Retirees: Where are you going for income?

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Van
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Retirees: Where are you going for income?

Post by Van » Wed Oct 12, 2016 6:11 pm

With interest rates on bonds and CDs so low, have any of you retirees out there found any decent investments for income? By decent, I mean something with more than a 3% or so interest/dividend return without being exposed to "crazy" default or interest rate risk?

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Re: Retirees: Where are you going for income?

Post by JoinToday » Wed Oct 12, 2016 6:49 pm

There is one thing I have learned: In the fixed income area, risk and return are intimately coupled (the exception being bank CD). Fixed income markets are really efficient in this respect.

I am doubtful that you will find what you are looking for at this time. Maybe an SPIA can get you higher income, but it comes at a price.
I wish I had learned about index funds 25 years ago

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9-5 Suited
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Re: Retirees: Where are you going for income?

Post by 9-5 Suited » Wed Oct 12, 2016 6:53 pm

No free lunches - you are taking some credit and duration risk - but I do like the iShares LQD ETF. It's an investment grade corporate bond fund (so fits your need for no crazy risk) and it's a bit longer in term than many intermediate funds (it's closer to 10 years than 5).

But, SEC Yield is 2.98%, TTM yield is 3.33%. Fits your bill for some more income. Expense ratio is 0.15, so nice and cheap.

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Re: Retirees: Where are you going for income?

Post by Leif » Wed Oct 12, 2016 6:57 pm

Rental income. But they have other risks.
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Van
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Re: Retirees: Where are you going for income?

Post by Van » Wed Oct 12, 2016 7:02 pm

9-5 Suited wrote:No free lunches - you are taking some credit and duration risk - but I do like the iShares LQD ETF. It's an investment grade corporate bond fund (so fits your need for no crazy risk) and it's a bit longer in term than many intermediate funds (it's closer to 10 years than 5).

But, SEC Yield is 2.98%, TTM yield is 3.33%. Fits your bill for some more income. Expense ratio is 0.15, so nice and cheap.


This appears to be comparable to Vanguard's VCIT (intermediate term corporate bond ETF), but the yield is a bit higher and the duration a bit longer for LQD.

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Re: Retirees: Where are you going for income?

Post by bengal22 » Wed Oct 12, 2016 7:29 pm

Not looking for income. I think more about the appreciation of my portfolio.

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Re: Retirees: Where are you going for income?

Post by LarryAllen » Wed Oct 12, 2016 7:33 pm

"B" neighborhood rentals in mid-west cities. Should be able to net 10% without a ton of work. Sure some risk involved too.

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Re: Retirees: Where are you going for income?

Post by Van » Wed Oct 12, 2016 7:42 pm

bengal22 wrote:Not looking for income. I think more about the appreciation of my portfolio.


If you are retired, don't you need some income to live on? I understand you can sell appreciated securities to generate income, but what do you do in a sustained down market? Do you sell assets from your depreciating portfolio? Maybe you have perfected market timing so you never have to sell into a down market.

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Re: Retirees: Where are you going for income?

Post by Kevin M » Wed Oct 12, 2016 8:17 pm

9-5 Suited wrote:No free lunches - you are taking some credit and duration risk - but I do like the iShares LQD ETF.

No free lunch is right. LQD dropped more than 19% when the credit risk showed up between 9/12/2008 and 10/10/2008. I owned some before that, and bought more when it dropped (but not at it's lowest point). I started selling shares when I had good gains, sold a chunk close to its highs earlier this year, and sold the last of my shares a couple of weeks ago to buy a 5-year credit union IRA CD at 2.6%.

As others have said, the fixed income markets are very efficient, but as a retail investor, you can get above-market rates in federally-insured deposit accounts. Some of us have purchased a 7-year CD at 3% in recent months, which is 140 basis points higher than the 7-year Treasury yield of 1.60%. The 5-year CD at 2.6% I recently bought (and am in the process of buying more of with proceeds from LQD sale) is about 130 basis points higher than the 5-year Treasury yield of 1.31% (so about 2X the yield).

