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Investing during retirement
Old 07-11-2013, 08:01 AM   #1
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Investing during retirement

We are fortunate to have strong pensions and Social Security so investment draw down rates are not the concern. What I am curious about is what others are doing regarding investment strategies with their extra cash flow. Are you following the same investment strategies for your now retirement years. Are you in a permanent build up mode and what is that strategy? We also have great health insurance to supplement Medicare. Are you more willing to increase your risk tolerance.
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Old 07-11-2013, 08:27 AM   #2
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The only retirees who can be in "permanent buildup mode" are those with pensions that exceed their expenses. The rest of us are in withdrawal mode. Managing investments is of course a big part of the picture, but adding to them is not. My investment goals nowadays prioritize "don't run out of money" (capital preservation), followed by "cash flow that equals or exceeds expenses" (income). If I am fortunate, my portfolio will continue to increase without additional investment from me at least in the short term. I will be watching that outcome parameter very carefully.
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Old 07-11-2013, 08:38 AM   #3
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Although I have tweaked my investment strategy since I ERed 4 1/2 years ago, I am basically reinvesting anything I don't spend into the funds they came from. This is true in both my IRA (which I won't be touching until I turn ~59.5, 10 years from now) and taxable accounts. I do some rebalancing, mainly in my IRA, but that is simply moving existing money from one fund to another, not introducing any new money. I am still up about 50% overall since I ERed (when the markets were near their low point).
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Old 07-11-2013, 09:15 AM   #4
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I am in the same situation as you. I generate between 1k-2k extra each month depending on my spending urges and trips to pay. I also worked PT for 3 years that allowed me to slog away a lot of cash (for me anyways). Though my portfolio is a drop in the bucket compared to others here, as long as I am alive it should continue to grow. Stocks are only about a 1/3 of my portfolio now, but I am at the point where I feel I have enough IBonds and CDs, where most of my extra cash is going to go to Vanguard Total Market Index. Next year, I will then start and split the excess monthly money into an international index fund. If those 30 year TIPS ever get over 2%, I will cash out my IBonds and put them there and forget about them. I consider all my investments "dead money". I never plan on accessing any of it, thus I feel no need to be a savvy investor.I have a cash reserve fund for unplanned expenses and can easily finance anything else through my monthly pension.
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Old 07-11-2013, 09:28 AM   #5
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We are fortunate to have strong pensions and Social Security so investment draw down rates are not the concern. What I am curious about is what others are doing regarding investment strategies with their extra cash flow. Are you following the same investment strategies for your now retirement years. Are you in a permanent build up mode and what is that strategy? We also have great health insurance to supplement Medicare. Are you more willing to increase your risk tolerance.
I'm not in this fortunate position. I thought I might be, but real life intervened.

I'd say it depends on your goal for the money. Presumably, you're planning to have a big estate when you die, who gets it?

If we wanted it to go to the children, I think we'd be sending them periodic checks long before we died. Tell them it's a refund of their SS taxes. If we didn't do that, I'd invest to maximize long term growth, (100% equities) figuring we've got decades of investment return before they get the money. (If it's in taxable accounts, at some point I'd try to maximize unrealized gains to get the step-up in basis.)

If I wanted it to go to charities, I'd look into tax-advantaged ways to contribute. Again, we'd probably give sooner rather than later.
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Old 07-11-2013, 09:52 AM   #6
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The only retirees who can be in "permanent buildup mode" are those with pensions that exceed their expenses. The rest of us are in withdrawal mode. Managing investments is of course a big part of the picture, but adding to them is not. My investment goals nowadays prioritize "don't run out of money" (capital preservation), followed by "cash flow that equals or exceeds expenses" (income). If I am fortunate, my portfolio will continue to increase without additional investment from me at least in the short term. I will be watching that outcome parameter very carefully.
While I agree with your general point, there are forms of income other than pensions that are useful in retirement. The one I've gone with is rental income. That will supplement a small pension and a couple of SS checks to hopefully put me in "permanent build up mode". This will allow me to maintain a similar investing approach both pre and post retirement.....although I will probably go from 5% to 10% cash
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Old 07-11-2013, 10:45 AM   #7
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I'm not in this fortunate position. I thought I might be, but real life intervened.

