Now retiring, need advice for an income fund

[wmc1000]

Cheesehead, I use the FIDO RIP all the time. To input vacation expenses for the years up til late 70's you can enter the detailed monthly expenses worksheet and under Recreation click add details - you can then add your annual vacation expenses as a monthly amount and use the custom years to plug in from now until the year you expect to become homebodies. Then click update total and then the save and continue button to see the results with the new info.

[wmc1000]

DEC - 1982 beat me to it! I also plug in a 20% SS cut in the year 2033 by adding a custom expense in that year!

[bingybear]

I use FSTVX instead of VTSMX, lower cost. It use to be Vanguard always had lower costs. Not so much anymore.
The idea of using Wellesley and Wellington as most/all of your portfolio leaves you with a portfolio that is not well diversified. Many people use total stock, total bond and total international stock to provide diversification. Note I do not practice this method completely... well not really much at all.
You asked about finding an objective (morningstar) rating of the fidelity backrock income portfolio. Can you find a single moringstar rating for a 45/55 split of Wellesley/Wellington? But you can look up each of these. I don't know if Fidelity would tell you which ETFs they actually use, but you could ask. From their documentation they use

Quote:

This portfolio seeks exposure to a broad range of income-producing investments including investment-grade bonds, high-yield bonds, domestic and international high dividend equities, preferred stocks, and REITs.

To get higher income, one usually takes higher risk components. I would assume they use diversification to reduce some of that risk. I know people who use these higher income investment and typically have done well... but some got bit with the old rout in the last 2 years. One was getting much of his income from one MLP paying about 10%. It slashed its dividend and the price dropped by 75%. Don't put all your eggs in one basket.
I tend to agree with the total return approach, but I do lean my portfolio more to value (dividend payers). Note that in creating in income stream, you need to consider taxation as well. You can't spend what the tax man takes.

When you ran the fidelity RIP (monte carlo analysis), were you evaluation success using their worst down market they model on the customer site? Note that this is a really pessimistic metric. It is the right thing to use for conservative retirees, but you also need to realize that you likely will do much better.
Look at what you are comfortable with in investing. There are many ways to skin the retirement game. Sometimes the worst thing can be getting into some more risky investment that makes you not sleep at night... and then you sell it when it is down in some short term volatility.

If interest rates are going up, it may pay not to buy an immediate annuity yet... but this is market timing.

[HadEnuff]

Cheesehead, I would urge you not to spend 1.1% on any kind of money management. You state you need your nest egg to deliver 3%. You can do this with very little risk exposure.
If you pay someone 1.1%, they need to deliver 4.1%, so you can get your 3%. In other words they need to be 36.6% better than your couch potato approach. Independent studies have shown, repeatedly, they almost never ever do this.

As far as your concern with rising interest rates, look for example at Vanguard's VICSX, which is an Intermediate Term Corporate Bond Index Fund, https://personal.vanguard.com/us/fun...FundIntExt=INT, with a stated SEC Yield of 3.41 %.
Say you have 100K in that fund, and you are getting 3.41%, and interest rates rise. While your principle amount will drop, as old bonds mature, and new ones come in, the yield will rise, so your income from the fund will be stable, unless you decide to sell shares.

Within a fund like Wellesley or Wellington, their exposure to rising interest rates will be managed the same way. Keep in mind that Wellington will be more exposed to stock prices falling than Wellesley, because they are "about" 2/3 stock/bonds invested, as opposed to Wellesley's "about" 1/3 stocks/bonds ratio.

Only needing 3% puts you in great shape to get what you need, and stay conservative.

BTW, your age and your wife's age are exactly the same as mine and my DW. I could survive on a 3% return, but to live the life I desire, I'd like to coax 3.5%, which I still feel is very doable with a conservative approach.

EDIT: I don't think you've mentioned if the bulk of your nest egg is "tax advantaged-deferred", as in IRAs. Mine is, so I don't worry about what some people on this forum refer to as "tax efficient", which is another way of saying "what your real return will be after Uncle Sam, and your state, take their tax bites". You might want to let us know about this, as there are many folks who have this figured out. I'm not one of them.

[eytonxav]

I don't like putting all my eggs in one basket, so to produce an income stream, I use a combination of equity and bond assets, including Wellington and Wellesley. For the equity side, I am more comfortable with low cost index investments both funds and etf, while for bonds, I am more willing to go for active management, except for term specific etfs. Right now, I am also considering an annuity for a small portion of my assets. Regarding the Fidelity Blackrock fund, did the advisor provide the funds return after fees are taken out. Personally, I think 1.1% is very high for managing a bond strategy.

[pb4uski]

Quote:

Originally Posted by Cheesehead Thanks PB4uski, I'll re-read that till I get it. Like I said, I am bad with numbers! You do agree that I can just ask for them to send a 3% annual check monthly (.25%) and unless there's a bear market I can leave it on auto-pilot, correct?...

Yes, in fact I helped BIL's mom set that up for her account... except she was in Wellington. To be clear, I don't think that you can do a % each month but you can do an automatic withdrawal for a fixed amount and send the proceeds to your local bank account... then just update the fixed amount as needed. If you have a few different funds you could do it proportionally from each fund or from the biggest one and rebalance occasionally as needed.

I do something along those same lines but a bit different. I tend to hold about 5% in cash in an taxable online savings account that pays 0.95%... I have an automatic monthly transfer for a fixed amount from that online savings account to my local credit union account that I use to pay my bills (my monthly "paycheck")... when I rebalance my investments towards the end of each year I replenish the cash back up to 5%... the 5% would be enough to cover up to 22 months of transfers. It has worked splendid for us.