Even a 1% savings account has about the same yield as a 3-year Treasury, but without the term risk.

Even the 30-year Treasury yield is only about 2.5%, so we're getting a steal with 5-year and 7-year CDs at 2.5%-3.0%.

You can scan something like the Vanguard Find CDs and bonds web page to see what credit risk and term risk you need to take to get yields above 3%. For example, I see a 20-year Agency with a yield of 3.09%, a 20-year "highest grade" corporate with a yield of 3.58%, a 10-year "high grade" corporate at 3.21%, and a 7-year "upper-medium grade" corporate at 3.10%.

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Re: Retirees: Where are you going for income?

Post by dollarsaver » Wed Oct 12, 2016 8:35 pm

Kevin M wrote:
9-5 Suited wrote:No free lunches - you are taking some credit and duration risk - but I do like the iShares LQD ETF.

No free lunch is right. LQD dropped more than 19% when the credit risk showed up between 9/12/2008 and 10/10/2008. I owned some before that, and bought more when it dropped (but not at it's lowest point). I started selling shares when I had good gains, sold a chunk close to its highs earlier this year, and sold the last of my shares a couple of weeks ago to buy a 5-year credit union IRA CD at 2.6%.

As others have said, the fixed income markets are very efficient, but as a retail investor, you can get above-market rates in federally-insured deposit accounts. Some of us have purchased a 7-year CD at 3% in recent months, which is 140 basis points higher than the 7-year Treasury yield of 1.60%. The 5-year CD at 2.6% I recently bought (and am in the process of buying more of with proceeds from LQD sale) is about 130 basis points higher than the 5-year Treasury yield of 1.31% (so about 2X the yield).

Even a 1% savings account has about the same yield as a 3-year Treasury, but without the term risk.

Even the 30-year Treasury yield is only about 2.5%, so we're getting a steal with 5-year and 7-year CDs at 2.5%-3.0%.

You can scan something like the Vanguard Find CDs and bonds web page to see what credit risk and term risk you need to take to get yields above 3%. For example, I see a 20-year Agency with a yield of 3.09%, a 20-year "highest grade" corporate with a yield of 3.58%, a 10-year "high grade" corporate at 3.21%, and a 7-year "upper-medium grade" corporate at 3.10%.

Kevin


Hi Kevin, What credit union is offering 2.6% for 5 years? Thanks

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Re: Retirees: Where are you going for income?

Post by Van » Wed Oct 12, 2016 8:58 pm

I just checked the Vanguard CD rates for new issues. 1.8% for 7 year CD. Pretty pathetic.

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Re: Retirees: Where are you going for income?

Post by dbr » Wed Oct 12, 2016 9:02 pm

Van wrote:
bengal22 wrote:Not looking for income. I think more about the appreciation of my portfolio.


If you are retired, don't you need some income to live on? I understand you can sell appreciated securities to generate income, but what do you do in a sustained down market? Do you sell assets from your depreciating portfolio? Maybe you have perfected market timing so you never have to sell into a down market.


Basic arithmetic says that a withdrawal is a withdrawal whether taken by cashing a dividend check or by selling shares and withdrawing the proceeds. To prevent disaster from selling during a down market you have to limit the size of your withdrawals either absolutely or by following a variable percentage withdrawal algorithm (if that works). An alternative is to invest only in things that are not volatile, such as a TIPS ladder or an inflation indexed single premium immediate annuity. It is not clear that at today's interest rates that either of those provides more income than 4% rule withdrawals from a portfolio. There are also those who argue the new 4% should be less, but I am not sure that is convincing. In any case investing for income solves nothing. Note that a TIPS ladder, an annuity, or 4% rule withdrawals all anticipate the possibility of completely consuming the portfolio. In the case of the TIPS ladder that part of the portfolio is consumed in a fixed amount of time, in the case of an annuity that part of the portfolio is consumed up front but the income is for life, and the case of a percentage withdrawal scheme the tendency is to protect against the worst case and likely have a lot of wealth and income in the best case. Again, none of this has anything to do with dividends.

