Safety first in retirement distribution

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CWRadio
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Safety first in retirement distribution

Post by CWRadio » Wed Oct 09, 2019 6:54 pm

I would like your opinion on my pending portfolio.

I am in retirement and in the distribution phase of my IRA.
I also a safety first investor ( if you won the game stop playing) as compare to probability type of investor.

I am 74 and wife is 72
Our IRA has $1,900,000
I need $40,000 a year to live on, plus Social Security. No other income.

My new portfolio will have about 66% in CD's from Fidelity. $1,250,000 in 5 different banks
The CD are in a five year ladder. 1 year, 2 year, 3 year, 4 year and 5 year CD for $250,000 each (FDIC and not callable)
The remaining 34% in Fidelity Zero Total Market index fund (FZROX).
When the first CD is due I will rebalance my IRA and buy another CD for 5 years.
At re balance I will also take out of my IRA to meet RMD distribution (about 4.20% to meet RMD at age 74) and put the money into my brokerage taxable account.
Each month the brokerage taxable account will transfer $3333.33 to my checking to live on.
The remainder of the money in the brokerage taxable account I will put into the Fidelity short term bond fund (FNSOX).

Bogleheads what do you think?

Thanks Paul
Last edited by CWRadio on Thu Oct 10, 2019 6:33 am, edited 1 time in total.

ExitStageLeft
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Re: Safety first in retirement distribution

Post by ExitStageLeft » Wed Oct 09, 2019 7:01 pm

I think you have all your bases covered. Happy spending!

ralph124cf
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Re: Safety first in retirement distribution

Post by ralph124cf » Wed Oct 09, 2019 7:09 pm

ExitStageLeft wrote:
Wed Oct 09, 2019 7:01 pm
I think you have all your bases covered. Happy spending!
+1

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Wiggums
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Re: Safety first in retirement distribution

Post by Wiggums » Wed Oct 09, 2019 7:11 pm

Is the money for the CDs outside of the IRA now or are these brokered CDs while in the IRA? I was just verifying that you were not taking 1.2 million out of your IRA all at once.

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RickBoglehead
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Re: Safety first in retirement distribution

Post by RickBoglehead » Wed Oct 09, 2019 7:33 pm

I would leave the $0.33 and put it in something speculative. :twisted:
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Watty
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Re: Safety first in retirement distribution

Post by Watty » Wed Oct 09, 2019 8:24 pm

CWRadio wrote:
Wed Oct 09, 2019 6:54 pm
I also a safety first investor ( if you won the game stop playing) as compare to probability type of investor.

I am 74 and wife is 72
Our IRA has $1,900,000
I need $40,000 a year to live on, plus Social Security. No other income.
Just for brainstorming an alternative would be to buy a ladder of individual TIPS in the IRA where a $40,000 TIPS matures each year for the next 30 years. That would cost $1.2 million dollars

With individual TIPS you could hold them to maturity so you would not be impacted if interest rates change, that is different than the way a TIPS mutual fund works when interest rates change.

That would last until you are 102 years old and you would also have another $700K that could be invested in total stock market and total international stock index funds.

That would give you an asset allocation of 63% bonds and 37% stocks which is pretty conventional asset allocation. For comparison the Vanguard Target Retirement Income fund is 70% bonds and 30% stocks.

https://investor.vanguard.com/mutual-fu ... file/VTINX

You would also be getting dividends and interest from your investments too.

That is not the way that I would do it if I was in your position but for someone that is a "safety first investor" having all those TIPS could let you sleep well at night.
Last edited by Watty on Wed Oct 09, 2019 8:39 pm, edited 1 time in total.

HomeStretch
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Re: Safety first in retirement distribution

Post by HomeStretch » Wed Oct 09, 2019 8:30 pm

As you only need 2.1% of your portfolio for annual spending, your plan sounds fine.

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Watty
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Re: Safety first in retirement distribution

Post by Watty » Thu Oct 10, 2019 8:04 am

Watty wrote:
Wed Oct 09, 2019 8:24 pm
That is not the way that I would do it if I was in your position but for someone that is a "safety first investor" having all those TIPS could let you sleep well at night.
I got a PM asking me how I would do it in my situation.

My portfolio is a lot smaller but when I retired in 2015 it was almost all in a 401k that I rolled into an IRA.

I just put all my IRA money into a the Vanguard Target Date 2015 fund. I did not have a lot in taxable accounts so I did not need to worry about how tax efficient my investments were.

A large part of my reasoning is that it would be a lot easier to manage as I get older and may be less financially capable or if my wife who knows less about investing has to manage it some day.

About the time I get to be the OPs age the 2015 fund will automatically be converted to the Vanguard Target Retirement Income fund.

When I get to the age where I need to take RMDs I will set those up to be done automatically in late January each year.

That should put my investments pretty much on automatic pilot so that I will not even have to deal with doing things like reinvesting CD's when I am 90 years old.

I need to keep my income low to qualify for the ACA healthcare subsidy but one I get on Medicare I will also do Roth conversions up to the top of the 12% federal tax bracket each year. That will help reduce future RMDs and also be good if one of us survives the other and then files tax returns in the higher single tax brackets.

Some of my actual details are slightly more complex but those are minor factors.

It sounds like the OP also has some funds in taxable accounts they they did not give any details about but that might be enough to cover any expected large expenses.

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JoeRetire
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Re: Safety first in retirement distribution

Post by JoeRetire » Thu Oct 10, 2019 8:19 am

CWRadio wrote:
Wed Oct 09, 2019 6:54 pm
Bogleheads what do you think?
Looks safe enough to me.

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Wiggums
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Re: Safety first in retirement distribution

Post by Wiggums » Thu Oct 10, 2019 8:32 am

I agree. Your conservative plan looks fine to me.

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David Jay
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Re: Safety first in retirement distribution

Post by David Jay » Thu Oct 10, 2019 8:59 am

My only concern for your plan is managing the CD ladder 10 or 15 years down the road. My plan is to simplify as much as possible, both for my future self and for my spouse who - actuarily speaking - should outlive me. You could drop the 66% in an intermediate term treasury fund and have a 2-fund portfolio: FZROX and an IT Treasury fund. All the safety, none of the hassle.

In my “After I am gone” letter, I recommended putting 100% in a single Life Strategy fund and calling it good.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

dbr
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Re: Safety first in retirement distribution

Post by dbr » Thu Oct 10, 2019 9:12 am

HomeStretch wrote:
Wed Oct 09, 2019 8:30 pm
As you only need 2.1% of your portfolio for annual spending, your plan sounds fine.
Agreed. It is very safe, but that is not because of how it is invested but because there is a lot of money and it is not being spent very fast -- not that there is anything at all wrong with how it is being invested.

The one other thing to think about is what circumstances might be anticipated where expenses might become much higher. But again, there is enough money to provide for most any reasonable contingency.

I agree with the concern about managing things. I had a relative who ended up with about half a million dollars in their checking account because they stopped dealing with T-bill renewals properly. The bank finally called somebody to ask what was going on.

MathIsMyWayr
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Re: Safety first in retirement distribution

Post by MathIsMyWayr » Thu Oct 10, 2019 10:18 am

20 years of expense in safe investment: 20*$40k=$800k
Rest in equity such as VTSAX/VTAIX: $1,100k

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CWRadio
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Re: Safety first in retirement distribution

Post by CWRadio » Fri Oct 11, 2019 6:47 am

Thank you all for sharing. Paul

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