I'd say it depends on your goal for the money. Presumably, you're planning to have a big estate when you die, who gets it?

If we wanted it to go to the children, I think we'd be sending them periodic checks long before we died. Tell them it's a refund of their SS taxes. If we didn't do that, I'd invest to maximize long term growth, (100% equities) figuring we've got decades of investment return before they get the money. (If it's in taxable accounts, at some point I'd try to maximize unrealized gains to get the step-up in basis.)

If I wanted it to go to charities, I'd look into tax-advantaged ways to contribute. Again, we'd probably give sooner rather than later.
These are the thoughts I am looking for TY.
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Old 07-11-2013, 11:12 AM   #8
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The investment and risk tolerance questions not only come if you have an income surplus.
They come regularly when you have built ladders of maturing annuities.

I have defined a certain percentage of equities / real estate / annuities to build a portfolio.
So far I have no desire to modify. I would be surprised if my level of risk tolerance changes.
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Old 07-11-2013, 11:20 AM   #9
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The only retirees who can be in "permanent buildup mode" are those with pensions that exceed their expenses. The rest of us are in withdrawal mode. Managing investments is of course a big part of the picture, but adding to them is not. My investment goals nowadays prioritize "don't run out of money" (capital preservation), followed by "cash flow that equals or exceeds expenses" (income). If I am fortunate, my portfolio will continue to increase without additional investment from me at least in the short term. I will be watching that outcome parameter very carefully.
Pretty much sums up our position. Pensions currently cover over half our expenses, investments need to cover the rest.
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Old 07-11-2013, 11:55 AM   #10
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My mother is in that position. She doesn't plan on touching her portfolio at all, including reinvesting dividends. She keeps it all in equities, figuring she is growing it for us kids. However, she has it available if she should need it.

I'd do the same thing, though I'll be making withdrawals. I'd be uncomfortable gifting it out early since you never know what the future may hold. However, if the portfolio gets too large, that would be an option.
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Old 07-11-2013, 12:33 PM   #11
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Originally Posted by TuborgP View Post
We are fortunate to have strong pensions and Social Security so investment draw down rates are not the concern. What I am curious about is what others are doing regarding investment strategies with their extra cash flow. Are you following the same investment strategies for your now retirement years. Are you in a permanent build up mode and what is that strategy? We also have great health insurance to supplement Medicare. Are you more willing to increase your risk tolerance.
There are two schools of thought/thinking:
1. Since I do not need the money to live on, I can take on more risks, e.g., 100% equity.
2. Since I do not need to grow our portfolio, I should invest conservatively.

Which approach to take depends on your goals (i.e., the amount of cushion needed, the amount of money left for your kids, if any, etc) and appetite for risks.

Keep in mind that pensions, SS or health benefits may disappear or change in the future. One cannot always trust the government or corporate to look after one's interest. In the interim, enjoy the pension/SS payments while they last.
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Old 07-11-2013, 01:17 PM   #12
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There are two schools of thought/thinking:
1. Since I do not need the money to live on, I can take on more risks, e.g., 100% equity.
2. Since I do not need to grow our portfolio, I should invest conservatively.

Which approach to take depends on your goals (i.e., the amount of cushion needed, the amount of money left for your kids, if any, etc) and appetite for risks.