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Re: Retirees: Where are you going for income?

Post by 9-5 Suited » Wed Oct 12, 2016 9:32 pm

Kevin M wrote:so we're getting a steal with 5-year and 7-year CDs at 2.5%-3.0%.
Kevin


Thanks Kevin. Where do you search for your CDs? Basic googling of the top aggregation sites like Bankrate show 5YR CD rates between 1.75-2.00%.

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Re: Retirees: Where are you going for income?

Post by AlohaJoe » Wed Oct 12, 2016 9:51 pm

I just opened a 12-month CD for 7%.

But I don't live in America, so that's not exactly repeatable for most of you.

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Re: Retirees: Where are you going for income?

Post by LadyGeek » Wed Oct 12, 2016 9:53 pm

This thread is now in the Investing - Theory, News & General forum (general investing).
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Re: Retirees: Where are you going for income?

Post by Banana Boat » Wed Oct 12, 2016 10:00 pm

Not a retiree, but I don't own any bonds at the moment and have no willingness to buy them. My target asset allocation to "fixed income" is about 20%.

Just went over my portfolio today, so here's a thought: I keep some money in my checking accounts as an emergency fund. Also have a couple of very small pensions - one is invested in bonds and the other is a defined benefit scheme, so both of them can be considered "fixed income". Also, I have a few thousand invested in Lending Club. Between all these accounts, I have almost 20% of my net worth in "fixed income", which includes "no income" for the checking accounts. So, once I reach about 20%, including a couple of years' worth in liquid assets which I can use if SHTF and the market drops significantly, I'll be fine investing the rest in equities. I don't want to deal with bonds in this low interest rate environment.

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Re: Retirees: Where are you going for income?

Post by boglerdude » Wed Oct 12, 2016 10:25 pm

AlohaJoe wrote:I just opened a 12-month CD for 7%.
But I don't live in America, so that's not exactly repeatable for most of you.
We need to know inflation rate too right

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Re: Retirees: Where are you going for income?

Post by AlohaJoe » Wed Oct 12, 2016 11:18 pm

boglerdude wrote:
AlohaJoe wrote:I just opened a 12-month CD for 7%.
But I don't live in America, so that's not exactly repeatable for most of you.
We need to know inflation rate too right


Core inflation is 1.3% right now, so about 5.7% real on the CD.

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Re: Retirees: Where are you going for income?

Post by Sheepdog » Thu Oct 13, 2016 12:04 am

For the last few years I use these to supply present spendable income as they supply all of our needs plus some:
Social Security
Wellesley (total return)
SPIAs
Short term investment grade fond fund

I have other investments, but they don't supply present income, and probably never will, except maybe for some PenFed 5 yr 3% CDs when they mature in 2019.
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Re: Retirees: Where are you going for income?

Post by ValueInvestor99 » Thu Oct 13, 2016 12:14 am

I could payoff my mortgage which is at 4%, but houses in the area are up 11% over the year.

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Re: Retirees: Where are you going for income?

Post by Watty » Thu Oct 13, 2016 6:45 am

ValueInvestor99 wrote:I could payoff my mortgage which is at 4%, but houses in the area are up 11% over the year.


The two rates are unrelated. The home value would go up or down by the same percentage if there was a mortgage or not.

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Re: Retirees: Where are you going for income?

Post by SQRT » Thu Oct 13, 2016 7:59 am

My pension and dividends provide generous cash flow. Retired 10 years, age 66.

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Re: Retirees: Where are you going for income?

Post by dbr » Thu Oct 13, 2016 8:28 am

SQRT wrote:My pension and dividends provide generous cash flow. Retired 10 years, age 66.


