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Advice please
Old 04-25-2005, 10:00 AM   #1
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Advice please

I need to invest apprx. 1.5 million in retirement income bearing instruments. Am I better off in a state muni bond fund or in funds like Wesseley/Wellington,Target income fund or should I diversify among them. I am trying to secure a safe return ($55,000) and some inflation protection. I'm not adverse to earning more if there are better investments. I've manged to make some money over my career but I'm not sure on investing it.
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Re: Advice please
Old 04-25-2005, 10:15 AM   #2
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Re: Advice please

55k is only a 3.66% return. You can easily get that in just cd's. I would diversify some though. Probably 1/3 in a ladder of cd's ( 3-7 years), 1/3 in a ladder of high quality bonds (10 year), and 1/3 in a vanguard fund as you mentioned. Good luck!
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Re: Advice please
Old 04-25-2005, 10:39 AM   #3
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Re: Advice please

Greetings-

You are right to consider the effect of inflation on your retirement income.

For inflation protection you should consider treasury inflation protected bonds (known as TIPS). You can create a ladder, buying individual bonds direct from treasury (for free at Fidelity if you buy online, free at Vanguard if your account is large enough). Or you can make life simpler by buying a TIPs mutual fund.

Personally I like the idea of a bond ladder with maturities each year. That way you always have liquidity available with selling bonds before maturity. If you don't need the money from a maturing bond, just roll it over.

You could consider a mixture of CD's, TIPS and an equity fund for income, inflation protection and growth.

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Re: Advice please
Old 04-25-2005, 11:41 AM   #4
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Re: Advice please

I'd set aside a year or two of spendable cash in a cd ladder and plonk the rest of it into a wellesley admiral account.

That would pay you the income you need, keep pace with inflation (it has historically anyhow), and keep enough cash between you and the fund shares to avoid selling in a downturn.
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Re: Advice please
Old 04-26-2005, 08:45 AM   #5
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Re: Advice please

Does that mean automatic 4% withdraw is a no no? How about distributions should those be reinvested?
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Re: Advice please
Old 04-26-2005, 11:50 AM   #6
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Re: Advice please

I just take the dividends and gains directly into my checking acct. You're going to pay taxes on them anyhow, so take them for your costs and try to minimize unnecessary distributions from other sources unless needed.
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Re: Advice please
Old 04-26-2005, 01:47 PM   #7
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Re: Advice please

Do you then suggest waiting until year end to sell shares for necessary (4%) income.? Which is taxable as capital gains?
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Re: Advice please
Old 04-26-2005, 01:52 PM   #8
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Re: Advice please

Since wellesley pays a 4% dividend, you wouldnt ever need to sell shares unless you needed more than 4%.

Share sales would be taxable to the extent that they've appreciated. Some part of the dividend paid is simple income at your regular income tax rate, some is stock dividend which is capped.
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Re: Advice please
Old 04-26-2005, 01:59 PM   #9
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Re: Advice please

I really appreciate you taking time to answer my questions, this is a great board with nice people.
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Re: Advice please
Old 04-26-2005, 02:37 PM   #10
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Re: Advice please

I am going with the Wellesley. I think they have a good thing going and offer low expenses. What I like about them is that they focus on a sustainable yield first and second offer small long-term cap appreciation. You may not care about that but CDs don't grow in value. By holding some stocks, low risk & high dividend payers, within the portfolio you get a small dose of cap appreciation over time & you should be better off as a result.
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