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Do you like a simple plan?
Old 06-05-2005, 06:42 PM   #1
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Do you like a simple plan?

I took early retirement, now income comes only from my portfolio. Asset allocation: I decided how much of my assets I could risk not touching for years if the market was in decline, and planned to generate a base income from bonds alone if necessary. If the trick is to "stay the course", then my common sense tells me NOT to sell stocks while they're down.

Since I can't touch IRAs before 59, I have to rely on my taxable accounts only. That means a mother load of bonds in taxable. So my formula:
Bonds: as much as I need for base income, using dividends only.
Stocks: as much as I'm willing to gamble with, about 30%.
The rest in more bonds.
Funds: all Vanguard, Total Stock Market, Total Bond Market, Short-Term Corporate,

Not very tax-efficient, but I figure that in the future* it will be easier to rebalance OUT of bonds and into a tax-efficient stock index fund than the other way around, because capital gain or loss will be small.

This is my first full-time year at the beach. The sand here so damn hot my laptop is gonna melt

Whaddya think?

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Re: Do you like a simple plan?
Old 06-05-2005, 07:09 PM   #2
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Re: Do you like a simple plan?

Why all Vanguard. I see them recommended here a lot. Are they better for retirees?
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Re: Do you like a simple plan?
Old 06-05-2005, 07:44 PM   #3
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Re: Do you like a simple plan?

Quote:
Originally Posted by Free_at_49
I took early retirement, now income comes only from my portfolio. Asset allocation: I decided how much of my assets I could risk not touching for years if the market was in decline, and planned to generate a base income from bonds alone if necessary. If the trick is to "stay the course", then my common sense tells me NOT to sell stocks while they're down.

Since I can't touch IRAs before 59, I have to rely on my taxable accounts only. That means a mother load of bonds in taxable. So my formula:
Bonds: as much as I need for base income, using dividends only.
Stocks: as much as I'm willing to gamble with, about 30%.
The rest in more bonds.
Funds: all Vanguard, Total Stock Market, Total Bond Market, Short-Term Corporate,

Not very tax-efficient, but I figure that in the future* it will be easier to rebalance OUT of bonds and into a tax-efficient stock index fund than the other way around, because capital gain or loss will be small.

This is my first full-time year at the beach. The sand here so damn hot my laptop is gonna melt

Whaddya think?

Why do people still insist that you "can't touch the IRA before 59.5"?
Absolutely not true.

JG
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Re: Do you like a simple plan?
Old 06-05-2005, 07:48 PM   #4
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Re: Do you like a simple plan?

Yeah but the 72t thingy is not very well publicized. And if you screw up the Substantially Equal Payment, the penalties are bad.
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Re: Do you like a simple plan?
Old 06-05-2005, 07:50 PM   #5
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Re: Do you like a simple plan?

Quote:
Originally Posted by Free_at_49
I took early retirement, now income comes only from my portfolio. Asset allocation: I decided how much of my assets I could risk not touching for years if the market was in decline, and planned to generate a base income from bonds alone if necessary. If the trick is to "stay the course", then my common sense tells me NOT to sell stocks while they're down.

Since I can't touch IRAs before 59, I have to rely on my taxable accounts only. That means a mother load of bonds in taxable. So my formula:
Bonds: as much as I need for base income, using dividends only.
Stocks: as much as I'm willing to gamble with, about 30%.
The rest in more bonds.
Funds: all Vanguard, Total Stock Market, Total Bond Market, Short-Term Corporate,

Not very tax-efficient, but I figure that in the future* it will be easier to rebalance OUT of bonds and into a tax-efficient stock index fund than the other way around, because capital gain or loss will be small.

This is my first full-time year at the beach. The sand here so damn hot my laptop is gonna melt

Whaddya think?

It's actually quite easy to make penalty-free withdrawals from an IRA before age 59-1/2, see link:

http://www.retireearlyhomepage.com/wdraw59.html

If you have a large IRA, it *may even make sense to draw from that first and leave your taxable account intact. See link:

http://www.retireearlyhomepage.com/irawithd.html

intercst
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Re: Do you like a simple plan?
Old 06-05-2005, 08:03 PM   #6
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Re: Do you like a simple plan?

Still need more "accumulation" before worrying about that, but my plan is to drop my 401k contributions enough to build taxable and Roth accounts the next x years, so I can slice and dice to my advantage, depending on the tax and interest-rate environment whenever x is.
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Re: Do you like a simple plan?
Old 06-05-2005, 08:14 PM   #7
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Re: Do you like a simple plan?

