starting retirement, 401K rollover?

[Mikegt4]

I officially retired at the end of the year due to corporate downsizing. At 63 I was planning on working a few more years but I had no choice in the matter. I did qualify for low cost company retiree healthcare/dental which is a big savings. I liked my work but hated the corporate culture so, in many ways, I was happy to leave. I have enough projects and hobbies to keep me busy for the rest of my life. I have been in almost every state and have no desire to travel (little if any travel expenses). "Retirement" is working in my shop/garage everyday (here is my discretionary spending would be).

I have tracked my expenses to the penny for the last year and with my somewhat frugal lifestyle, I averaged about $2K per month. I have a small ("pocket money" small) pension coming in from a previous employer that combined with potential SS benefits could cover nearly all of my monthly expenses as they exist today. I will probably do some part time work to postpone taking SS or dipping into retirement funds more than necessary. I have no debt and own my home. SS, pension and 4% withdrawal rate would be about 75% of my per-retirement income, good enough for me.

The purpose of this post is to ask for some recommendations as to rolling over my 401K account. The options in the 401K were company stock or a few poorly managed, high fee funds. Last year's run up has helped the stock value but it's time to move to Vanguard. I am not one who is interested in finance/money so a passive investment plan is in order. I have read "Millionaire Teacher" and ETFs with a 3-4 fund portfolio appeals to me. AA is yet to be determined as I am a little leery of bonds at this time except maybe stable value. I am thinking of re-balancing and/or withdrawals 3-4 times a year. What Vanguard ETFs would be good for a 3-4 fund plan. What about Wellesley?

Thank you for you input, Mike

 

[Ready]

Welcome to the forum Mike, and congratulations. It sounds like you have a very nice plan for retirement all laid out.

In regards to your question, many people find that two Vanguard index funds can make up the core balance of their holdings without the need for much else on the equities side. For mutual funds these would be Vanguard Domestic Stock Market (VTSAX), and Vanguard International Index (VTIAX). If you prefer the ETF versions, no problem. They have the same cost structure and there are no fees to purchase either the ETF or the mutual fund as long as you are buying them within a Vanguard account.

Their main bond fund is Total Bond Index (VTABX). I'm not a big fan, and many of us on the forum have moved at least some of our bond holdings to a 5 year PenFed CD at 3%. However, tomorrow is the last day they are guaranteeing that rate, and the rumor is that it is going to drop significantly next week. If the CD rates are closer to 2%, bond funds start to look a little better.

For money outside of your retirement account, you may also want to look at municipal bonds (either individual or bond funds). They are paying a little higher rates right now that treasuries and corporate bonds.

I'm sure others will have more to add. Good luck with it!

 

[sengsational]

Mike, Welcome to the posting side of life on this board (I say that because from the content of your question, you are well schooled in the standard material here).

Many would say this calculator results in something that's more complex than it has to be, but it might give you some ideas. The guy that puts together that calculator thinks that the countries with the highest 'financial freedom' will do best in the long run. You may or may not agree with that, but that's the reason for all of the country specific stuff. You can go with pacific ex japan and do about the same thing as all of those specific countries.

 

[pb4uski]

Mike, does your 401k offer a stable value fund? If so, what rate do they offer?

As you may know, you can't get a stable value fund other than in a 401k. Based on what you described, the only reason that I can think of to keep the 401k is if they offer a decent stable value fund.

As for a fund, the easiest way would be to find a Vanguard balanced or target retirement fund that has an AA similar to what you want and just invest in that fund. If you select a target retirement fund, note that the fund doesn't necessarily have to be the 2010 or 2015 fund since you are currently retired, it just need to have an AA similar to what your target AA is.

This link shows the index funds that Vanguard uses for their Target Retirement funds. My target would be 42% Total Stock, 18% Total International Stock, 32% Total Bond and 8% Total International Bond if I was designing a four fund portfolio with an overall 60/40 AA.

 

[Animorph]

You might qualify for special tax treatment with company stock in your 401k, so research that before liquidating it.

+1 to duplicating the Vanguard Target Retirement fund of your choice, or just using one of them. Wellesley is about 40/60 and a good track record if you like that stock/bond split. You can subdivide your allocations if you want to take on more work.

You can use cash in place of bonds for a while if you'd like to avoid bonds right now. That's the flexibility of creating your own set of funds instead of using just one.

 

[2B]

Welcome.

There's no need to rebalance 3-4 times per year. You could take money out of the "heavy" side of your portfolio when you need cash but I wouldn't worry about trying to rebalance completely. Rebalancing has been beaten to to death. The theories range from annually to never and with "bands" where you only rebalance when an asset class get a certain percentage out of balance (5% is typical). I rebalance annually.

I have a Vanguard heavy portfolio. It is 40% in equities and includes VTSAX (60%), VSMAX (10%), VDMAX (20%) and VEMAX (10%). My other 60% is in money market or laddered CDs. Because of the meaningless interest rates being paid now and the prospect of their increasing, the CD ladder is only 2 yrs out. My goal is to shift out to 5 years. Vanguard has brokered CDs available on their site.

 

[Live And Learn]

This link shows the index funds that Vanguard uses for their Target Retirement funds. .

Hi Mike - welcome to the forum and congratulations on your retirement !

Pb4uski - that link is great ! thanks for posting that.

 

[Mikegt4]

Thank you everyone, this is exactly what I was looking for.