Where to park/invest funds needed at certain time intervals during retirement?

[Bailing-Bob]

During Retirement where do you park/invest funds needed in....?

now-1 year
1-2 years
2-5 year
5-10 year
10 years and later?

What I mean is the asset class such as MM. CD, Treasuries, Bond Mutual Funds, Equities (MF or Individual stocks)

Thanks

 

[mathjak107]

i use 3 time frames 1-7 years 7-14 years and 14 years and out

i run 3 seperate dedicated portfolios for each

1-7 money markets , cd's, bank

7-14 bond funds, income funds , un-listed reits,bonds,conservative growth and income funds

14+ stock funds, reits, commodities


there has almost never been a 14 year period where you would be forced to liquidate stocks at a loss to fill the other buckets. you can shorten the time frames if your more aggressive even eliminating most of the 1-7 year down to only what you think you will need short term plus emergency cash.

 

[mathjak107]

another spin on the above is to set the buckets up based on goals and meeting them. as an example if you already saved the money for your house and are thinking of buying one in the next few years and have achieved that goal put the money in bucket 1. thats because you have the money now and can set a date. if you dont have the money yet then put more in 2 and 3 to achieve that goal , if your real far away put more in 3.

the closer we are to our goals the more risk we can temper if thats your personality.

as we get older its not about getting as much as we can, its getting as much as we need at a risk level we can tolerate.

 

[LOL!]

Buckets, schmuckets. We have an asset allocation of 25% fixed income and 75% equities. The fixed income part has some cash in it that varies between 8% and 12% of total assets.

Since our expenses are about 4% of total assets, one could say we might have 2 to 3 years of living expenses in cash. Right now, "cash" means a money market fund paying above 5%. We do not own any CDs or treasuries.

Our other fixed income is an intermediate bond fund, another bond fund held in a tax-deferred account, and stuff in a couple of balanced funds.

I imagine if treasuries and CDs paid somewhat more than a money market, then we would have some of the them. Cash has also outperformed AGG (the bond index ETF) this year.

 

[mathjak107]

i show cash for the year about 4.30-4.40 in total in most brokerage money market returns, we started out the beginning of the year with far lower returns than now. agg shows 4.90 for the year. of course longer term bonds werent the place to be in the 1st half of the year but now giving up a little yield in exchange for locking in longer intermediate term bonds may not be a bad idea in preperation if short term rates start coming down this year.

 

[LOL!]

VMMXX return YTD: 4.65% (to 12/15, source Vanguard website)
AGG 4.72% (to 11/30, source ETF connect, does not include the 12/7 distr.)
so with these updated numbers, I was wrong about cash vs AGG.

 

[mathjak107]

fidelity shows 4.30- 4.00 ytd for most money markets up to dec 1 though , market watch shows 4.90 for agg. but thats up to the minute

i think you can look at quite a few sources and get different numbers but usually they are close enough to know how you are doing.

 

[GOJAGATORS]

If you have a specific dollar amount targeted at a specific time in the future, and you want to remove any uncertainty of meeting that amount, you may want to consider using zero coupon bonds. I funded my kids college money this way. I used individual issues so there was no uncertainty of what a bonds NAV would be when the time came that I needed the money.

If you do this, think very high quality (US Treasuries and insured muni bonds only) since zeros are sold at a discount and you only see the money when they mature. You do pay income tax on the accrued interest (none for munis obviously) as you go, but generally you will get 20 to 25 basis points more yield. You give up any growth potential with zeros but you will know exactly what the future value will be when they mature.

 

[mathjak107]

zero's work well for a time and specific amount. only problem is unloading zero's before they mature. phew talk about volatile.

a 30 year zero treasury moves up or down approx 30% for every 1 point change in interest rates. truly a wild ride.


i used to use them following harry brownes permanent portfolio years ago.
it was
25% zero coupon treasuries 30 yr

25% fully invested all the time stock funds

25% money market

25% gold eagle coins

rebalance once a year.

way back when i tried it i found the gold weighting pulling everything down and it was a boring portfolio to watch.


truth is if i followed it for more than 2 years it probley didnt do to bad long term.

 

[GOJAGATORS]

zero's work well for a time and specific amount. only problem is unloading zero's before they mature. phew talk about volatile.

a 30 year zero treasury moves up or down approx 30% for every 1 point change in interest rates. truly a wild ride.


i used to use them following harry brownes permanent portfolio years ago.
it was
25% zero coupon treasuries 30 yr

25% fully invested all the time stock funds

25% money market

25% gold eagle coins

rebalance once a year.

way back when i tried it i found the gold weighting pulling everything down and it was a boring portfolio to watch.


truth is if i followed it for more than 2 years it probley didnt do to bad long term.

Agree with you there, thry are only appropriate for a specific time period and then only if you can ignore the fluctuations along the way. And boy will they fluctuate, especially longer term ones! However, for time frames of 10 years or so, I've found them to work well if you can ignore the ride to maturity.

 

[ferco]

Would Vanguard Wellington be a safe place for minimal volatility over a 3-4 year period? I won't need the funds for 4 years and at that point would probably shift half the funds to a MM or laddered CD structure.
I'm also planning to shift funds out of Target 2045 to Wellington for this same reasoning after the new year. Any suggestions?

 

[Bailing-Bob]

Re: Where to park/invest funds needed at certain time intervals during retiremen

Sorry Forum Members. It was not the intent of my question to start another buckets thread.