That is a combination that would be very workable for many people, but only you know what generous means.

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Re: Retirees: Where are you going for income?

Post by 22twain » Thu Oct 13, 2016 8:29 am

Van wrote:If you are retired, don't you need some income to live on? I understand you can sell appreciated securities to generate income, but what do you do in a sustained down market?


That's what my bonds (funds) and other fixed-income stuff are for. If my stocks (funds) are above my target allocation to them, I'll sell some of them to make up whatever dividends don't provide. If they're below my target allocation, I'll sell some of my bonds (or other fixed income) instead.

After we've both reached 70 and started collecting SS, it will cover most or all of our expenses anyway. Small-town life in the boonies does have a few advantages. :wink:

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Re: Retirees: Where are you going for income?

Post by SeeMoe » Thu Oct 13, 2016 9:21 am

Pensions and SS allow us the freedom not to be concerned squeezing out buck$ from our folios.We do have annual end of year RMD', s though, and our IRA's are 100% bond funds now. Some short/intermediate corporates, high yield, some total bond index and international bond for diversification.
Our taxable account is mostly stock index funds with a portion in limited/intermediate/pa. Tax exempt bonds. Plus a Prime MM for temporary distributions/disbursement...FYI.

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Re: Retirees: Where are you going for income?

Post by SQRT » Thu Oct 13, 2016 9:23 am

dbr wrote:
SQRT wrote:My pension and dividends provide generous cash flow. Retired 10 years, age 66.


That is a combination that would be very workable for many people, but only you know what generous means.

Agreed. The combination is well in excess of what I spent before retirement and would easily put me in the top 1% of income earners.
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Re: Retirees: Where are you going for income?

Post by dollarsaver » Thu Oct 13, 2016 9:42 am

Hello,

Where is a credit union CD for 2.6% for 5 years available? It was mentioned in this post. Thanks!

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Re: Retirees: Where are you going for income?

Post by Abe » Thu Oct 13, 2016 10:04 am

Van wrote:With interest rates on bonds and CDs so low, have any of you retirees out there found any decent investments for income? By decent, I mean something with more than a 3% or so interest/dividend return without being exposed to "crazy" default or interest rate risk?


Rental properties, mortgages I hold, and social security provide more than enough income to cover living expenses. Of course, I never dreamed interest rates would go this low and stay this long. If I could get even 3% on short term investments (CD's, short term bond, etc.), I would probably sell the houses and not have the headaches associated with rental property. But, as long as we have these low interest rates, I'll probably hold on to the rentals. They do provide income.
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Re: Retirees: Where are you going for income?

Post by MWormwood » Thu Oct 13, 2016 10:20 am

It sounds like you're thinking about "income investing" rather than "total return" investing. I think more people on Bogleheads subscribe to "Total Return", in which you don't focus on dividends/interest, because it's a distraction from what really matters: overall portfolio performance and the sustainability of your withdrawal rate.

Here's a thread if you want to read more: viewtopic.php?t=170720

And here's a paper from Vanguard related to the topic: https://advisors.vanguard.com/VGApp/iip ... estResults

Hopefully this is helpful food for thought.

Good luck!

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Re: Retirees: Where are you going for income?

Post by Van » Thu Oct 13, 2016 11:37 am

MWormwood wrote:It sounds like you're thinking about "income investing" rather than "total return" investing. I think more people on Bogleheads subscribe to "Total Return", in which you don't focus on dividends/interest, because it's a distraction from what really matters: overall portfolio performance and the sustainability of your withdrawal rate.

Here's a thread if you want to read more: viewtopic.php?t=170720

And here's a paper from Vanguard related to the topic: https://advisors.vanguard.com/VGApp/iip ... estResults

Hopefully this is helpful food for thought.

Good luck!


