Income in retirement?

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Curiosity$$
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Income in retirement?

Post by Curiosity$$ » Mon Nov 05, 2018 5:27 pm

How are people investing for income? Where do you put the bulk of your money if you are retired or soon to be? Would like to try and get 4-6% ideally a year. Ideas thoughts? I have read about CES, preffered stock, bonds but they all seem to have their own risk and not sure I want to a big portion of capital there. I have been basically in cash and some good stock I plan to hold which sell weekly covered calls against which is ok, but not sure that's the best way. Appreciate any help.

Thegame14
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Re: Income in retirement?

Post by Thegame14 » Mon Nov 05, 2018 5:33 pm

most people here advocate the three fund portfolio or a target date fund and then adjust their risk tolerance by adjusting their asset allocation and then you withdraw money as needed, with a general rule of thumb to no withdraw more then 3.5-4% each year.

delamer
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Re: Income in retirement?

Post by delamer » Mon Nov 05, 2018 5:36 pm

A 4% to 6% total return is doable with a Boglehead style lazy portfolio: https://www.bogleheads.org/wiki/Lazy_portfolios

If you want a portfolio that throws off 4% to 6% in income, then I have no suggestions.

jebmke
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Re: Income in retirement?

Post by jebmke » Mon Nov 05, 2018 5:38 pm

I invest for total return and try to avoid income if I can. It just adds to my tax burden and moves me closer to an IRMAA cliff.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Jordan4FI
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Re: Income in retirement?

Post by Jordan4FI » Mon Nov 05, 2018 5:41 pm

Most of us are going to say we are in Broad Based Index funds with Asset Allocations that meet our personal risk tolerance.

Myself plan to retire early before 40 years old. I am in a Target Date as of now that once it hits 60%stock/40%bond (about age 46) I will switch over to a 60/40 permanent AA till I deem a need to change.

My RothIRA is also in a Target set far in the future a 90/10 AA right now and will be about 50/50 when I am age 62, I may just let that ride till it hits Target Retirement Income a 30/70 AA.

These funds are all made up of Total US and Total Intl' (Stock and Bond)

These working together (4 fund portfolio) should be able to return ample annual growth/dividends to maintain a good lifestyle while living abroad.

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bengal22
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Re: Income in retirement?

Post by bengal22 » Mon Nov 05, 2018 5:42 pm

I am 66 and retired. I do not care about income. I look for total return. My rmd's, when combined with SSA and pension will exceed my expected expenses. In the meantime I just pull money from my taxable to cover gap between expenses and pension.
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dknightd
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Re: Income in retirement?

Post by dknightd » Mon Nov 05, 2018 6:02 pm

you have two threads . . .

You might consider an SPIA to provide some nice stable lifetime income. I wouldn't put all my money in one, I thinking 25-33% enough to cover my basics when SS kicks in.

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LadyGeek
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Re: Income in retirement?

Post by LadyGeek » Mon Nov 05, 2018 8:21 pm

Curiosity$$ - You had a duplicate post, which I've removed. The replies have been merged into a single thread.

I noticed you are requesting portfolio help here: Can I retire??

In order to give appropriate advice, it's best to keep all the information in one spot. If you intend to use any of the suggestions in this thread, please update your other thread with this info. We can review your choices to ensure they align with what you want to do (or explain why not).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Peter Foley
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Re: Income in retirement?

Post by Peter Foley » Mon Nov 05, 2018 8:50 pm

For many retirees turning off dividend reinvestment and capital gains reinvestment in taxable accounts are ways to provide some income in retirement.

One's approach depends greatly on how much one holds in taxable accounts relative to tax deferred accounts. It takes a substantial taxable account to generate enough income to live off. As a supplement to other income, however, any amount can be helpful.

Obviously, a source for tax free funds (not really income) in retirement is Roth withdrawals.

SGM
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Re: Income in retirement?

Post by SGM » Tue Nov 06, 2018 4:05 am

I have a friend who sells covered calls. It seems like a lot of work which would increase taxes for me which are already large. There is the possibility of losing some potential capital gains by selling covered calls.

