Advice

H

hudson

Dryer sheet wannabe
Joined
Sep 19, 2007
Messages
11
I am retired age 66 married, no debt. I recieve #60,000 per yr in SS and Pension. I have 1.5 mil invested in Vanguard. 1 mil in Tax Free Muni Fd, 500k in Wessley. I need advice on how to max income with only moderate risk. Any ideas.
 
With that much you should be able to get free Vaguard Financial Planning. Have you asked them yet?
 
With 106 reads and one reply, I'll jump in to point out that to a large extent, yield on an investment is a function of its risk, so there is no magic investment out there that gives a high yield with low risk.

And risk is not only losing your investment but may also be due to losing your purchasing power due to inflation.

The recommendation to get a free consultation with Vanguard is a good one.
 
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It may be time to research Single Premium Immediate Annuities (SPIA) with joint life-expectancy or whatever it is called.
 
From what you shared it seems you should be in a low tax bracket. If that is the case I'm not sure munis make a lot of sense. As others have suggested, talk with Vanguard. How much is taxable vs tax-deferred vs tax-free?
 
I read the old thread and the one on Bogleheads. Hudson, it appears that you had only $0.5m in equities in early 2007. At some point you put most of the remaining money into the Vanguard funds. I would be interested in knowing when in the cycle that happened, when you retired, and how the crash of 2008-09 played out for you, given that your portfolio now appears to be approximately $1.5m as opposed to the $2.0m you had at that time.

As you are probably aware, the sustainability of a portfolio is highly dependent on market behaviour in the first several years of retirement. It's very appropriate to reassess things several years after retirement. Have you read Jim Otar's book? If not, it might be helpful.
 
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I have requested a review from Vanguard. I was checking on any advice I received prior to the analysis from the planner.The other 500K is at Vanguard in a retirement acct. and cash. I did fine over 2008/2009 as I only had muni fund and mostly cash no Wessley.
 
Vanguard is big on total return, I think. So I'll put in a plug for that. Forget income, go with a total return portfolio and harvest as necessary.
 
Counting your pension as if it were a 10yr T bond @ 4% your AA = 93% fixed income. + 7% equities.

My recommendation is for you to put your entire investment portfolio into equities. I recommend all into Vanguard's all world equity ETF VT to make your AA = 60/40.

If you want a 40/60 port, put $1M of your port into VT. You have a 29 year retirement horizon. 7% stocks is not going to cut it. You need a MINIMUM of 20% equities IMHO.
 
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What are your expenses? Getting 4% SWR from a balanced portfolio of 1.5 MM stocks and bonds is a reasonable expectation, but you already have $60k in income without the portfolio. I think your biggest risk here is investing too conservatively and failing to protect against inflation scenarios. I'm reluctant to do a lot of digging through old threads to see the history of this portfolio, but I would have expected it to grow from it's 2007 size. What has your strategy been so far, and how is that working? Are you asking because you want to make a change or are you trying to confirm if your plan is likely to be successful. If the latter, can you describe more about your plan?
 
Putting 100% of his vanguard port into VT for a 60/40 port he can safely withdraw an initial inflation adjusted 4% for 29 years.

That means he can live on a gross $100K per year. $60K from his pension and $40K from his Vanguard port.

Note that the 12 month yield on VT = 2.44%. I he takes only $36.6K from his port instead of $40K ($283 less per month) he will never have to sell shares of VT.
 
I don't worry about anyone who has more money to spend than I do.

Ha
 
Since hudson keeps referring to the "wessley" fund, I wonder if we might not be misconstruing his actual question by assuming he means the Vanguard Wellesley fund.

I can't find a reference for "wessley," but I found The Wesley Fund - Asbury Theological Seminary which is at least a little closer.

According to their website:
Did you know that a gift of $100 to the Wesley Fund contributes as much to the annual budget as a $2,000 endowed fund?
Click to expand...

That sounds like a 5% rate of return. Wellesley does considerably better than that.
:hide:
 
It may be time to research Single Premium Immediate Annuities (SPIA) with joint life-expectancy or whatever it is called.
Click to expand...
All annuities are really bad financial products, especially for someone like the OP who has a lot of money. An annuity would be a tax nightmare. A SPIA locks your principal away for LIFE too.
 
ETFs_Rule said:
All annuities are really bad financial products...
Click to expand...

I'm no fan of annuities, don't own one and don't have any plans to do so. That said, I can see where a SPIA might be a good financial instrument for some individuals.

I won't venture an opinion as to the suitability of a SPIA for the OP as there are many variables in the decision. But a broad brush statement that "all annuities are bad" isn't backed up by factual evidence.
 
REWahoo said:
I'm no fan of annuities, don't own one and don't have any plans to do so. That said, I can see where a SPIA might be a good financial instrument for some individuals.

I won't venture an opinion as to the suitability of a SPIA for the OP as there are many variables in the decision. But a broad brush statement that "all annuities are bad" isn't backed up by factual evidence.
Click to expand...

+1

Wade Pfau did some work that (IIRC) Nords shared here showing how someone with no pension income would benefit by converting part of a portfolio into an annuity stream. A very interesting option for some forum members. Not the case of the OP, who has a pension.
 
It is the Wellesley Fd. I do not use any of the monies generated by it, all is reinvested.
As I said I was looking for advice to compare with upcoming planners rec's.

ha ha...I hope you are not a financial planner...ha
 
REWahoo said:
I'm no fan of annuities, don't own one and don't have any plans to do so. That said, I can see where a SPIA might be a good financial instrument for some individuals.

I won't venture an opinion as to the suitability of a SPIA for the OP as there are many variables in the decision. But a broad brush statement that "all annuities are bad" isn't backed up by factual evidence.
Click to expand...
Once you enter into a SPIA contract your principal is gone for life. All you get is the payments. Agents who sell SPIA's earn between 5 and 10 percent! That money comes right out of your principal in the form of lower payments. You also have to pay for mortality fees, underwriting costs, plus the insurance company factors in their overhead, plus insurance companies are for profit companies. People can easily do better elsewhere. Also the ordinary income monster will get you with annuities. It's not what you make, but what you get to keep.
 
Back in 2007 you said you wanted a return of 4% with some inflation protection, and since then you have invested in Vanguard funds including Wellesley.

You can go on the VG site and see what return you have achieved this last 5 or 6 years, including personal performance of each individual fund.

I just had a quick look at my Wellesley account and from Nov 1, 2008 to Nov 30, 2013 it has returned 11.8% /year. Your personal return will be different as I was adding to my fund for the first 18 months of that period while I was still working.

How have your funds performed, and what level of improvement are you looking for?
 
ETFs_Rule said:
Once you enter into a SPIA contract your principal is gone for life. All you get is the payments. Agents who sell SPIA's earn between 5 and 10 percent! That money comes right out of your principal in the form of lower payments. You also have to pay for mortality fees, underwriting costs, plus the insurance company factors in their overhead, plus insurance companies are for profit companies. People can easily do better elsewhere. Also the ordinary income monster will get you with annuities. It's not what you make, but what you get to keep.
Click to expand...

I've gotten quite a few quotes for SPIAs. The commission was only 2% of the money put down. I think you're confused with variable annuities?
 
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