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RPSIX and PONDX for quick temporary stash?
Old 09-04-2017, 09:58 AM   #1
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RPSIX and PONDX for quick temporary stash?

Hi,

I've got about 900K total split between 350K in an IIRA, 150K in a Roth,
and the remainder in an individual account. I have about 180K in a 401K
[FOSFX] but I'm not going to even consider touching that. Hitting about 57 soon had an injury so I'm off full time work for a few years. No short term disability or workman's comp. Own house. Thinking about pulling
out of all stocks and sticking everything into a split between RPSIX and PONDX to see if I can get decent 3% income, live frugally [very] and not deplete much principal. Then go back to work and fix everything. Does this seem plausible? A terrible move?

I've read that if you make less than 37K a year, you don't have to pay
taxes on capital gains, so that would be good on taking money out of the
IIRA.

Thanks,

Mike
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Old 09-04-2017, 10:18 AM   #2
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What would happen if you are unable to return to work?
I would base my plan on worse case scenario and go from there. 57 is fairly young and you would need to plan for several years retirement, just in case.
Others with far more investment knowledge than I will be able to comment on those choices.
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Old 09-06-2017, 02:46 PM   #3
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Quote:
Originally Posted by Mike93 View Post
Hi,



I've got about 900K total split between 350K in an IIRA, 150K in a Roth,

and the remainder in an individual account. I have about 180K in a 401K

[FOSFX] but I'm not going to even consider touching that. Hitting about 57 soon had an injury so I'm off full time work for a few years. No short term disability or workman's comp. Own house. Thinking about pulling

out of all stocks and sticking everything into a split between RPSIX and PONDX to see if I can get decent 3% income, live frugally [very] and not deplete much principal. Then go back to work and fix everything. Does this seem plausible? A terrible move?



I've read that if you make less than 37K a year, you don't have to pay

taxes on capital gains, so that would be good on taking money out of the

IIRA.



Thanks,



Mike


IRA withdrawals are treated as regular income. Capital gains rate does not apply. Also IRA withdrawals before 59.5 are subject to penalty unless an exception applies or you could use a 72t plan to avoid penalty.
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Old 09-06-2017, 03:02 PM   #4
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....A terrible move?

I've read that if you make less than 37K a year, you don't have to pay
taxes on capital gains, so that would be good on taking money out of the
IIRA. ...
I think so. According to Firecalc, if you invest the $900k in a 60/40 AA you can spend $35k a year for the next 33 years with a 95% chance of success.... also, it looks like your total nut is $1,080k, not $900k, in which case the $35k becomes $42k..... why constrain yourself to $27k a year?

Besides, what will happen to RPSIX and PONDX if interest rates increase 200 bps over the next few years?

On the last part, money taken out of the IRA is ordinary income, not LTCG... but if you hold equities outside your IRA ($300k?) your tax bill should be minimal as both qualified dividends and long-term capital gains are tax free for those in the 15% tax bracket and lower.
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Old 09-07-2017, 02:22 PM   #5
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If you decide to invest in PONDX, look into PIMIX, which is the the institutional share class of the same fund. At Schwab it costs $76 to buy with a minimum $100K but saves you the .25% 12b-1 charge. You'll recoup the $76 buy commission in less than 4 months on $100K, and less time for a larger initial investment. I know Fidelity has a similar charge for PIMIX, it may be better there.

As a caveat, I am a longterm holder of PIMIX, I've had about 25% of my total portfolio in PIMIX since 2009. I have been very happy with that position and consider PIMIX to be one of very, very few outliers for active funds. I generally invest in passive indexes. In the last 8 years, it has had an amazing run on a volatility/reward basis. There is a reason the fund has grown to over $80 billion. All that said, you are subject to manager risk with PIMIX to a degree greater than just about any mainstream fixed income investment. The prospectus allows the manager to invest in about anything they want within the fixed income sphere and also to use leverage and to short while doing so. With PIMIX/PONDX you are giving extraordinary trust to the managers.

As long as you understand the risks, PIMIX has delivered outsized returns with much less volatility than the market pretty much since inception in 2007. As the prospectus will state: Past performance doesn't guarantee future results. I personally wouldn't put all or the majority of my portfolio into it, and I'm a person that has been called out for the percentage I do keep in it.
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Old 09-07-2017, 02:50 PM   #6
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I think it would be a terrible move. Basically, you are skating to where the puck was.

I guess the standard advice is to come up with a well-diversified asset allocation plan consisting of low-expensive, passively-managed index funds with some US stock index fund, a foreign stock index fund, and a bond index fund. If those are 70% to 90% of your assets, then you will do fine. If those are 100% of your assets, then you might do even better.
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Old 09-07-2017, 02:52 PM   #7
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I've read that if you make less than 37K a year, you don't have to pay taxes on capital gains, so that would be good on taking money out of the IIRA.
The problem is that IRAs are not taxed based on their capital gains. In general, withdrawals from a traditional IRA (not a Roth IRA) are taxed as so-called ordinary income, just like interest on a savings account. And by that I mean the interest and not the return of capital of a savings account.
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Old 09-07-2017, 08:12 PM   #8
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If you add your w/d to your projected SS benefit at age 62, can you live on that? If so, that shortens your horizon. Just find a way to financially make it for the next 5 years. PT work, lowered cost of living, downsizing your home, selling a car, etc.

If you cannot get to your retirement funds before 59-1/2 w/o penalty, consider taking a mortgage out on your house, and spending the cash for a couple of years, until 59-1/2. Then, take out enough to pay back the mortgage over 5 years or so.

