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Advice prior to retirement
Old 03-13-2005, 04:07 PM   #1
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Advice prior to retirement

I am within 9 to 15 months from RE at 63. We will have $33k from wife's pension, $15K from SS and a little over $1mil in funds from brokerage and 401k.

I believe the funds I will select at retirement are:
1. Wellington - 35%
2. Weslesley - 35%
3. TR Price Cap Apprec (PRWCX) - 20% (never lost $)
4. 1St Eagle O/S - 10% (comp 401K - never lost $)

Plus I would have $80K in 6 mo or 1 yr CDs.
I plan to budget for $90K/yr (penison, SS, withdrawl)

Is this a good plan or do I have too much overlap?
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Re: Advice prior to retirement
Old 03-13-2005, 04:38 PM   #2
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Re: Advice prior to retirement

Congratulations, Kenepp1, on your forthcoming retirement.

Your fund selection looks OK with me. We'll let those with more technical/financial aptitude take a swing at it, but it looks fine to me.

Your future budget, of the top of my head, looks right on. You may want to look into the "Optimal Retirement Planner" at the following website to get a rigorous 'planners' view of budgeting for your specifics. When I looked into it, I was surprised by the impact of inflation over an extended period that we all would hope to experience in retirement. Also, look at the section where the program recommends how to withdraw monies before 70 1/2 from tax deferred vs taxed accounts - most interesting.

www.i-orp.com/TaxCutForm.html

Great to have you aboard

Best Regards

JohnP
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Re: Advice prior to retirement
Old 03-13-2005, 06:11 PM   #3
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Re: Advice prior to retirement

A little late in retiring, but sounds like you have a solid financial plan. Good luck.

It also sounds like you could have retired earlier. Any reason why you waited until 63 instead of say 53 or 43? A $90K budget is on the high side. Would you care to give us an idea of some of the details behind that budget?
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Re: Advice prior to retirement
Old 03-13-2005, 06:58 PM   #4
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Re: Advice prior to retirement

You are definitely in good financial shape. Even though $90K is relatively high, your withdrawal is only $50K on a $1 mil conservative portfolio.

Good luck.
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Re: Advice prior to retirement
Old 03-14-2005, 06:31 AM   #5
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Re: Advice prior to retirement

Kenepp1, you ARE on the right track.

Figuring $33k from your wife's pension (is it Cola'ed) plus $15k from SS ($48k total by my trusty calculator) means that you are only $42k from your $90k Goal without figuring in your retirement savings contribution. Congratulations!

Check out the Safe Withdrawal Rates forum here. The typical answer is that you can withdraw approximately 4% a year safely for an extended retirement period; 4% withdrawal on your '...a little more than $1mil in funds from brokerage and 401k.' means you are safely within pocket change of the $90k goal.

Let me know if it is time to toss my old calculator.

Best Regards

JohnP
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Re: Advice prior to retirement
Old 03-14-2005, 10:22 AM   #6
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Re: Advice prior to retirement

Thanks for the reassuance. I see why so many put off retiring. It is scary. The reason I have waited is to rebuild what I lost in the market in 2002. Also wanted to get within 18 mos of medicare so my COBRA would cover me at a reduced rate of health insurance. To continue my present medical coverage will be about $700/mo. COBRA should be somewhat less.

The reason I want about $90K is we want to travel some, plus after I budgeted everything up it will take about $8K/mo to feel comfortable. I may have overestimated on taxes. We may reduce that as we become adapted to retirement. No bills except about $55K left on the house. I may elect to pay that off too.

Question 2. About the stated "yield" of the funds (If I don't have that reinvested) is that what is sent out as dividend checks? I am trying to understand how I will get an income stream periodically, if I don't sell off and buy CDs.
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Re: Advice prior to retirement
Old 03-14-2005, 10:57 AM   #7
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Re: Advice prior to retirement

Some funds pay dividends monthly, some quarterly, some annually, some irregulary. Wellesley and Wellington pay them quarterly. You'll get roughly 1/4th of the stated yield paid at the end of each quarter.

So if the dividend is 4%, you'll get 1% of your investment paid out as the dividend. I get my wellesley/wellington dividends paid our by vanguard directly to my checking account automatically.

I will throw out the quip that since historically nobody beats the S&P500 on a sustained basis using a managed fund, that the ones that have 'never lost money' are statistically due for a string of bad years to return them to the mean. Which doesnt mean that will actually happen...but...
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Re: Advice prior to retirement
Old 03-14-2005, 11:13 AM   #8
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Re: Advice prior to retirement

Kenepp1 - I retired in Feb 2003 but my wife has continued working half time so I have been sort-of doing a trial-retirement. Things have been going well with virtually all my financial assumptions working out in spite of my initial worry and skepticism.

With respect to Question 2 - I can only speak from personal experience about Wellington. I got VWELX in June 2003 - $50,000 worth - 1863 shares - and since I was trying retirement I requested to be paid for all dividends and to reinvest cap gains. In 2004 I got quarterly dividends totalling $1631 (~3.15%) and capital gains of $1694 which gave me 56 more shares. Hope this info correlates to VGs yield info and is useful for you.

This transition from saving to dipping into savings is indeed scary! It took me a while to decide that I wasn't just skipping school and enjoy this retirement. My wife has summers off as a teacher so we are now filling up the summer with activities - last summer we went to the Baltic and visted the northern capitols and had a family reunion in Colorado. This coming summer we spend 12 days in and around Paris.

Hold off until you are ready and then jump - it'll be better than you think!

Best Regards

JohnP
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Re: Advice prior to retirement
Old 03-14-2005, 11:14 AM   #9
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Re: Advice prior to retirement

Thanks TH. Yes I know that historical data doesn't mean a guanantee for the future. That is why I will drop AVALX sometime soon and the foreign market is good right now too. I still like the PRWCX better than the 500 idx tho.
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