Thanks for the suggestion of thinking more along the line of total return. A couple of other people have made the same point. I'll check out the links. I guess my concern would be the increased risk, but we all know that increased return requires increased risk.

Van

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Re: Retirees: Where are you going for income?

Post by Kevin M » Thu Oct 13, 2016 12:10 pm

yorkpond wrote:Hi Kevin, What credit union is offering 2.6% for 5 years? Thanks

yorkpond wrote:Where is a credit union CD for 2.6% for 5 years available? It was mentioned in this post. Thanks!

Achieva Credit Union. This rate is for IRA CDs only. The rates shown on their website are 2.45% APY for $25K minimum and 2.55% APY for $75K minimum. I met the higher minimum and did five checking account transactions, which apparently got the rate bumped to 2.61% APY.

I bought the first one with a direct IRA transfer from Ally Bank, using proceeds from recently matured IRA CDs there. I am in the process of buying the second one with a direct IRA transfer from Fidelity using proceeds from the sale of LQD and an emerging markets bond fund.

Van wrote:I just checked the Vanguard CD rates for new issues. 1.8% for 7 year CD. Pretty pathetic.

Brokered CDs, like those purchased from Vanguard, Fidelity or any other broker, often do not offer the best rates. They also do not offer an early withdrawal option. The "direct" CDs I've recently purchased allow early withdrawals at a penalty of 180 days of interest. This limits the downside to about 1.5% on the 7-year 3% CD and 1.3% on the 5-year 2.6% CD. This significantly lowers the term risk relative to a Treasury of same maturity.

Despite the benefits of direct CDs, some prefer brokered CDs for convenience. Better rates often are available on secondary CDs. I see 7-year rates of 2.3% for secondary CDs at Vanguard, but these are priced at a premium (e.g., 105), and the premium is not FDIC insured. Highest yield I see for a non-premium secondary CD at Vanguard is 1.93% (price 99.156).

9-5 Suited wrote:Thanks Kevin. Where do you search for your CDs? Basic googling of the top aggregation sites like Bankrate show 5YR CD rates between 1.75-2.00%.

DepositAccounts.com. Search IRA Rates for the IRA-only CD deals, which lately have been better than non-IRA CDs. Also check out the weekly CD Rates Summary in the blog; for some reason the Achieva CD is listed in the blog post but not in the CD rates or IRA rates sections (might have something to do with the filters--maybe someone else can figure out why Achieva is not showing up).

Kevin
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Re: Retirees: Where are you going for income?

Post by White Coat Investor » Thu Oct 13, 2016 1:28 pm

Invest for total return and declare your own dividends as needed. Investing with a focus on income is a good way to make portfolio design errors.
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Re: Retirees: Where are you going for income?

Post by ruralavalon » Thu Oct 13, 2016 2:22 pm

Van wrote:With interest rates on bonds and CDs so low, have any of you retirees out there found any decent investments for income? By decent, I mean something with more than a 3% or so interest/dividend return without being exposed to "crazy" default or interest rate risk?

We do not invest for income, we invest for total return.

Age 71, retired 5 years, and our income needs are met by Social Security and Required Minimum Distributions from my traditional rollover IRA.
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Re: Retirees: Where are you going for income?

Post by dbr » Thu Oct 13, 2016 3:01 pm

Van wrote:
MWormwood wrote:It sounds like you're thinking about "income investing" rather than "total return" investing. I think more people on Bogleheads subscribe to "Total Return", in which you don't focus on dividends/interest, because it's a distraction from what really matters: overall portfolio performance and the sustainability of your withdrawal rate.

Here's a thread if you want to read more: viewtopic.php?t=170720

And here's a paper from Vanguard related to the topic: https://advisors.vanguard.com/VGApp/iip ... estResults

Hopefully this is helpful food for thought.

Good luck!


Thanks for the suggestion of thinking more along the line of total return. A couple of other people have made the same point. I'll check out the links. I guess my concern would be the increased risk, but we all know that increased return requires increased risk.

