact would be if you sold stocks in your taxable account to rebalance.

With all the screwy things going on it would be good to make your portfolio more conservative sooner rather than later.
bushy9277 wrote: Fri Jun 26, 2020 11:03 am $138,000 Akre Focus Fund (AKREX) (1.32%)
That is a very high expense ratio. It would likely make sense to sell that to have your house funds in less risky investments.
RevFran
Posts: 169
Joined: Sun Jul 07, 2019 4:48 pm

Re: 61 year old female Divorcee - how am I doing?

Post by RevFran »

were you married for 10+ years? Ifso research whose soc sec you're better off claiming -- yours, or you ex's.

from ssa.gov:
Benefits For Your Divorced Spouse

If you are divorced, your ex-spouse can receive benefits based on your record (even if you have remarried) if:

Your marriage lasted 10 years or longer.
Your ex-spouse is unmarried.
Your ex-spouse is age 62 or older.
The benefit that your ex-spouse is entitled to receive based on their own work is less than the benefit they would receive based on your work.
You are entitled to Social Security retirement or disability benefits.

How Much Will Your Divorced Spouse Receive

If you have not applied for retirement benefits, but can qualify for them, your ex-spouse can receive benefits on your record if you have been divorced for at least two continuous years.

If your ex-spouse is eligible for retirement benefits on their own record, we will pay that amount first. If the benefit on your record is higher, they will get an additional amount on your record so that the combination of benefits equals that higher amount.

If your ex-spouse was born before January 2, 1954 and has already reached full retirement age, they can choose to receive only the divorced spouse’s benefit and delay receiving their own retirement benefit until a later date.

If your ex-spouse’s birthday is January 2, 1954 or later, the option to take only one benefit at full retirement age no longer exists. If your ex-spouse files for one benefit, they will be effectively filing for all retirement or spousal benefits.
If Your Ex-Spouse Works

If your ex-spouse continues to work while receiving benefits, the same earnings limits apply to them as apply to you. If your ex-spouse is eligible for benefits this year and is also working, you can use our retirement earnings test calculator to see how those earnings would affect those benefit payments.

If your ex-spouse will also receive a pension based on work not covered by Social Security, such as government work, their Social Security benefit on your record may be affected.

The amount of benefits your divorced spouse gets has no effect on the amount of benefits you or your current spouse may receive.
If You Remarry

If you remarry, your ex-spouse will still be eligible for benefits if they meet the requirements.
02nz
Posts: 5562
Joined: Wed Feb 21, 2018 3:17 pm

Re: 61 year old female Divorcee - how am I doing?

Post by 02nz »

Do you have access to a 403b and 457b, like many teachers do? If so and you have good low-cost options in them, you should be prioritize contributing to those ahead of investing in taxable. Depending on the size of your pension and whether you'll get any SS benefits*, deferring taxes (making traditional contributions) may save you taxes.

The house question is a personal one, but many (including me) would generally not recommend buying if you intend to stay in a location <5 years, given the high transaction costs.

I agree with others that 100% in stocks in your situation is far too aggressive.

* This is a little complicated, depending on whether MA teachers pay into SS. And, as noted by another poster you may qualify to collect on your ex-spouse's record, but that can be reduced if you receive a pension for a job where you didn't pay SS taxes.
delamer
Posts: 10535
Joined: Tue Feb 08, 2011 6:13 pm

Re: How Am I Doing?

Post by delamer »

bushy9277 wrote: Fri Jun 26, 2020 5:08 pm
David Jay wrote: Fri Jun 26, 2020 12:19 pm Welcome to the forum!

I have to say that 100% stocks is a very high-risk portfolio. I would begin to move some of those assets towards bonds in anticipation of retirement (I presume you are anticipating retiring in a few years). I would move, say, 5% to 10% per year between now and your retirement date.

No money that will be needed within 5-7 years should be in the market. The recent "V" shaped recovery (rapid fall, rapid return) is not typical, many bear markets last for several years.
Thanks! I expect to retire in about 5 years, I thought I could afford the all stocks option since I expect to receive a large inheritance soon.

Any thoughts on my house question?
Within the next decade is not really “soon.” And do you know how the funds you expect to inherit are currently invested?

