Portfolio Suggestions Welcome

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
PaulW
Posts: 32
Joined: Mon Feb 26, 2007 1:09 am
Location: PA

Portfolio Suggestions Welcome

Post by PaulW » Wed Nov 04, 2009 4:16 pm

I am recently retired and am taking a closer look at our investment plan as we enter a new stage of life. We would greatly appreciate any comments, suggestions, and/or cautions.

Facts of our situation include;

Emergency Fund: We have this in CD's. Total would cover about 2 years of living expenses. We plan to use 50% of this for2010 living expenses.

Debt: We have no debt. Credit card is paid in full monthly.

Filing Status: married, filing jointly.

Tax Rate: Fed 15%, Pennsylvania, 3.2% (IRA distributions not taxed in PA

Age: Mine 66, spouse 64

Stock/Bond Allocation: 50/50 is where we are comfortable.

International stock: 1/3 of equities.

Portfolio size: Low 7 figures

Additional Funds: We will add about $7,000 annually to ROTHs, which are earnings from part time work. In 2010, we plan to convert about 5% of the total portfolio from an IRA to a Roth

Withdrawal Plan: Beginning in 2011, we would like to draw 5% annually for 3 years until I begin receivins SS at age 70 and then reduce our draw to 4% annually. 2 years later we would reduce our draw to 3.5% when my wife begins receiving SS.

Present Holdings, all Vanguard funds

Joint
24% Total Stock Market -- VTSMX - .18
5% Extended Market Index -- VXF - .27
10% FTSE All-World -- VFWIX - .25
<1% Prime Money Market -- VMMXX

His ROTH
10% Inflation-Protected Securities -- VAIPX - .11

His IRA
10% GNMA -- VFIJX - .12
20% Short-Term Investment Grade --VFSUX - .11
5% Small Cap Index -- VB - .15

Her ROTH
3% High-Yield Corporate -- VWEHX - .26

Her IRA
3% International Explorer -- VINEX - .36
3% Emerging Markets Index -- VWO - .27
7% High-Yield Corporate -- VWEHX - .26

Is this a reasonable allocation for us?

Thanks for your consideration.

Paul

Lauren Vignec
Posts: 260
Joined: Sat Feb 16, 2008 9:34 am

Post by Lauren Vignec » Thu Nov 05, 2009 4:31 pm

Hello Paul,

For the most part your portfolio is very reasonable, and your withdrawal goals are attainable. You have succeeded, then, at the most important aspects of investing.

I have only small suggestions to make. High-yield debt tends to have lower than expected returns at the same time as stocks have lower than expected returns. And in some cases (like last year) high yield bonds have equity-like negative returns. High-yield bonds are a stock-like asset class.

So if you really want a 50/50 portfolio, I'd suggest selling the high-yield bonds and buying more of the TIPS fund.

You might also want to consider reducing the number of funds you have to make rebalancing and staying on track easier. For instance, you have 3% each in Emerging Makets and Explorer. Those are pretty small percentages. And if it were me, I would be more comfortable with the Total Bond Index than with a combination of GNMA and short-term investment grade bonds.

Best wishes,

L
Last edited by Lauren Vignec on Thu Nov 05, 2009 5:14 pm, edited 1 time in total.

livesoft
Posts: 61335
Joined: Thu Mar 01, 2007 8:00 pm

Post by livesoft » Thu Nov 05, 2009 4:45 pm

I like your portfolio as it is. It does look like a reasonable allocation.

retiredjg
Posts: 32905
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Suggestions Welcome

Post by retiredjg » Thu Nov 05, 2009 5:18 pm

Is this a reasonable allocation for us?
It doesn't seem unreasonable. I suppose everyone would change something - me, I'd drop the junk bonds.

Still Learning
Posts: 254
Joined: Thu Sep 18, 2008 10:16 am

Post by Still Learning » Fri Nov 06, 2009 2:34 pm

Sounds like the wife also plans to start SS when she turns 70

If her benefit will be determined from your work record (spousal benefit) and not hers, she should start SS at age 66.

For spousal benefit, waiting past 66 does not add to her SS but will cost her 4 years of SS.

For her to get the spousal benefit you will need to file for SS at the time she turns 66. When you apply, you can simultaneously suspend your benefit until you reach 70, as you are planning now.

This will get her the maximum spousal benefit and start it at the earliest time (age 66) that she is eligible for the max benefit.

S L

Ron
Posts: 6311
Joined: Fri Feb 23, 2007 7:46 pm

Re: Portfolio Suggestions Welcome

Post by Ron » Fri Nov 06, 2009 2:48 pm

PaulW wrote:Tax Rate: Fed 15%, Pennsylvania, 3.2% (IRA distributions not taxed in PA
Nor any other retirement income sources, including SS.

Of course, any earned income (e.g. work) will be taxed.

- Ron

Ziggy75
Posts: 307
Joined: Wed Sep 24, 2008 7:24 am

Post by Ziggy75 » Fri Nov 06, 2009 3:57 pm

Another Simplified option:

Joint:
100% - (US) Total Stock Index

His Roth:
100% TIPs (doesn't need changing)

His IRA:
100% - Total Bond Index

Her Roth:
100% - Short Term Bond Index

Her IRA:
100% - FTSE All World Except US Index

Got it down to five funds.

PaulW
Posts: 32
Joined: Mon Feb 26, 2007 1:09 am
Location: PA

Post by PaulW » Tue Nov 10, 2009 2:57 pm

Many thanks for your comments. Some good suggestions were offered that will cause me to rethink some ideas that I may not have given enough attention.

Paul

Post Reply