Getting 4-6% dividends would be a risky proposition in terms of decreasing diversification.

I increased my income after age 70 by delaying SS. If I wanted more guaranteed monthly deposits I would add a ladder of SPIAs with a relatively small amount of my portfolio. I may do this as I think it would simplify things a bit and offer a little bit of security against fraud as we age. I have seen elderly relatives who have been scammed out of parts of their nest eggs in their late 80s and 90s.

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Watty
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Re: Income in retirement?

Post by Watty » Tue Nov 06, 2018 5:21 am

Curiosity$$ wrote:
Mon Nov 05, 2018 5:27 pm
How are people investing for income? Where do you put the bulk of your money if you are retired or soon to be?

I retired a few years ago and most of my funds were in retirement accounts where tax efficiency is not an issue so I just put it all into the Vanguard Target Date 2015 fund. As I understand it in about 2022 it will automatically be converted into the Target Date Retirement Income fund.

One important thing for me was to get everything to be on "auto pilot" as much as possible so that it would be easier to manage as I got older or if my wife who knows less about investing has to manage it someday. One of the early signs of declining mental capability or even dementia is making mistakes with your financial decisions so having it on automatic pilot can help avoid that.

MikeG62
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Re: Income in retirement?

Post by MikeG62 » Tue Nov 06, 2018 7:23 am

Peter Foley wrote:
Mon Nov 05, 2018 8:50 pm
For many retirees turning off dividend reinvestment and capital gains reinvestment in taxable accounts are ways to provide some income in retirement.

One's approach depends greatly on how much one holds in taxable accounts relative to tax deferred accounts. It takes a substantial taxable account to generate enough income to live off. As a supplement to other income, however, any amount can be helpful.

Obviously, a source for tax free funds (not really income) in retirement is Roth withdrawals.
Retired three years ago and I do this. To date, I've been bridging the gap between our spend and dividends and interest with excess cash. I expect to be able to do that for many years yet (before selling any equities would be necessary).

Peter is correct. I would add that it would take not only a very large taxable account, but also a very low level of spend for the income your portfolio is throwing off to cover your spending needs (most certainly if you are spending 3% or more of your portfolio per year). After all, dividends themselves are under 2% and interest on FI is maybe in the 3% range - blended together this won't cover a 3.0%+ annual withdrawal rate.
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fourwheelcycle
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Re: Income in retirement?

Post by fourwheelcycle » Tue Nov 06, 2018 8:45 am

Another boring BH response - we are about age 70 and all of our savings are in total stock market and intermediate bond market index funds, with the ratio set to suit our risk tolerance.

Before we retired we had all of our taxable dividend distributions set to reinvest and we paid the taxes out of our current income. Now that we are retired we have our dividends set to come to us and that is the only withdrawal we make from our taxable savings.

ChinchillaWhiplash
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Re: Income in retirement?

Post by ChinchillaWhiplash » Tue Nov 06, 2018 8:56 am

You might be able to do it with an international REIT fund like VNQI combined with a high yield short term bond fund like PGHY. It would be very risky, but if you just need the dividends and have enough invested in them, it could pay out what you need. Not that I would do this, but in theory, it could work.

22twain
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Re: Income in retirement?

Post by 22twain » Tue Nov 06, 2018 9:00 am

Curiosity$$ wrote:
Mon Nov 05, 2018 5:27 pm
How are people investing for income?
I don't invest specifically for income, i.e. dividend and/or interest checks every month or quarter. I use broadly-based index mutual funds and ETFs. I take whatever dividends they produce, and let them flow into my money-market fund. I sell some shares about once a year to cover the rest of my spending needs, and rebalance my portfolio at that time if necessary. Once a month I transfer some money from the MMF to my checking account. That's my "retirement paycheck." Sometimes I skip a month if I haven't been spending much and I still have plenty of money in my checking account.

After I start collecting Social Security in a few years, I probably won't need to sell any more shares except for rebalancing, unless/until my expenses rise a lot.
My investing princiPLEs do not include absolutely preserving princiPAL.

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