50% Wellesley/50 % Wellington - So Simple Why didn't I do it?

[ejman]

Helen, I see - we have a different withdrawal philosophy. I prefer not to sell at all and live off the distributions only. By selling bonds and or/stocks depending on your read of the markets you are practicing a form of market timing and it can work very well if you are good at it. Unfortunately I am not so I don't do it. I do sell and exchange occasionally to rebalance my portfolio to my desired asset allocation but I do that only in the retirement bucket.

[FANOFJESUS]

Quote:

Originally Posted by ejman Helen, I have a variety of funds (7 actually ) in my non retirement basket ( 2 of which are Wellsi/Welltn) and they provide a good retirement income. Like I said at the beginning of this thread, I wish this pot was mostly if not all in the Wellsi/Welltn combo. I'm not sure I follow your logic in this not beong desirable in the withdrawal phase. CFB Agree, diversified portfolio increases portfolio survavility MPT and all that but I hate the complexity. Tiger, My comments on rates of return before were intended in a humorous vein and I'm not sure if that's how they were taken so I'm not playing no more...

We think along the same lines. I have 9 funds in my non retirement basket. I got caught in 2007 with only one fund the Dodge and Cox Balanced fund. For many years it did great but last year was the pitts. Because of this I have become gun shy of only one fund or maybe even two. So right now I have nine. It might be overkill but at least if one has a bad year it will not hurt me to much. But you are right those two are great funds. I have the wellington and the star as two of the nine. My ER is about .90 average for all nine funds which is higher but I do feel safe. I am down about 6% for the year so not to bad for a 60/40 mix.

[ejman]

Rec7: good points. My comments on just having the Wellsi/Welltn combo is directed to the simplicity of the idea and the fact that over the past 21 years that combo performed somewhat better than the more complex group of funds I have. But there is obviously a lot of value to diversifying as your experience with DCB showed.

[cute fuzzy bunny]

Helen...two things to consider.

One is that the balanced funds lately HAVE been selling bonds to buy stocks so as to maintain their asset allocation.

The other is that in this proposed scenario, you'd be getting roughly a 4% dividend payout by a 50/50 combination of wellesley/wellington. You wouldnt have to sell anything at all to maintain your withdrawal.

You'll probably see a modest capital gain distribution at the end of each year, reinvest it. Between the realized and unrealized capital gains, theres your inflation protection.

At least thats how its worked for the last 40 years.

Granted in many of those years, wellesley threw off 7 or 8% in dividends along with notching up a few percentage points of gains, but inflation was pretty high in those years.

[Helen]

Thanks for the explaination, CFB. Once I retire, I plan to roll my TSP account into a Roth at Vanguard. I wouldn't mind using the W/W as a core holding. I want to keep it as simple as possible in case I kick the bucket first. My partner is not interested in learning about investing.

I have some Wellington in a Roth right now.

I'm still 5 - 6 years away from retirement. I need to start thinking more about my withdrawal strategy.

[cute fuzzy bunny]

Good news is that there are a lot of easy options these days. Far more than when I retired 7 years ago.

By peanut buttering around to funds like wellesley, target retirement income, lifestrategy income, or the managed payout 3/5/7% funds you can get a lot of diversity, foreign holdings, some value stock, some TIPS, yada yada yada.

All produce a nice 4%ish dividend without a lot of sudden moves and loud noises, are cheap to own, and dont require much manual labor from the investor.

[Nords]

Quote:

Originally Posted by Helen Thanks for the explaination, CFB. Once I retire, I plan to roll my TSP account into a Roth at Vanguard. I'm still 5 - 6 years away from retirement. I need to start thinking more about my withdrawal strategy.

Spouse is contemplating whether to leave her TSP where it is (expense ratio of 0.03%) or roll it over to somewhere else. For that ER, though, we're not sure she could find a better deal. What's behind your thoughts of rolling your TSP over to (a conventional IRA and then converting it to) a Roth?

[Helen]

Quote:

Originally Posted by Nords Spouse is contemplating whether to leave her TSP where it is (expense ratio of 0.03%) or roll it over to somewhere else. For that ER, though, we're not sure she could find a better deal. What's behind your thoughts of rolling your TSP over to (a conventional IRA and then converting it to) a Roth?

I don't like the withdrawal options of the TSP, I think they are too limited. Also, the first 3 - 4 years of retirement I'll be living on after tax money only and will probably be in a zero tax bracket. I think it makes sense to roll the TSP money into a (yup, conventional IRA lump sum first then a) Roth IRA up to the 15% tax bracket before I start taking a pension and later Social Security. I'll spread the roll over into the span of several years.

I will miss the G fund and the low expense ratios though.

[Nords]

OK, thanks. Spouse has another 13 years to make her decision...