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HI, I am looking for a conservative investment options
Old 05-03-2010, 12:17 PM   #1
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HI, I am looking for a conservative investment options

HI,
Here are some details about me.
About 40 y.o. now, want to retire in 2 years or so, which gets me to qualify for my employer pension which I plan on starting at 60. So basically I need income for 18 years (assuming retiring at 42 and starting pension at 60, the pension is with COLA and will be enough for me after I am 60). I count in “eating up” the principal during this 18 years ER (ideally will like to have a bit of it left by the time pension kicks in).
By the time I retire I plan to have 450K in my after tax portfolio. My annual expenses are pretty low (house paid off, and my lifestyle is simple), I can do OK with 25-30K per year. So I count 25* 18=450 which gives me my bare minimum lifestyle with zero risk (put everything in the bank, where it is right now, embarrassingly). However, this does not allow me for inflation adjustment, which I think is important. I also want some cushion (i.e. have income closer to 30K rather than 25K) and perhaps some reserve for contingencies, emergencies and some extra vacations that are not part of the budget, etc. So it would be nice to make some return on the money.
I am looking for some conservative investment options, especially for the first 9 years (i.e. from when I am 42 to 50). For the second “bucket” (i.e. 50-60, which is still 10 years away) I can take a bit more risk and I plan to do index funds (some version of the lazy portfolios that some of you mentioned here), but for the first bucket I want less risk and I am concerned even conservative index fund mix might be a bit too risky (even heavily bond weighted might be risky if interest rates go up in the future which I am sure they will eventually).
I considered EIA, which after reading a lot here and elsewhere I am thinking not to do. Another option someone is trying to sell me is called “Preservation strategy” by Genworth Financial Management. They are something like an “absolute return” strategy that try not to lose the money. I look at their performance during the worst of the recent crisis they were only down about 4%, at the worst year.
They charge 1.5% asset management fees, which I believe are on top of the mutual fund fees they invest in, so it seems I am looking at 2.5% total fees, which I don’t like at all. But if they will produce return higher then CDs with just a bit more risk, then maybe it is worth it?
I understand the futility of paying someone an asset management fee if all they do is try to “beat the market” but these guys try to “preserve principal” and provide some modest returns (about 4.5% over past 5 years, but have to adjust for taxes since this is pretty actively managed, so say 3.5% which still beats available CD rates). So in this case maybe paying a fee is worthwhile?
So my question is:
What are other low risk options out there that I may not be considering?
What do you think about this “preservation strategy” idea?

Thanks
NoRisk
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Old 05-03-2010, 12:32 PM   #2
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I think you have a number of options, especially for the first several years. Perhaps the simplest would be to buy a ladder of bonds that will mature each year to provide you with enough money to live on for the year. This could be done with CDs, treasuries or agencies if you wish to be extremely conservative, or with high qualifty corporates if you want to try for a little yield pick-up.

Alternatively, you could assemble a conservative, relatively low volatility portfolio and tap it every year, although even in this case a couple years worth of cash might be a good idea. In this case, I would buy a bunch of high grade bonds/bond funds, perhaps some merger arbitrage funds (ARBFX/MERFX), maybe some hedged equity exposure (Hussman fund or similar) and a slug (10 or 15%) of commodities to help hedge inflation risk.

There are other possibilites, but you start getting way out in the weeds, IMO.

It would be interesting to hear more about the preservation account, but I would be leery of anything that ran 2.5% annually.
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Old 05-04-2010, 09:00 AM   #3
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I looked at the Preservation Strategy briefly. I'd never invest in it, but then I don't trust most of the financial industry. If you do take the strategy's track record at face value, it is still less than ten years old. Their market brochure shows even less -- how they weathered one bear market. Their goals are oriented to conservative investors, but their investment strategy, along the lines of tactical asset allocation, is not conservative. I bet their analysis and tools are often correct, but how many times have we seen the expert's crystal balls fail during unexpected market conditions?

For the 18 years you mentioned, a 4% inflation-adjusted return is very conservative and low risk. A 5% return for $22.5 annually is moderately conservative given you can still approach a 100% success rate if you harvest your returns carefully (more on this below). For a 6% return of $27,000 per year the historical success rate using a smart withdraw strategy still will not have much more than a 90% historical success rate (certainly not "no risk"). You can fix this though by overlaying a variable rate withdrawal on top of your withdraw strategy. Using a variable rate should prevent you from running out of money, while having good odds of many years returning close to your target number.

