I'm New & I Could Use Some Help

[RASAP]

Hello all.

I am a new member of this forum and I have come seeking knowledge of the many new things coming as I approach retirement (hopefully in 12 to 18 months if all goes per plan). I believe that many of the people reading this likely fit into the category of “expert by experience” and I believe that is an excellent source of good information.

The one issue that has been on my mind the most lately is how I will manage my investment portfolio throughout my retirement years. What I am trying to get straight in my mind is the proper way to allocate (and subsequently reallocate) the various investments I own. I have found it difficult to find information that focuses on this. It seems that most books concentrate on how to invest for future retirement but I cannot find much at all on how to invest DURING retirement. For example, here is a method I have heard of that seems to make sense:

Allocate investments as follows:

- One year’s expenses plus emergency funds in a Money Market account for month-to-month living.
- Five year’s expenses in short term bonds.
- Remaining portfolio invested in stocks, mutual funds, bonds, and money market in a proportion that meets your risk tolerance.

I guess the theory here is that the 5 year’s expenses invested in short term bonds can be used during extended periods of poor stock market performance. What I’m not quite sure of is when money should transition from one investment type to another. Would it go something like this...?

At the end of the year (quarter?, month?), if the stock market is doing well, I would sell some of the portfolio holdings and move this money into the money market account leaving the short term bonds alone. On the other hand, if the stock market is performing poorly, I would leave my portfolio alone and sell some of the short term bonds and move this money into my money market account. Later (1 to 5 years), when the stock market has recovered and my portfolio is back on track, I would sell some of it to replenish the bonds I have used during the down period.

I would like some opinions on the above and would also like to hear of other methods of managing ones portfolio during retirement. Also, can anyone recommend books / articles that address this specific subject?

Any and all help would be greatly appreciated.

Swooper

[Nords]

Welcome to the board, Swooper.

Originally Posted by RASAP

Also, can anyone recommend books / articles that address this specific subject?

First I'd recommend reading library copies of Bernstein's "Four Pillars" and Bob Clyatt's "Work Less, Live More". Both recommend specific portfolios and Bob's book delves into withdrawal methods. A link to Bob's book is at the bottom of the website.

You can also read more about retirement planners & withdrawal methods at the FIRECalc page.

Your plan sounds fine. There are many different methods to withdrawing your portfolio during ER, and in subsequent posts you're gonna see all of them in excruciating detail. You can make it easy or you can make it awful complicated. If you stick with your approach then rebalancing once a year (how much & where depending on market performance) is probably sufficient.

Many of your questions have probably already been addressed in the board's other 100,000 posts. The "Search" button at the top of the page will let you look for keywords and help sort out the chaff.

[jdw_fire]

How you invest also depends on what income streams you have supporting your retirement.* That is, are you going to produce an income solely from of financial assets or do you also have a pension, income from an annuity, income from cash flowing real estate, etc.* For example, the greater the percentage of your required retirement income is produced by a pension the higher risk you can take with your financial assets and the fewer bonds you need.* You may even go to a two bucket approach that drops the "Five year’s expenses in short term bonds" bucket.* In other words you need to look at the entire income producing picture.