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Am I on the right track?
Old 10-19-2006, 08:21 AM   #1
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Am I on the right track?

I need some feedback, I'm going to take the plunge and open a Vanguard account. I've been reading and researching for the past year as well as wading thru the information everyone posts here, Thank you BTW, it's sometimes over my head but I'm learning.

Background:
Dh 64 (retired), I'm 52 still working at a company that I'm a partner in.
No debt of any kind except daily living expenses.
401K is maxed plus I fund the catch up but because I'm highly compensated I sometimes get money back.
No IRA or Roth because I'm over the income level.
Cash reserve is funded (actually overly funded)
Tax bracket is in the 33 to 35% depending on how the business does.
I have a small account with the broker that handles the 401k at work but he's gotten all he's going to get out of me… I know I know, live and learn.

I want to some what retire when I'm 55, I won't have a pension or health benefits but I'll still have the distributions coming in although they are not guaranteed. Dh will be 67 by then and he'd like to spend some retirement time together while he's still able. I should be able to stay on the health insurance from work since I'm an owner but I'll have to pay it 100%, it will probably be cheaper than getting it on my own since I'm in MA. I've figured we need about $50k a year for retirement expenses.

Dh will probably still work his seasonal job because he likes having some "spending money", he also receives a small pension (pays the cable bill) along with his SSI check, which he doesn't touch. Once I retire I'll probably still putter with my Ebay and consignment shop hobby, which brings in some spending money for me. I'll also probably have to do a year or two of consulting until my replacement is fully trained which I could bargin to include paid health insurance.

I spent the last 4 years paying off our mortgage and the business loan I took out to buy into this company. Being debt free is a wonderful feeling!!!

So I'm at that point that I need to do something with this money. I receive about $40k a quarter (after taxes) in distributions and I don't want to just stick it in CDs or a MM account although that's what DH would have me keep doing (if it were up to him he'd bury it in the back yard). I want to take $30k, or possibly more, each quarter and invest it in one or more of the following funds but this is where I need help. I'm not sure if I'm being redundant or should just invest in one fund. I'm pretty sure the MA Tax-Exempt is a no brainer for me but the others I'm not sure about. I've narrowed it down to the following.

Vanguard Wellington Fund Investor Shares (VWELX)

Vanguard STAR Fund (VGSTX)


Or should I just go with Vanguard LifeStrategy Growth Fund (VASGX)

Included with either of the above - MA Tax-Exempt Fund

Any thoughts or am I on the right track?


Carolyn
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Re: Am I on the right track?
Old 10-19-2006, 08:56 AM   #2
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Re: Am I on the right track?

Quote:
Originally Posted by Outtahere


So I'm at that point that I need to do something with this money. I receive about $40k a quarter (after taxes) in distributions and I don't want to just stick it in CDs or a MM account although that's what DH would have me keep doing (if it were up to him he'd bury it in the back yard).

I'd "stick it in CDs", but that's just me. BTW, if you want to have some fun with DH, show him the "TIPS for Dummies" thread running here now.
Bet he'd be looking for his shovel in no time.

JG
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Re: Am I on the right track?
Old 10-19-2006, 08:59 AM   #3
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Re: Am I on the right track?

LOL, showing him the balance in the online bank account is bad enough, I don't want to give him a stroke.
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Re: Am I on the right track?
Old 10-19-2006, 09:28 AM   #4
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Re: Am I on the right track?

Quote:
Originally Posted by Mr._johngalt
I'd "stick it in CDs", but that's just me. BTW, if you want to have some fun with DH, show him the "TIPS for Dummies" thread running here now.
Bet he'd be looking for his shovel in no time.

JG

JG, if I'm not mistaken I started reading that thread and got part way through when quickly ran to get my aspirins. I believe I was mislead by the title.
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Re: Am I on the right track?
Old 10-19-2006, 11:33 AM   #5
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Re: Am I on the right track?

Quote:
Originally Posted by Outtahere
Vanguard Wellington Fund Investor Shares (VWELX)
Vanguard STAR Fund (VGSTX)
Or should I just go with Vanguard LifeStrategy Growth Fund (VASGX)
Included with either of the above - MA Tax-Exempt Fund
Nothing wrong with those.

When you cut back on your income will you be in a much lower tax bracket? There may be some benefit to starting up conventional IRAs now ($4000/year for each of you plus the catch-up contributions) and then converting to Roth IRAs when you're in a lower income-tax bracket. But that's just cannonball polishing.
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Re: Am I on the right track?
Old 10-19-2006, 10:11 PM   #6
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Re: Am I on the right track?

You need to provide more information:

1. How many years from now do you intend to withdraw the money that you want to invest?

2. What is your risk tolerance? On a scale of 10, where 10 is someone who trades stocks on a daily basis and who is willing to accept large fluctuations in share prices, and 1 is someone who keeps all of their money in a CD in the bank for fear of losing any of it, where do you fall?

3. How long could you maintain your desired lifestyle without touching the money that you plan to invest?
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Re: Am I on the right track?
Old 10-19-2006, 11:37 PM   #7
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Re: Am I on the right track?

If you need $50k/year and get $40k/quarter in distributions it sounds like you don't need to do anything different. What are these distributions from?
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Re: Am I on the right track?
Old 10-20-2006, 04:45 AM   #8
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Re: Am I on the right track?

As for risk, you take one kind of risk investing in stocks and another kind of risk burying your money in the back yard. You have to balance the risk of capital loss versus the risk of losing purchasing power to inflation.

In your post you never gave any indication as to your assets but you apparently have a very high income. You've been posting here long enough to know to go to FIRECalc for a conservative review of your assets. If the goal is $50K after tax, you're all set if you have $1.3 - 1.5 MM with a very conservative portfolio. You can subtract social security and your "other income" from your needed income and do well with even less.
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Re: Am I on the right track?
Old 10-20-2006, 06:43 AM   #9
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Re: Am I on the right track?

My risk tolerance is probably an I on a 1-10 scale but my dh is more like a 1 so I compromise. I'm hoping that as our nest egg grows he'll relax a little and maybe even take an interest in helping me with this.

Yes, I have a high income but I spent the last 6 years paying off debt which was something I promised dh I would do when I jumped into this partnership.

My problems are - a dh that is older than me and may at some point need LTC that could put a big draw on our funds.

The distributions are from the partnership and they are in no way guaranteed. We've been fortunate that business is good and we're able to distribute profits but there is also a chance that next year or even next quarter there won't be anything to distribute. So, on the outside it looks great but things could drastically change over night, that's why I'm concerned about investing what I have now and going forward.




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