If you are interested, here's a "starter" link on variable withdraws: Variable Withdrawals in Retirement. For a good withdraw strategy, I believe Weiss's, http://www.bobsfinancialwebsite.com/...ebalancing.pdf, is one of the best. Weiss's paper is not so specific though but I can tell you the following works well using historical data: 45% well-diversified stock portfolio; 55% in very high-quality bonds; rebalancing back to bonds only in years when the cumulative real stock return (i.e. inflation adjusted) is greater than 6.0%. This means you may go years living off the bonds while preserving the stocks until their return improves. A second viable strategy is Guyton's. An advantage of Guyton's is it also defines variable withdraws, although I see it being over complicated. Again, with Weiss you would need to overlay a variable-rate withdraw strategy.

You mentioned using your own "buckets". I'd caution you that a simple bucket strategy does now perform that well historically without a corresponding smart strategy to refill the buckets (which Weiss essentially provides).
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Old 05-04-2010, 11:42 AM   #4
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Here are some comments and suggestions...

I like the 25*18=450k math
you do NOT need all 450k at once, as you pointed out... and even needing 200k at once is low probability.

Try this:

Put 7*25k=175k into CDs
CD1 is 12 months
CD2 is 24 months
CD3 is 36 months
CD4 is 36 or 48 months
CD5-6-7 either open 12-24-36-48 month CDs or longer if the return justifies the longer term, otherwise, keep the duration short enough on 5-6-7 to where you pay a low penalty if you redeem the CDs early when rates go up.

Put years 8-9-10-11-12-13=150k into a moderate mutual fund (how you define moderate is up for discussion). The goal is that in the 7 years you use the CDs, this 6 years of expenses can compound to a 7th or 8th year of expenses on its own, while invested very conservatively.

30k/150k=20% return over a 7 year period- very doable (probably twice).

4 thoughts on this
Wellesley (about 40-60 stocks bonds)
Spectrum Income (about 20% stocks and 80% bonds- RPSIX)
Permanent Portfolio (about 40% stocks and 30% gold/silver and 30% bonds-PRPFX)
Wellington (I believe this is more conservative than Wellesley- around 25% stocks)

I own spectrum income and Permanent portfolio.

175k+150k=325k

You have the first 13 years of the portfolio more or less in a good liquid/stable place. This should give you 15 years of income (by year 7 you would hop to see 15 years of income from first two tiers).

The remaining 125k I would suggest putting into dividend paying stocks... logic is when a 20% return happens, take the 25k profit and open a new CD (immediately). In 13 years you need to do this 3-5 times... I like those chances. Once you sell to get the 5 years expenses you need, you can let the rest "ride" and give you an inflation hedge or income addition to the COLA pension.

or put 125k into ibonds

or add to the 8-9-10-11-12-13 allocation
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Old 05-04-2010, 01:17 PM   #5
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Just to make it clear, most people on the forum would consider the "preservation strategy" fund you mentioned a scam (the used car dealer from horror stories type of scam). You will certainly not beat the market with it, and it is likely you will not even beat inflation with it. 2.5% upfront fees+very likely loads+likely churning = almost all or all of your returns in a conservative portfolio. I would not be surprised if they completely ignored your risk needs or tax efficiency. At best, they will probably preserve your "principal," as long as you don't draw from it or worry about inflation eating away at it.
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Old 05-04-2010, 03:25 PM   #6
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Just to make it clear, most people on the forum would consider the "preservation strategy" fund you mentioned a scam (the used car dealer from horror stories type of scam). You will certainly not beat the market with it, and it is likely you will not even beat inflation with it. 2.5% upfront fees+very likely loads+likely churning = almost all or all of your returns in a conservative portfolio. I would not be surprised if they completely ignored your risk needs or tax efficiency. At best, they will probably preserve your "principal," as long as you don't draw from it or worry about inflation eating away at it.
Thanks for the comment. I am sorry if I was not being clear. Their intention is not to beat the market, but to provide some modest return in exchange for relatively low risk; they seem to have done well in the most recent crisis. 2.5 fees are not upfront - it is 1.5% AUM fee that my advisor will charge (which is split 50/50 between him and Genworth who manage the strategy - what I don't get is why the advisor who sells me this fund has to get 0.75 since all he does is to put money with Genworth and Genworth does all the work). but the problem is Genworth is putting the money in some other actively managed funds which have their own AUM fees, which I won't know ahead of time and since those are institutional funds (i was told) the total of those should not be above 1%; so 2.5 is my guess. So basically you are right it does nto look like a good investment compared to market, but I am comparing this with current CD rates and it does look a bit more attractive.
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Old 05-04-2010, 03:32 PM   #7
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Thanks for the comment. I am sorry if I was not being clear. Their intention is not to beat the market, but to provide some modest return in exchange for relatively low risk; they seem to have done well in the most recent crisis. 2.5 fees are not upfront - it is 1.5% AUM fee that my advisor will charge (which is split 50/50 between him and Genworth who manage the strategy - what I don't get is why the advisor who sells me this fund has to get 0.75 since all he does is to put money with Genworth and Genworth does all the work). but the problem is Genworth is putting the money in some other actively managed funds which have their own AUM fees, which I won't know ahead of time and since those are institutional funds (i was told) the total of those should not be above 1%; so 2.5 is my guess. So basically you are right it does nto look like a good investment compared to market, but I am comparing this with current CD rates and it does look a bit more attractive.
If you are comparing a product which does not have guaranteed return to CD rates, then you really need to think...