Keep in mind that pensions, SS or health benefits may disappear or change in the future. One cannot always trust the government or corporate to look after one's interest. In the interim, enjoy the pension/SS payments while they last.
That has been my position also. I am operating under the assumption we could experience a 25 percent reduction in pension and SS. Funding levels keep that as appropriate floors for now.
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Old 07-11-2013, 01:23 PM   #13
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We just opened a vanguard account for some of our monthly cash flow. We know are in a position to postpone DW taking SS at least until FRA. When we decide to sell the vacation rentals, that will put an end to the extra cash flow.
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Old 07-11-2013, 01:27 PM   #14
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That has been my position also. I am operating under the assumption we could experience a 25 percent reduction in pension and SS. Funding levels keep that as appropriate floors for now.
I am becoming more risk friendly as we enter our next stage and my spousal benefits will add to new savings and my eventual SS which is close to max will go into investments. I have been through a number of crashes over the years and know that markets come and in many ways I am 30 again with a long term horizon. Income levels at 70 should cover if not come close to covering Nursing Home cost. Assets go to sons and am about to go on cruise control and I am trying to affirm a few things with others who have already gotten there
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Old 07-11-2013, 01:46 PM   #15
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We just opened a vanguard account for some of our monthly cash flow. We know are in a position to postpone DW taking SS at least until FRA. When we decide to sell the vacation rentals, that will put an end to the extra cash flow.
I have to laugh we opened accounts with Vanguard recently for the same purpose. We did 62/70 for SS. My wife's SS pays for a condo we bought at the beach at market bottom.
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Old 07-11-2013, 03:09 PM   #16
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While I agree with your general point, there are forms of income other than pensions that are useful in retirement. The one I've gone with is rental income. That will supplement a small pension and a couple of SS checks to hopefully put me in "permanent build up mode". This will allow me to maintain a similar investing approach both pre and post retirement.....although I will probably go from 5% to 10% cash
I do have rental income. I consider my rental properties part of my portfolio.
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Old 07-13-2013, 09:11 AM   #17
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To answer your questions : please note I am not retired yet, but planning to FIRE this year, and my extra cash flow goes into deferred annuities or CDs. I moved some money a few weeks ago to bonds, which have been taking a beating since. So right now I am staying the course and not willing to increase my risk tolerance.
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We are fortunate to have strong pensions and Social Security so investment draw down rates are not the concern. What I am curious about is what others are doing regarding investment strategies with their extra cash flow. Are you following the same investment strategies for your now retirement years. Are you in a permanent build up mode and what is that strategy? We also have great health insurance to supplement Medicare. Are you more willing to increase your risk tolerance.
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Old 07-13-2013, 10:31 AM   #18
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There are two schools of thought/thinking:
1. Since I do not need the money to live on, I can take on more risks, e.g., 100% equity.
2. Since I do not need to grow our portfolio, I should invest conservatively.

Which approach to take depends on your goals (i.e., the amount of cushion needed, the amount of money left for your kids, if any, etc) and appetite for risks.....
+1 Since I have been a stock investor all of my adult life I am very comfortable with the risks and potential volatility of equities so my AA is about the same as in the 10 years prior to RE - 60% equities/40% fixed income in my case.

The only thing I have done different in RE is that 6% of the 40% fixed income allocation is cash so it represents about two years of spending at our ~3% WR.
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Old 07-13-2013, 11:17 AM   #19
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We are fortunate to have strong pensions and Social Security so investment draw down rates are not the concern. What I am curious about is what others are doing regarding investment strategies with their extra cash flow. Are you following the same investment strategies for your now retirement years. Are you in a permanent build up mode and what is that strategy? We also have great health insurance to supplement Medicare. Are you more willing to increase your risk tolerance.
In the years just before I retired, I adopted an AA that is less than half equities and that has not changed.

I don't take as much risk with my investments as I did in the accumulation phase, because I don't have to any more. I am already there.
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Old 07-13-2013, 12:10 PM   #20
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There are two schools of thought/thinking:

1. Since I do not need the money to live on, I can take on more risks, e.g., 100% equity.
2. Since I do not need to grow our portfolio, I should invest conservatively.

Which approach to take depends on your goals (i.e., the amount of cushion needed, the amount of money left for your kids, if any, etc) and appetite for risks. ...
And FIRECALC runs show that with a low WR, either approach has succeeded. But if you plan to leave money for younger heirs, I think it makes sense to invest it as appropriate for their age, which probably means a fairly aggressive AA.

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