Free_at_49

Congratulations on the ER! *Enjoy the beach and don't forget the sunscreen. *

Your mostly bonds taxable portfolio could, in my opinion, use more equity component (stocks and stock mutual funds) since you have a long retirement time horizon at age 49. * Many, especially, unclemick, like dividend paying stocks while others like dividend paying stock mutual funds like Vanguard Wellington and Wellesley in addition to those funds you mentioned. *Equities can give you an appreciation in value matched to the market *in addition to dividends. *

OldAgePensioner

When I started investing in mutual funds all I was offered was high front and back loaded funds that had annual expenses of 1.5-2.5% or more, mostly much more. *What did I know then - I was working hard, raising a family, etc... I had other things to do then worry about finances. *

Then I discovered that there were such things as no-load funds and then I discovered low annual expense funds and a whole new world opened up to me financially. *Now there are a relative handfull of companies that offer no load and low annual expense funds, Vanguard being one of them, Fidelity is another. *

What difference does low expenses make to you? *In the Safe Withdrawal Rate (SWR for short) section of this forum you will find discussions that say that a person with a reasonably well planned portfolio can expect to draw approximately 4% of their portfolio per year in retirement. *And that portfolio will increase with the general inflation growth for the expected life of the individual. *My thinking is that if 4% is a significant number than a 1.5-2.5% annual expense for a typical *mutual fund is a major hit to what I can expect to draw in retirement. *

As a result, I have tended to gravitate toward Vanguard for my funds. *Are they better for Retirees? *I think you need to decide for yourself on that decision. *

Best Regards

JohnP
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Re: Do you like a simple plan?
Old 06-05-2005, 08:28 PM   #8
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Re: Do you like a simple plan?

JohnP,
Thanks for the answer. I just went from being paid and a reckless investor to a retiree who needs lots of learning before I commit to a new approach.

I agree. I acutally only own a couple of stock funds right now. Rest in individual stocks. I got irritated back in the 90's by funds claiming 15% appreciation per year and yet I didn't see the same thing in may account.

Now I have to re-learn the basics.
Thanks
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Re: Do you like a simple plan?
Old 06-05-2005, 08:29 PM   #9
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Re: Do you like a simple plan?

JG & *intercst *:

I have considered drawing down my IRAs via SEPP, and convert them to taxable accounts, but I don't yet feel too confident in my investing abilities.

I think of IRAs as longer-term investments, that's why the bulk of my stocks are in there. My plan has worked fine for 3 years now, but I'm open to suggestions.



OldAgePensioner:

Cost! *Lets assume a conservative portfolio with 4% annual return after inflation. If your ER cost is 1%, you're giving away 1/4 of your paycheck! *Beyond that, I would not recommend Vanguard, their service sucks.

Are you Canadian?
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Re: Do you like a simple plan?
Old 06-06-2005, 12:18 AM   #10
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Re: Do you like a simple plan?

Free,
I'm an American but worked overseas and just came home after 20 years away. Bit of culture shock.

One thing that really cracks me up. In England people shop nearly everyday for groceries and their refrigerators are about 1/3 US size. The refrig in my condo is about 4 feet wide.
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Re: Do you like a simple plan?
Old 06-06-2005, 12:27 AM   #11
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Re: Do you like a simple plan?

Quote:
Originally Posted by OldAgePensioner
One thing that really cracks me up. In England people shop nearly everyday for groceries and their refrigerators are about 1/3 US size. The refrig in my condo is about 4 feet wide.
Sam's Club and Costco are new in the past 20 years. You have to have the huge fridge to hold the 25 lb pack of hamburger patties! Being single, my fridge currently has lots of beer, some bratwurst and beef. Shop every day? I can't imagine. But I suppose they eat much fresher stuff.
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Re: Do you like a simple plan?
Old 06-06-2005, 05:50 AM   #12
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Re: Do you like a simple plan?