for a similar expense, you might be able to find an annuity which has less risk and a guaranteed return... or you can ask yourself...

for what expense am I willing to get a higher return (than CDs) and take on X amount of risk to incur the expense and the risk? You are comparing the returns to CD returns... yet you are investing in something with a much different risk profile than CDs.

Most of the asset allocation suggestions on this thread (mine included) had you use CDs, for some of the monies, then take on more risk with other portion of the monies.

The returns of these suggestions are not guaranteed.
However the costs of those suggestions was free, and the cost of the funds in those suggestions is quite low. Your risk is entirely on the allocation, and at least half of the allocation could be cash based, which removes the return risk from at least half the money, and the risks of the "other half" are still quite moderate (because they have cash and bond positions built into them).
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Old 05-04-2010, 03:37 PM   #8
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A second viable strategy is Guyton's. An advantage of Guyton's is it also defines variable withdraws, although I see it being over complicated. Again, with Weiss you would need to overlay a variable-rate withdraw strategy.
.
Thans for this idea - can you say more about Guyton's - where do I find it and what is it? sorry, but I am pretty new at this investing business.
Thanks
nr
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Old 05-04-2010, 03:52 PM   #9
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for what expense am I willing to get a higher return (than CDs) and take on X amount of risk to incur the expense and the risk? You are comparing the returns to CD returns... yet you are investing in something with a much different risk profile than CDs.
those are great questions. I guess what I am looking for is a little higher return then on CDs (it is around 3% now on 5 year cd) but only with a little more risk. That is why I am exploring this preservation strategy, but I agree with you on the costs - that is why I am looking for other options. .

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Originally Posted by jIMOh View Post

Most of the asset allocation suggestions on this thread (mine included) had you use CDs, for some of the monies, then take on more risk with other portion of the monies.
I appreciate all asset allocation suggetions!!!

I guess what I am hoping with this preservation strategy is that those guys who manage it have more tools then I do to figure out what the market is doing (they are for the large parts in US and global fixed income with only small portions - most likely under 20% in equity) and change their asset allocations based on market conditions. of course this requires they have a crystall ball on what the fixed income markets are doing. anyway I am also sceptical of this thing, just wanted to explore (it sounded much better before I learned of the costs)
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Old 05-04-2010, 05:40 PM   #10
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those are great questions. I guess what I am looking for is a little higher return then on CDs (it is around 3% now on 5 year cd) but only with a little more risk. That is why I am exploring this preservation strategy, but I agree with you on the costs - that is why I am looking for other options. .



I appreciate all asset allocation suggetions!!!

I guess what I am hoping with this preservation strategy is that those guys who manage it have more tools then I do to figure out what the market is doing (they are for the large parts in US and global fixed income with only small portions - most likely under 20% in equity) and change their asset allocations based on market conditions. of course this requires they have a crystall ball on what the fixed income markets are doing. anyway I am also sceptical of this thing, just wanted to explore (it sounded much better before I learned of the costs)
If you find one product which does the following, you need to let me know

Quote:
I guess what I am looking for is a little higher return then on CDs (it is around 3% now on 5 year cd) but only with a little more risk.

Remember there is more than one kind of risk-

interest rate risk
inflation risk
market risk
currency risk
principal risk
liquidity risk

if one of risks is absent, its probably because one or more of the others is really high

for example a CD has no market risk, no currency risk (you are investing in US dollars) and no principal risk. But its inflation risk is thru the roof and you have interest rate risk too (if rates go up you miss the increase unless you pay a penalty and redeem the CD). The interest rate risk with a CD is minimal, but its still there.