Van


That is not what total return means. Total return simply means keeping complete accounting of all the things that affect how a portfolio evolves under withdrawal and hence how much can be safely withdrawn.

If you do look at how asset allocation affects a portfolio during withdrawal you will find that all asset allocations are safe if the withdrawal rate is low enough and all asset allocations have a significant risk of failure if the withdrawal rate is high enough. If the withdrawal rate is in between then asset allocations without enough stocks have a high risk of failure and those with enough stocks are safe.

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Re: Retirees: Where are you going for income?

Post by ruralavalon » Thu Oct 13, 2016 3:25 pm

Van wrote:
MWormwood wrote:It sounds like you're thinking about "income investing" rather than "total return" investing. I think more people on Bogleheads subscribe to "Total Return", in which you don't focus on dividends/interest, because it's a distraction from what really matters: overall portfolio performance and the sustainability of your withdrawal rate.

Here's a thread if you want to read more: viewtopic.php?t=170720

And here's a paper from Vanguard related to the topic: https://advisors.vanguard.com/VGApp/iip ... estResults

Hopefully this is helpful food for thought.

Good luck!


Thanks for the suggestion of thinking more along the line of total return. A couple of other people have made the same point. I'll check out the links. I guess my concern would be the increased risk, but we all know that increased return requires increased risk.

Van

In using a "total return" approach you just recognize that a dollar is a dollar no matter where it comes from. You can draw your retirement cash/spending needs from either capital appreciation or from interest & dividends.
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Re: Retirees: Where are you going for income?

Post by Toons » Thu Oct 13, 2016 4:16 pm

Retired
We "rely" on
SS
Pension
Dividend income from a handful of stocks.
Dividends from various mutual funds
Year End dividends & capital gains from mutual funds
"For Income'.
So far ,the strategy has 'worked"
:happy
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Re: Retirees: Where are you going for income?

Post by nisiprius » Thu Oct 13, 2016 5:05 pm

There isn't any place to get a safe 3% that I know of.

I know the rates on CDs are low, but they are a heck of a lot higher than they were just a few years ago. I don't know what that means. You can't get 3% but you can get 2% without too much trouble.

I can tell you what we're doing. It's pretty loosey-goosey and I can't tell you how well it's going to work over the coming decades.

We rely primarily on Social Security and the proceeds of two immediate annuities we purchased. This income stream is roughly matched with our expenses. We us the amount of this income to decide on what we can "afford," just as we adjusted our spending to salary income while we were working. (Social Security and one of the annuities is indexed for inflation, and the other is a TIAA Traditional annuity with a "graded payout" option which means that the payments do increase with time, but maybe not well-matched to inflation).

The investment portfolio is a Bogleheadish portfolio of Vanguard mutual funds, mostly index funds--one of the bond funds isn't technically an index fund. It grows. We don't pay much attention to where the growth is coming from, income or capital appreciation. We treat the investment portfolio as something we can tap for somewhat-unpredictable not-regular-monthly expenses. We tap it by seat-of-the-pants, with the idea that we can "afford" to spend as much as 3-4% of it in any one year, but making it a goal that we not spend that much every year.

It's a useful thought experiment to say: suppose my retirement savings didn't earn anything above inflation. Could I survive? The answer for me is, yes, you just need to come to grips with the idea that you will need to spend down your savings.
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Re: Retirees: Where are you going for income?

Post by Christine_NM » Thu Oct 13, 2016 5:22 pm

Highest to lowest amount of income:
1. RMD
2. pension
3. charitable gift annuities (6.1% total yield -- earlier ones yield 8.9%, latest one yields 5.5%)
4. taxable fund distributions taken in cash (2% yield)
5. Social Security started at 62 (early SS makes #1 and #4 larger than they would have been if waited till 70)

It adds up to 3-4x what I need and about 2x what I want and need.
10% cash 45% stock 45% bond. Retired, w/d rate 1.5%

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Re: Retirees: Where are you going for income?