Quote:
Originally Posted by BigMoneyJim
Sam's Club and Costco are new in the past 20 years. You have to have the huge fridge to hold the 25 lb pack of hamburger patties! Being single, my fridge currently has lots of beer, some bratwurst and beef. Shop every day? I can't imagine. But I suppose they eat much fresher stuff.
My wife is a compulsive purchaser of foodstuffs. We agree this is due to her not having much growing up. She is a careful shopper, but having every
square inch of pantry, freezer and fridg filled to bursting makes me nervous.
When I was single, I was like BMJ except maybe I had a little wild game and fish also. The high point? of my bachelor days was the time I made pancakes
with pickle juice (I was out of milk, beer and bottled water). Yeah, they were as bad as they sound

JG
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Re: Do you like a simple plan?
Old 06-06-2005, 07:16 AM   #13
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Re: Do you like a simple plan?

I fell into the habit of shopping every day and can't break it. And yes, the milk, meat and veggies were just hours old over there.

By the way Wal-Mart bought out the ASDA store where I lived and the locals were not too happy. Look for the Brits to start buying large lots soon and there goes the tiny fridges.

What next, replace traditional fish&chips with McD's. Ooops, already happened.

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Re: Do you like a simple plan?
Old 06-06-2005, 09:32 AM   #14
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Re: Do you like a simple plan?

Quote:
Originally Posted by OldAgePensioner
Free,
I'm an American but worked overseas and just came home after 20 years away. Bit of culture shock.

One thing that really cracks me up. In England people shop nearly everyday for groceries and their refrigerators are about 1/3 US size. The refrig in my condo is about 4 feet wide.
When I used to live in Hong Kong, we had no refrigerator and therefore had to shop almost daily. The advantage is that you are always getting the fresh stuff, e.g., meat, seafood, vegetable and fruit.
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Re: Do you like a simple plan?
Old 06-06-2005, 09:35 AM   #15
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Re: Do you like a simple plan?

Quote:
Originally Posted by BigMoneyJim
Sam's Club and Costco are new in the past 20 years. You have to have the huge fridge to hold the 25 lb pack of hamburger patties! Being single, my fridge currently has lots of beer, some bratwurst and beef. Shop every day? I can't imagine. But I suppose they eat much fresher stuff.
Similar to the storage space (or garage), the refrigerator is never big enough. As we buy a bigger one or additional one, we immediately fill it with more stuff.
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Re: Do you like a simple plan?
Old 06-06-2005, 11:02 AM   #16
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Re: Do you like a simple plan?

Spanky, I love Hong Kong. Just can't beat it for the hustle and bustle. I once stayed in room in Chung King Mansions on Nathan Rd and you could see suitmakers worker round the clock in a sweatshop down the hall.

Room was so tiny that the door would not open fully just big enough to hold a twin bed. Knew a lot of street dealers back in those days and
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Re: Do you like a simple plan?
Old 06-06-2005, 11:19 AM   #17
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Re: Do you like a simple plan?

Old age pensioner...you find a lot of vanguardies here because their funds are as good on the whole as any other, and their fees are a lot lower. When you can get a solid well managed fund with a good 40-80 year track record for under .20% vs some other outfits charging you 1-2% a year, you've got a bit of a head start on the fund costs alone.

I have a large port with substantial investments in reits, small caps, sector funds, precious metals, etc and my weighted expense ration is roughly .25%. Try that with another fund company!

Regarding refrigerators...dont talk to me. I have two of them totalling 50 square feet. One works, one sort of works. I still shop and cook 2-3 meals almost every day.
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Re: Do you like a simple plan?
Old 06-06-2005, 11:55 AM   #18
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Re: Do you like a simple plan?

Quote:
Originally Posted by OldAgePensioner
Look for the Brits to start buying large lots soon and there goes the tiny fridges.
GE is standing by. They probably paid Wal-Mart to start this seismic cultural shift.
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Re: Do you like a simple plan?
Old 06-06-2005, 02:28 PM   #19
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Re: Do you like a simple plan?

Quote:
Originally Posted by OldAgePensioner
Spanky, I love Hong Kong. Just can't beat it for the hustle and bustle. I once stayed in room in Chung King Mansions on Nathan Rd and you could see suitmakers worker round the clock in a sweatshop down the hall.

Room was so tiny that the door would not open fully just big enough to hold a twin bed. Knew a lot of street dealers back in those days and
Old AgePpensioner,

Hong Kong is a great place for visit. The city never sleep. There are always people and entertainment in the street.
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Re: Do you like a simple plan?
Old 06-07-2005, 10:15 AM   #20
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Re: Do you like a simple plan?

Quote:
Originally Posted by Nords
GE is standing by. They probably paid Wal-Mart to start this seismic cultural shift.
To be fair and balanced, the GE refrigerator in my garage makes a mighty fine cabinet.
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