In the asset allocation examples, you add a little of each risk, but avoid a lot of each risk too. IMO what you want to do is decide which risks you can live with, and which ones you want to deal with.

For example, you mentioned inflation in OP, so IMO you need at least 20-40% of portfolio dealing with that risk. 10% of porfolio (45k) probably would not beat the risk by itself (meaning no way could I see 45k invested for 18 years account for all inflation in 25k of spending for all 18 years). I doubt 20% would do it for 18 years, but it might come close... and 30-40% equities is what permanent portfolio has, and its stated goal is to preserve spending power (returns=inflation) and increase spending power (returns>inflation)... but the gold position has as much to do with that as the equities IMO.

You did not account for interest rate risk in OP, but I think you knew it existed, and if CDs are being considered, you need to address that.
If bonds are considered, you need to address that even more.

IMO interest rate risk on bonds is much higher than interest rate risk on CDs, even though both investments are subjected to same risk input (fed changing rates).

if you do a portfolio which is 30% stocks and 30% bonds and 40% cash, you are leveling all the risks to something you can tolerate.

30% of 450k is 135k, for you this is about 5-6 years expenses?
so with 30% of your money, you are trying to beat the inflation risk present in the other 70% (bonds and cash have high inflation risk).

By laddering CDs you eliminate some of the interest rate risk, so its not that high (only 1 years expenses is subjected to any given interest rate, so if rates are low, like right now, only 1 year is subjected to the low rates).

Liquidity risk- by putting 7 years expenses in CDs, which are liquid, you can reduce liquidity risk because the CDs are liquid, even though most of your money is put into something where you might not get what you want for it tomorrow.

Market risk- this goes away with time (the longer something is invested, the more it grows, the the original principal is probably going to exist if given enough time with positive returns). This would couple with principal risk too.


My point is if you are looking to avoid one kind of risk (market risk) remind yourself of the others risks which exist, and make sure you are comfortable with those risks.
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Old 05-04-2010, 08:47 PM   #11
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Norisk,

Most of us here believe strongly that active managers have a very small chance of beating the market on a sustained basis. And, it is even more difficult to tell who those managers will be.

I suggest you read some of the books mentioned on this board. I recommend Four Pillars of Investment by William Bernstein or one of Bogle's books.

Please educate yourself before you jump into any of these investments. I (and a lot of others on this board) came to this conclusion the hard way - by losing money trying to beat the market. I strongly believe there are no short-cuts - you either spend the time educating yourself using the available literature or you learn the hard way. And do you really want to do that with your life's savings?
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Old 05-05-2010, 09:09 AM   #12
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I guess what I am hoping with this preservation strategy is that those guys who manage it have more tools then I do to figure out what the market is doing (they are for the large parts in US and global fixed income with only small portions - most likely under 20% in equity) and change their asset allocations based on market conditions. of course this requires they have a crystall ball on what the fixed income markets are doing. anyway I am also sceptical of this thing, just wanted to explore (it sounded much better before I learned of the costs)
We all hope that when we pay an expert, we will get our money's worth. Unfortunately, this is not true in actively managed funds with high expenses. jIMOh has laid things out well.

If you have the proper overall asset allocation the buckets idea makes things needlessly complicated. For a one fund approach where you take out what you need to live, you could just use Vanguard's Target Retirement Income Fund or perhaps one of their new manged payout funds: e.g. https://personal.vanguard.com/us/fun...FundIntExt=INT

Given your willingness to smooth your consumption either one will work.
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Old 05-05-2010, 09:27 AM   #13
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Thans for this idea - can you say more about Guyton's - where do I find it and what is it? sorry, but I am pretty new at this investing business.
Thanks
nr
Guyton is an author of one of the papers referenced in the "Variable Withdraw" link I gave. His paper is not easy to read but his strategy is well tested with relatively good results. Of course all these simulations and backtesting cannot predict the future, but if a strategy cannot do well with backtesting, then there is no reason to believe it will do well in the future. I've seen quite a few strategies that sound good, certainly making sense, but don't perform well with backtesting.
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Old 05-05-2010, 01:03 PM   #14
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if you do a portfolio which is 30% stocks and 30% bonds and 40% cash, you are leveling all the risks to something you can tolerate.