Just some thinking outside the box....
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Old 09-10-2017, 12:48 AM   #9
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Thanks for the advice from everybody. I guess I'm a little worried about all the over valuation recession talk concerning the stock market, and am thinking about dodging a correction with some bond funds, although I've read that bond funds get affected also, but not as much. I hate those doomsday bear articles. I was looking at preserving principal, living off of some yield while avoiding a correction, and at the same time dealing with the work issues. But most corrections don't seem to last that long anyway.

So, I am now considering the following:

PRSGX : TRPrice's Spectrum Growth Stock
PSILX: Spectrum International Stock
RPSIX: Spectrum Income [Bond mix 10% stock]
PRDGX: Dividend Growth

The Spectrum funds invest in a bunch of other mutual funds.
Maybe the opposite extreme, spreading it too thin, but the return on
these look ok.
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Old 09-10-2017, 07:54 AM   #10
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All of your choices are risky and none of them will preserve principal.

May I suggest that you step back and spend a few months reading some basic books on investing? How about starting with John Bogle's "Common Sense on Mutual Funds"?
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Old 09-10-2017, 08:31 AM   #11
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All of your choices are risky and none of them will preserve principal.

May I suggest that you step back and spend a few months reading some basic books on investing? How about starting with John Bogle's "Common Sense on Mutual Funds"?
+1 a even 25% allocation this portfolio was down 32.65% in 2008.

Since you seem to like t rowe price funds try this , you can add a international fund if you want.

PRTIX T. Rowe Price U.S. Treasury Intermediate Fd 40.00%
POMIX T. Rowe Price Total Equity Market Index Fund 60.00%

Only went down about 17% in 2008.
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Old 09-10-2017, 09:07 AM   #12
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I think it would be a terrible move. Basically, you are skating to where the puck was.

I guess the standard advice is to come up with a well-diversified asset allocation plan consisting of low-expensive, passively-managed index funds with some US stock index fund, a foreign stock index fund, and a bond index fund. If those are 70% to 90% of your assets, then you will do fine. If those are 100% of your assets, then you might do even better.
While I own both pondx and pimix (different accounts), I worry when recommending things that juice that returns (AKA increases risk). In a down turn this will not hold up like high quality bonds. These are great funds but you must understand the risks. All investing comes with risks.

Someone else already posted that the OP should do some learning so they have an idea of the risks they are taking. Don't make final decision based on SGOTI. Listen to the advice that is offered, get informed and make your own decision.

I've made good returns in EM debt and equity funds... but I would not recommend these to the OP.
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Old 09-10-2017, 03:55 PM   #13
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Why do people insist in talking in the code of funds letters ID, thus forcing people to look up their meaning if interested, vs. stating the fund's name first with the letters codes? It's like you don't want people to be interested/helpful.
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Old 09-12-2017, 10:34 AM   #14
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Why do people insist in talking in the code of funds letters ID, thus forcing people to look up their meaning if interested, vs. stating the fund's name first with the letters codes? It's like you don't want people to be interested/helpful.
I use the letters because the three or four word descriptions don't help that much.. there is so much overlap between terms, you almost have to look them up. I use Google/Finance for a quick allocation list.
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Old 09-12-2017, 10:36 AM   #15
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Ok, here was the advice I got from TRP. I'm not looking for reviews, just throwing it out there FYI. They were very nice
but I did get the feeling a lot of this portfolio was overbought.
But hey what do I know the market might double in the
next decade.

They did clarify their advice was for retirement only, and
was given with the intent that the client would live to 95.
So my 'how can I get 3% safely for a few years and not
worry about principal' question was largely ignored.
It was almost like I had kicked a hornet nest to ask for such
advice. But now I understand that's not their job.

PRGFX Growth Stock
TRVLX Value Fund
RPMGX Mid Cap
TRMGX Mid Cap
OTCFX Small Cap
PSILX Fund of International funds
---
Bonds
PRCIX New Income
PRHYX High Yield Corp [junk]
PRFHX Muni tax free [junk]
RPIBX Interna Bond [this one looked bad]
PREMX Emerging Markets Bond
---
Short Term
TRBFX Limited Duration Inflation Focused Bond
PRTXX US Treasury

The allocation percentage of the above list was fairly top down.


A simpler approach might be:

POMIX Total market
RPSIX Multi bond
PONDX Multi bond
PRCIX Investment grade bond
PSILX Multi International stock fund
PRHYX High Yield Corp bonds [junk]
PRFHX Muni tax free bonds [junk]

Anyway I'm still kicking around the ideas, thanks for the feedback.


Btw, is there any point in putting tax free municipal bonds in a Roth
or IIRA?

Mike
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Old 09-12-2017, 11:53 AM   #16
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I think your questions are answered in that book I recommended earlier in this thread.

I suppose it should not bother me to see someone all set to waste time and money on floundering around, so I promise not to respond anymore to this thread.
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Old 09-12-2017, 07:57 PM   #17
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I think your questions are answered in that book I recommended earlier in this thread.

I suppose it should not bother me to see someone all set to waste time and money on floundering around, so I promise not to respond anymore to this thread.
Do not put tax free bond funds in a Roth, and why a high yield (junk) bond fund when both PONDX and RPSIX already have 15-20% junk.

I would just go with 3 fund portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio READ THIS!

Total Equity Market Index Fund (POMIX) 40%
International Equity Index Fund (PIEQX) 20%
US Bond Enhanced Index Fund (PBDIX) 40% this will give you a 60/40 stock to bond and will give you about 2.15 yield and then sell enough to get to 3%
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Old 09-15-2017, 01:04 AM   #18
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Ok I will check it out! Thanks
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Old 09-15-2017, 01:05 AM   #19
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I'll check out the Wiki link, thanks.
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