Post by Phineas J. Whoopee » Thu Oct 13, 2016 6:35 pm

nisiprius wrote:...
It's a useful thought experiment to say: suppose my retirement savings didn't earn anything above inflation. Could I survive? The answer is, yes, you just need to come to grips with the idea that you will need to spend down your savings.

Agreed. Maybe the elephant in the room is none of us will last forever so our savings don't need to, but it's uncomfortable to think about that.
PJW

dbr
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Re: Retirees: Where are you going for income?

Post by dbr » Thu Oct 13, 2016 6:45 pm

Phineas J. Whoopee wrote:
nisiprius wrote:...
It's a useful thought experiment to say: suppose my retirement savings didn't earn anything above inflation. Could I survive? The answer is, yes, you just need to come to grips with the idea that you will need to spend down your savings.

Agreed. Maybe the elephant in the room is none of us will last forever so our savings don't need to, but it's uncomfortable to think about that.
PJW


I can't think I have seen any retirement analysis mooted on this forum that does not assume spending down one's savings. Certainly the infamous 4% rule is explicitly a calculation for savings to just last a fixed length of time in the worst case. (The best case leaves the retirees heirs fabulously wealthy, of course.) The now equally infamous TIPS ladder is explicitly arranged to be spent to nothing by the end of the ladder. The even more infamous path of buying an annuity eliminates savings in one fell swoop at the onset. So who is talking about both maintaining or increasing the real value of a portfolio and withdrawing a living income from it? I know naive posters sometimes begin with a statement something to the effect of "take income and preserve the principal," but it turns out fairly quickly in most cases that no such thing is actually possible.

I don't know what is so uncomfortable about "If you aren't going to spend the money, what did you save it for?"

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tennisplyr
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Re: Retirees: Where are you going for income?

Post by tennisplyr » Fri Oct 14, 2016 6:26 am

dbr wrote:
Phineas J. Whoopee wrote:
nisiprius wrote:...
It's a useful thought experiment to say: suppose my retirement savings didn't earn anything above inflation. Could I survive? The answer is, yes, you just need to come to grips with the idea that you will need to spend down your savings.

Agreed. Maybe the elephant in the room is none of us will last forever so our savings don't need to, but it's uncomfortable to think about that.
PJW


I can't think I have seen any retirement analysis mooted on this forum that does not assume spending down one's savings. Certainly the infamous 4% rule is explicitly a calculation for savings to just last a fixed length of time in the worst case. (The best case leaves the retirees heirs fabulously wealthy, of course.) The now equally infamous TIPS ladder is explicitly arranged to be spent to nothing by the end of the ladder. The even more infamous path of buying an annuity eliminates savings in one fell swoop at the onset. So who is talking about both maintaining or increasing the real value of a portfolio and withdrawing a living income from it? I know naive posters sometimes begin with a statement something to the effect of "take income and preserve the principal," but it turns out fairly quickly in most cases that no such thing is actually possible.

I don't know what is so uncomfortable about "If you aren't going to spend the money, what did you save it for?"


+1
I'm as cheap as the day is long but I have no problems spending my savings.
Those who move forward with a happy spirit will find that things always work out.

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Re: Retirees: Where are you going for income?

Post by erik265 » Fri Oct 14, 2016 6:56 am

Market is too efficient years ago bond rates interest rates etc were much higher those days are gone. The best way to gain advantage is when information is harder get. When i was a kid for example my step dad bought me a utility yielded like 7% tax free low risk where can you do that today (also paid $7 a share went to $33). There was no boglehead cnbc etc internet access only people that were in the industry knew of these things. So the future of investing will be much harder modest returns in a ever more competitive market...

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Re: Retirees: Where are you going for income?