30% of 450k is 135k, for you this is about 5-6 years expenses?
so with 30% of your money, you are trying to beat the inflation risk present in the other 70% (bonds and cash have high inflation risk).

By laddering CDs you eliminate some of the interest rate risk, so its not that high (only 1 years expenses is subjected to any given interest rate, so if rates are low, like right now, only 1 year is subjected to the low rates)
Thanks for this idea. What I am thinking is that given current rates on CD's it is difficult for me to allocate 40% in something that will pay only 3% over 5 years (which are current rates on 5 year CD's the rates are much lower rates on 3- and 4 year products). So this most likely won't beat inflation over next 5 years (after taxes).

I guess I should have introduced myself as a "greedy "no risk"" :-)

But seriously, do I just have one conservative portfolio (say 50/50 stocks bond or even 45/55 stocks bonds) and then use the dynamic allocation or variable withdrawals, or do I use the CD laddering strategy proposed above for first 5-6 years (again the rates on 2 or 3 year CDs are terrible now).

Thanks again.
NR
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Old 05-05-2010, 01:45 PM   #15
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But seriously, do I just have one conservative portfolio (say 50/50 stocks bond or even 45/55 stocks bonds) and then use the dynamic allocation or variable withdrawals
This is easy and will do the job. You should also consider the single fund approach (e.g. retirement income or managed payout). Sorry to be repetitive, but do check it out.

There is nothing wrong with laddered bonds + equity investment. Its just a little more complicated (and imo needlessly so).
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Old 05-05-2010, 03:46 PM   #16
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Thanks for this idea. What I am thinking is that given current rates on CD's it is difficult for me to allocate 40% in something that will pay only 3% over 5 years (which are current rates on 5 year CD's the rates are much lower rates on 3- and 4 year products). So this most likely won't beat inflation over next 5 years (after taxes).

I guess I should have introduced myself as a "greedy "no risk"" :-)

But seriously, do I just have one conservative portfolio (say 50/50 stocks bond or even 45/55 stocks bonds) and then use the dynamic allocation or variable withdrawals, or do I use the CD laddering strategy proposed above for first 5-6 years (again the rates on 2 or 3 year CDs are terrible now).

Thanks again.
NR
If current rates on CDs are low, and even the 5 year returns are low, you want most of money in CDs in shorter term CDs, then when the CD matures, rethink duration.

Meaning if your "goal" was the portfolio I described (30% stocks, 40% bonds, 40% cash)

40% of 450k is 180k
25k is :expected" annual expenses
I will round this down to 175k, which is 7 years expenses at 25k and 38.9% cash

Put 25k into a 5 year CD (cd a)
put 25k into a 4 year CD (cd b)
put 25k into a 3 year CD (cd c)
puy 25k into a 2 year CD (cd d)

those 4 CDs have "medium" interest rate risk/

with remaining 75k, put that into a 3 month CD or money market (whichever returns better) and when you see a CD rate you like, move 25k into that CD.

Eventually you want a 7 year CD ladder, but because rates are so low, you do not want to commit too much money to any CD with a duration longer than 4-5 years.

If this is still locking in too much of a low return, only open 3 CDs with 3-2-1 year maturities and 100k in money market.

The with 40% bond allocation, research what you are comfortable with. A fund like RPSIX owns domestic and foreign, government and corporate, high grade and junk. All in various percentages. It's yield is (was?) above 4% last I checked (it has been a while...). If this is a taxable account, you may want to consider muni bonds with some or all of the bond allocation too.


Quote:
But seriously, do I just have one conservative portfolio (say 50/50 stocks bond or even 45/55 stocks bonds) and then use the dynamic allocation or variable withdrawals, or do I use the CD laddering strategy proposed above for first 5-6 years (again the rates on 2 or 3 year CDs are terrible now).
You need to decide what lets you sleep at night.

Buckets is a way to let people justify taking X risk with Y% of the portfolio in anticipation of generating $Z of income (to cover expenses).

The whole portfolio approach works if people are comfortable with the risks equities present while also being flexible with their withdraw amounts/ spending amounts and rebalancing techniques.

I suggested buckets because it was a way for you to see the problem differently. In your situation I think total portfolio approach is better. Your withdraw rate is about 5.6% over 18 years, so total portfolio approach is better for this IMO. Buckets work better with lower withdraw rates over longer time periods IMO.
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Old 05-06-2010, 09:53 AM   #17
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...

