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It's decision time...
Old 04-07-2012, 04:56 AM   #1
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It's decision time...

I admit I'm concerned about taking the plunge into investing, but have about 200k in inherited (non-spousal) IRAs and 172k in cash currently in a PNC 'Investment Account'. I retire in a year where there is about 560k in tax deferred accounts to deal with - but not until then.

Vanguard has a Wellesley Income Fund, VWINX or VWIAX, 30/70, higher dividends, and I'm wondering about using that for one of the IRA accounts (150k). The other 50k Ira I'm considering putting into a more aggressive account.

Vanguard also has a couple of nice balanced accounts (60/40) I'm considering putting 100k of the taxable cash in. (68k of the 172k to pay aff mortgage).

In the IRA account, where I have RMDs starting at 3.38%, would it be best to have the money in a conservative or aggressive account if I'm only going to take RMDs?

Income or growth for the cash? We have pensions, and I only want to withdraw 20k a year from the portfolio.



Being new, any thoughts or recommendations are appreciated.

Associated thought/question: on a non-spousal beneficiary IRA, can dividends be reinvested? I know we cannot contribute to the fund and must take the RMDs...
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Old 04-07-2012, 07:56 AM   #2
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Vanguard has a financial planning service that is pretty good and reasonable (might be free in your case given the amount you have to invest) and they could make some good recommendations for you.

I'm a couch potato and only have Vanguard Total Stock, Total International and Total Bond in roughly 48/12/40 ratio across all my accounts. For tax efficiency, you want to have your bonds in your tax-deferred or tax free accounts.
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Old 04-08-2012, 10:46 AM   #3
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Originally Posted by pb4uski View Post
I'm a couch potato and only have Vanguard Total Stock, Total International and Total Bond in roughly 48/12/40 ratio across all my accounts.
Is that equity/fixed-income/cash?
40% cash seems excessive.
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Old 04-08-2012, 12:16 PM   #4
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Is that equity/fixed-income/cash?
40% cash seems excessive.
No, domestic equity/international equities/fixed income. So my equity allocation is 60% and fixed income is 40%.

I count cash the same as fixed income (albeit meager income these days). I vacillate as to whether cash is part of investments or outside investments, but it doesn't make enough of a difference in my case to fret over.
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Old 04-09-2012, 07:40 AM   #5
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Originally Posted by seraphim View Post
Associated thought/question: on a non-spousal beneficiary IRA, can dividends be reinvested? I know we cannot contribute to the fund and must take the RMDs...
The dividends can be reinvested but you are probably going to have to redeem more shares than the dividends buy to cover your RMD.

You mentioned that you only want to withdraw $20,000/year. Based on your post, you have $932,000 in assets. The "classic" SWR would have you able to supplement your pensions with up to $40,000/year. How to invest depends on what your ultimate goal is for the money you aren't planning to spend.

If you are investing to increase what you leave to children, a 70% equity allocation makes sense because you would be investing in their time horizon. If it's for added security for you, you have "won" the asset accumulation game. In the words of William Bernstein, "When you have won the game, stop playing." In this case, I'd consider going very conservative and put 60 or 70% in fixed income.

I'm a big Vanguard fan. I am also a couch potato(e) investor with a 40% equities allocation. My equities are Vanguard Total Stock Market (VTSAX) - 60%, Vanguard Developed Market (VDMAX) - 20%, Vanguard Small Cap (VSMAX) - 10% and Vanguard Emerging Markets (VEMAX) - 10%. My fixed income is in individual bonds or CDs. Personally, I consider the interest rates at absurdly low levels due to Fed manipulation. These will go up and probably go up a lot. Long term bond mutual funds will get hammered when this happens. It happened to me in the 1980s and I don't intend to experience it again.

Yes, the paper value of my bonds and CDs will drop but they will mature at their full face value for me to reinvest. A bond mutual fund will continue paying the same dividends but their value will drop.
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Old 04-10-2012, 09:32 AM   #6
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A chunk in ETFs........
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Old 04-11-2012, 04:41 AM   #7
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Thanks for all of the reponses. I've been out of touch for a few days, camping.

Quote:
Vanguard has a financial planning service that is pretty good and reasonable (might be free in your case given the amount you have to invest) and they could make some good recommendations for you.
That is my next step. DW is hesitant, however, to move away from her mom's FP. I I appreciate the advice about the bonds.

Quote:
The dividends can be reinvested but you are probably going to have to redeem more shares than the dividends buy to cover your RMD.

You mentioned that you only want to withdraw $20,000/year. Based on your post, you have $932,000 in assets. The "classic" SWR would have you able to supplement your pensions with up to $40,000/year. How to invest depends on what your ultimate goal is for the money you aren't planning to spend.

If you are investing to increase what you leave to children, a 70% equity allocation makes sense because you would be investing in their time horizon. If it's for added security for you, you have "won" the asset accumulation game. In the words of William Bernstein, "When you have won the game, stop playing." In this case, I'd consider going very conservative and put 60 or 70% in fixed income.
Yes, but I may not have to make an additional draw for a couple of years; The first RMD was $9100+, and it MIGHT be possible to squeak by on that - depends on how much we end up travelling.

I wouldn't mind leaving a nice inheritance for our son, so I have been using a longer time horizon. Plus, the women in DW's family are notoriously long lived. 50/50 is the most conservative I've considered, but maybe 60/40 isn't out of line. The more I listen to people hear, the more conservative I'm becoming. Everyone's helping me narrow down my allocation decision.

Quote:
A chunk in ETFs........
If I understand ETFs: what would be the advantage, if I don't plan on trading?
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