HI,
Here are some details about me.
About 40 y.o. now, want to retire in 2 years or so, which gets me to qualify for my employer pension which I plan on starting at 60. So basically I need income for 18 years (assuming retiring at 42 and starting pension at 60, the pension is with COLA and will be enough for me after I am 60). I count in “eating up” the principal during this 18 years ER (ideally will like to have a bit of it left by the time pension kicks in).
By the time I retire I plan to have 450K in my after tax portfolio. My annual expenses are pretty low (house paid off, and my lifestyle is simple), I can do OK with 25-30K per year. So I count 25* 18=450 which gives me my bare minimum lifestyle with zero risk (put everything in the bank, where it is right now, embarrassingly). However, this does not allow me for inflation adjustment, which I think is important. I also want some cushion (i.e. have income closer to 30K rather than 25K) and perhaps some reserve for contingencies, emergencies and some extra vacations that are not part of the budget, etc. So it would be nice to make some return on the money.
I am looking for some conservative investment options, especially for the first 9 years (i.e. from when I am 42 to 50). For the second “bucket” (i.e. 50-60, which is still 10 years away) I can take a bit more risk and I plan to do index funds (some version of the lazy portfolios that some of you mentioned here), but for the first bucket I want less risk and I am concerned even conservative index fund mix might be a bit too risky (even heavily bond weighted might be risky if interest rates go up in the future which I am sure they will eventually).
I considered EIA, which after reading a lot here and elsewhere I am thinking not to do. Another option someone is trying to sell me is called “Preservation strategy” by Genworth Financial Management. They are something like an “absolute return” strategy that try not to lose the money. I look at their performance during the worst of the recent crisis they were only down about 4%, at the worst year.
They charge 1.5% asset management fees, which I believe are on top of the mutual fund fees they invest in, so it seems I am looking at 2.5% total fees, which I don’t like at all. But if they will produce return higher then CDs with just a bit more risk, then maybe it is worth it?
I understand the futility of paying someone an asset management fee if all they do is try to “beat the market” but these guys try to “preserve principal” and provide some modest returns (about 4.5% over past 5 years, but have to adjust for taxes since this is pretty actively managed, so say 3.5% which still beats available CD rates). So in this case maybe paying a fee is worthwhile?
So my question is:
What are other low risk options out there that I may not be considering?
What do you think about this “preservation strategy” idea?
Thanks
NoRisk
Here are some details about me.
About 40 y.o. now, want to retire in 2 years or so, which gets me to qualify for my employer pension which I plan on starting at 60. So basically I need income for 18 years (assuming retiring at 42 and starting pension at 60, the pension is with COLA and will be enough for me after I am 60). I count in “eating up” the principal during this 18 years ER (ideally will like to have a bit of it left by the time pension kicks in).
By the time I retire I plan to have 450K in my after tax portfolio. My annual expenses are pretty low (house paid off, and my lifestyle is simple), I can do OK with 25-30K per year. So I count 25* 18=450 which gives me my bare minimum lifestyle with zero risk (put everything in the bank, where it is right now, embarrassingly). However, this does not allow me for inflation adjustment, which I think is important. I also want some cushion (i.e. have income closer to 30K rather than 25K) and perhaps some reserve for contingencies, emergencies and some extra vacations that are not part of the budget, etc. So it would be nice to make some return on the money.
I am looking for some conservative investment options, especially for the first 9 years (i.e. from when I am 42 to 50). For the second “bucket” (i.e. 50-60, which is still 10 years away) I can take a bit more risk and I plan to do index funds (some version of the lazy portfolios that some of you mentioned here), but for the first bucket I want less risk and I am concerned even conservative index fund mix might be a bit too risky (even heavily bond weighted might be risky if interest rates go up in the future which I am sure they will eventually).
I considered EIA, which after reading a lot here and elsewhere I am thinking not to do. Another option someone is trying to sell me is called “Preservation strategy” by Genworth Financial Management. They are something like an “absolute return” strategy that try not to lose the money. I look at their performance during the worst of the recent crisis they were only down about 4%, at the worst year.
They charge 1.5% asset management fees, which I believe are on top of the mutual fund fees they invest in, so it seems I am looking at 2.5% total fees, which I don’t like at all. But if they will produce return higher then CDs with just a bit more risk, then maybe it is worth it?
I understand the futility of paying someone an asset management fee if all they do is try to “beat the market” but these guys try to “preserve principal” and provide some modest returns (about 4.5% over past 5 years, but have to adjust for taxes since this is pretty actively managed, so say 3.5% which still beats available CD rates). So in this case maybe paying a fee is worthwhile?
So my question is:
What are other low risk options out there that I may not be considering?
What do you think about this “preservation strategy” idea?
Thanks
NoRisk