... I guess I should have introduced myself as a "greedy "no risk"" :-)

But seriously, do I just have one conservative portfolio (say 50/50 stocks bond or even 45/55 stocks bonds) and then use the dynamic allocation or variable withdrawals, or do I use the CD laddering strategy proposed above for first 5-6 years (again the rates on 2 or 3 year CDs are terrible now).

Thanks again.
NR
The "greedy "no risk"" aspect is the real emotions of investing. Commonly, called "greed vs fear". Too aggressive an allocation, and when the market falls we kick ourselves. Too conservative, and when the market climbs, we kick ourselves.

That's why I just use the 100 - age = amount in equities, my age = amount in fixed income formulas for my allocation. To try to take the emotion out of the allocations and to protect my investments from my worst enemy, that being myself .

The age formulas is a way of keeping myself honest with my allocations, plus it helps simplify things too.
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Old 05-06-2010, 10:59 AM   #18
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But seriously, do I just have one conservative portfolio (say 50/50 stocks bond or even 45/55 stocks bonds) and then use the dynamic allocation or variable withdrawals, or do I use the CD laddering strategy proposed above for first 5-6 years (again the rates on 2 or 3 year CDs are terrible now).

I think we are down to different opinions.

Here's a hodgepodge of related thoughts to perhaps help you make your decision.
  1. Since you have a couple of years before you retire, you may want to proceed slowly. You appear to be a good planner and do your homework well, so what is best for yourself should get clearer with more study. Also, sometimes our brain needs time to mature its thinking about new ideas that are multifaceted.
  2. The 18-year period until your pension coupled with your desired income puts you in the same boat as many retirees -- there is no risk-free solution (although the odds are greatly in your favor). So welcome to the club :-)....we all struggle with the same "risk" problem and wish there was a silver bullet to solve it. You have two significant advantages though. First, you know the exact time period (i.e. your first phase "dies" in 18 years), so if all goes well, around year 12 or so you may be able to safely shift to 100% bonds. Second, getting low on money when you are 55 is not the same as getting low when you are 85....you can pick up a part-time job if the market is extremely bad.
  3. I believe "risk" in retirement is not about volatility but about the odds of running out of money. (Volatility does indirectly contribute to the problem, but it is secondary.) To a certain extent, the more you study market history the more comfortable you become with volatility. When it comes to the odds, you are in great shape.
  4. I don't remember you mentioning how you are invested now, but you should go ahead and move into some allocation that is compatible with retirement (don't try to squeeze out extra return these last two years).
  5. You used the wording "dynamic allocation or variable withdraws". If I understand you correctly, I recommended both, but you can use one or the other. To avoid confusion, I'd prefer the wording "smart harvesting" as opposed to "dynamic allocation", since we are only talking about a withdraw strategy that uses bonds as a buffer for the down years in stocks (as opposed to the risky "dynamic asset allocation" deployed by Genworth). Smart harvesting will increase your portfolio performance, but I don't want to overstate -- for your case it is not greatly better than typical annual rebalancing; more important is variable withdraws (coupled with any withdraw strategy), which is what really keeps you from running out of money.
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Old 05-06-2010, 12:24 PM   #19
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Quote:
Originally Posted by mmcc View Post
I think we are down to different opinions.

HI don't remember you mentioning how you are invested now, but you should go ahead and move into some allocation that is compatible with retirement (don't try to squeeze out extra return these last two years).
You used the wording "dynamic allocation or variable withdraws". If I understand you correctly, I recommended both, but you can use one or the other. To avoid confusion, I'd prefer the wording "smart harvesting" as opposed to "dynamic allocation", since we are only talking about a withdraw strategy that uses bonds as a buffer for the down years in stocks (as opposed to the risky "dynamic asset allocation" deployed by Genworth). Smart harvesting will increase your portfolio performance, but I don't want to overstate -- for your case it is not greatly better than typical annual rebalancing; more important is variable withdraws (coupled with any withdraw strategy), which is what really keeps you from running out of money.[/LIST]
well said
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Old 05-06-2010, 12:25 PM   #20
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A couple of more examples using funds that are popular among retirees:

Using just a bond fund, you could withdraw $32,000 per year for 18 years. (Using todays yield on Vanguard's total bond fund: 3.13% )

With a little equity exposure using either Wellington (~60/40 stocks/bond) or Wellesley (~40/60 stocks/bonds) ON AVERAGE you could withdraw about 39,000 per year. Your willingness to smooth consumption with smaller withdrawals (down to about $25k) makes this VERY likely to succeed.
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