How you are doing depends on how your expected income compares to your expected expenses in retirement. We’d need more information about both to answer your question.

I’m confused about your moving plans, but I would not recommend buying a house in any location unless 1) you moving there within a few months and 2) you expect to live there for at least 5 years.
bsteiner
Posts: 5140
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: 61 year old female Divorcee - how am I doing?

Post by bsteiner »

bushy9277 wrote: Fri Jun 26, 2020 11:03 am ...
State of Residence: MA
...
net worth is approximately $1.2 million. Also expect to receive a large inheritance in next decade or so.

...any advice?
The Massachusetts estate tax exempt amount is $1 million. You may want to ask the person who will be leaving you an inheritance to leave it to you in a flexible trust that you control rather than outright, to keep it out of your estate for Massachusetts estate tax purposes in case you still live in Massachusetts at the time of your death and the Massachusetts estate tax exempt amount remains at $1 million.
Wanderingwheelz
Posts: 478
Joined: Mon Mar 04, 2019 9:52 am

Re: How Am I Doing?

Post by Wanderingwheelz »

bushy9277 wrote: Fri Jun 26, 2020 5:08 pm
David Jay wrote: Fri Jun 26, 2020 12:19 pm Welcome to the forum!

I have to say that 100% stocks is a very high-risk portfolio. I would begin to move some of those assets towards bonds in anticipation of retirement (I presume you are anticipating retiring in a few years). I would move, say, 5% to 10% per year between now and your retirement date.

No money that will be needed within 5-7 years should be in the market. The recent "V" shaped recovery (rapid fall, rapid return) is not typical, many bear markets last for several years.
Thanks! I expect to retire in about 5 years, I thought I could afford the all stocks option since I expect to receive a large inheritance soon.

Any thoughts on my house question?
Having 20%-40% in bonds isn’t likely to have a tremendous effect on your growth since you’re 61, now. Compounding over decades is where all equities really works it’s magic.
ecocredit
Posts: 25
Joined: Wed Jul 02, 2014 11:25 pm

Re: 61 year old female Divorcee - how am I doing?

Post by ecocredit »

Engaging in sloth wrote: Fri Jun 26, 2020 7:09 pm If you reduce your equity holdings I recommend cash CD's over bonds at this point.
Could you elaborate why CD's instead of bond funds?
User avatar
celia
Posts: 11405
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: 61 year old female Divorcee - how am I doing?

Post by celia »

The 2019 and 2020 Roth contribution limit for someone over 50 is $7,000. You have until July 15 to finish contributing for 2019.

I didn’t notice a budget or how much your living expenses are. Without knowing that, no-one can calculate if you have enough (although you likely do unless you are a heavy spender).
Herekittykitty
Posts: 736
Joined: Wed Apr 16, 2014 8:11 pm
Location: Flyover Country

Re: 61 year old female Divorcee - how am I doing?

Post by Herekittykitty »

Checking into Social Security benefits has been mentioned. Just a quick look online at the Massachusetts Teachers Retirement System looks like it is one of the states in which the employee contributes to the state retirement system and not to Social Security. If that is correct, one of the following could apply:

Windfall Elimination Provision: https://www.ssa.gov/pubs/EN-05-10045.pdf

Government Pension Offset: https://www.ssa.gov/pubs/EN-05-10007.pdf

So if the OP has had credible work history (per SSA definition) in which she has contributed to Social Security, or if her ex spouse had work history sufficient to have earned Social Security benefits and if so if she was married to him a sufficient period (I think it is 10 years but check for sure) to collect retirement benefits on his record, there could be a reduction in Social Security benefits she would be eligible to collect (depending on if it is correct that she does not contribute to Social Security based on her current employment.)

It is worth checking to see what Social Security benefits you could receive either on your or on your ex husband's Social Security record on retirement - in addition of course to checking into what benefits you could receive you could receive from your state retirement.

You are getting great advice regarding investments. I would add that knowing what Social Security benefits if any and what your state retirement benefits will be will add valuable knowledge to your understanding of where you stand and will stand financially.
I don't know anything.
Post Reply