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Retirement portfolio
Old 12-05-2010, 08:34 AM   #1
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Retirement portfolio

I've been reading a lot of stuff about retirement portfolio allocation. I had no idea it could be so much more complicated than the saving years. When I got the serious urge to retire my thoughts were to keep one year of income in a money market fund, four years income in a short term bond fund and the balance in something like Vanguard Wellsesly. I would use the first two funds to supplement my pension at below a 4% withdrawal rate. My idea is to take money from the Wellesly fund in good years to replenish the first two funds and let it ride in bad years. Now I'm thinking I might be better off to replace Wellesly with a few index funds that give me more diversity. I would appreciate your thoughts on the whole concept.
Jim
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Old 12-05-2010, 08:49 AM   #2
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Wellesley is a good fund. Also I think diversification is an excellent idea for any of us. Maybe you could include both Wellesley and some index funds. For example you could invest, say, 30% in Wellesley and divide the rest between equity index funds, bond index funds, and cash.

One characteristic of Wellesley is that it throws off a lot of dividends. If you send those to your money market account, that income can be part of what you live on in retirement.

Most of us rebalance at least once a year, which means we buy or sell as necessary to return to our planned asset allocation.

Keep reading! It may seem complex at first but it is so important as you approach retirement. Personally I like this list from the Bogleheads board.
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Old 12-05-2010, 09:10 AM   #3
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Keep reading! It may seem complex at first but it is so important as you approach retirement. Personally I like this list from the Bogleheads board.
+1 - still the best list I know of...
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Old 12-05-2010, 11:59 AM   #4
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A couple of books you can read to see some fully described approaches are Ray Lucia Bucket Of Money and Grangaard's Strategy.

They describe their trademarked approaches for what you described.... but with more detail about why and how.

I like the idea of breaking the management of income between base income (what we need to maintain an acceptable lifestyle for the rest of our lives) and discretionary income. Someone posted a good summary on the techniques here:

http://www.early-retirement.org/forums/f28/journal-of-financial-planning-retirement-income-53464.html

It was labeled as Modern Retirement Theory.
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Old 12-05-2010, 12:29 PM   #5
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Thanks for the replies. I ordered Lucia's book this week. I like the concept except for the last bucket. I'm going to do something similar, I just don't have it nailed down yet. I'm finding this process of preparation quite interesting and just a tad bit scary.
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Old 12-05-2010, 12:39 PM   #6
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Thanks for the replies. I ordered Lucia's book this week. I like the concept except for the last bucket. I'm going to do something similar, I just don't have it nailed down yet. I'm finding this process of preparation quite interesting and just a tad bit scary.

Grangaard's book is also worth reading to compare and contrast the differences. You can probably get it at your library.

Here is a whitepaper that gives a basic description of it.

http://www.thegrangaardstrategy.com/...ion%202010.pdf

Some other articles from his web site:

PAG, Inc.
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Old 12-05-2010, 01:50 PM   #7
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Thanks Chinaco. I just finished reading the whitepaper. This guy thinks more like me than any of the others I've checked out. I like the fact that you can use more or less risk depending on your needs. I'm going to order the book right now. Some clarity and order are starting to set in.
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