Post by munemaker » Fri Oct 14, 2016 7:45 am

Van wrote:With interest rates on bonds and CDs so low, have any of you retirees out there found any decent investments for income? By decent, I mean something with more than a 3% or so interest/dividend return without being exposed to "crazy" default or interest rate risk?


The concept of maintaining principle and living off of interest/ dividends is outdated in today's zero interest environment.

Just keep a properly diversified portfolio of equities and bonds, and use the 4% rule. You'll do fine.

furnace
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Re: Retirees: Where are you going for income?

Post by furnace » Fri Oct 14, 2016 7:51 am

ruralavalon wrote:Age 71, retired 5 years, and our income needs are met by Social Security and Required Minimum Distributions from my traditional rollover IRA.


I'm glad you don't have to touch your giant nest egg yet, and the future is still far ahead. But it seems like, while many people under-save, some have over-saved. Hopefully this will give some comfort to those who are behind on their savings -- that it's possible to retire on a smaller nest egg than otherwise believed :sharebeer

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Re: Retirees: Where are you going for income?

Post by furnace » Fri Oct 14, 2016 7:57 am

22twain wrote:After we've both reached 70 and started collecting SS, it will cover most or all of our expenses anyway. Small-town life in the boonies does have a few advantages. :wink:


Your last sentence could be considered "retirement gold." While the traditional focus of retirement is on inflating one's asset base, the easy way to get to retirement heaven, is to find a nice but low cost locale to retire. In this place, a dollar can run a marathon instead of dropping dead after 50 yards :shock:

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Kevin M
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Re: Retirees: Where are you going for income?

Post by Kevin M » Sun Oct 16, 2016 6:40 pm

nisiprius wrote:There isn't any place to get a safe 3% that I know of.

<snip>You can't get 3%

Yes you can.

Kevin
||.......|| Suggested format for Asking Portfolio Questions (edit original post)

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Re: Retirees: Where are you going for income?

Post by bengal22 » Tue Oct 18, 2016 9:23 pm

Van wrote:
bengal22 wrote:Not looking for income. I think more about the appreciation of my portfolio.


If you are retired, don't you need some income to live on? I understand you can sell appreciated securities to generate income, but what do you do in a sustained down market? Do you sell assets from your depreciating portfolio? Maybe you have perfected market timing so you never have to sell into a down market.


I am retired and currently I have a pension and my spouse has s.s. I make up the shortfall my selling non-taxable funds. Since I believe on average the market will go up I do not care if market is going up or down. If my portfolio appreciates better with non-income type investments then I am still better off. If my portfolio would dip below my retirement starting point then maybe I would rethink. Plus being in my pre RMD years I actually want to minimize income.

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Re: Retirees: Where are you going for income?

Post by boater07 » Tue Oct 18, 2016 9:48 pm

Kevin M wrote:
nisiprius wrote:There isn't any place to get a safe 3% that I know of.

<snip>You can't get 3%

Yes you can.

Kevin

apparently it depends ont the county where you live
I can't log in

itstoomuch
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Re: Retirees: Where are you going for income?

Post by itstoomuch » Tue Oct 18, 2016 10:12 pm

-currently drawing some cash holdings from IRA's.
-2017 will begin taking withdrawals from GLWB VAs. They will have completed the 8th year of the 10year guaranteed Income growth term. The extra 10.1% Income to complete the 10 year guaranteed is not worth the extra 2 years of Income. Remaining annuities are laddered and will take their income latter.
-I'll make a few extra % in trading my utility's stock. *
-I'll do OK in a buy and hold VPU/XLU. *
-Income from rental inheritance.

* currently relatively high cash in Discretionary accts. These accounts are discretionary.

YMMV
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Retirees: Where are you going for income?

Post by honduranhurricane » Tue Oct 18, 2016 10:21 pm

Bank loan funds. Some are yielding 5+% and loans sit at the top of the capital structure. No duration thanks to the floating rate but there is credit risk. I am ok with that.

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