Classic strategies for retirement investment

[fledermaus]

I am new both to this board and to retirement. I have been investing for about 6 years and still consider myself a beginner. Now that we achieved our goal of early retirement I realize that there must be many basic principles that are commonly known for investing during retirement that perhaps I'm not aware of.

I focussed the past 12 months on creating an income using a combination of mutual funds (munis of various kinds, high-yield bonds, money markets) and those publicly traded stocks from REITS and Master limited partnerships which offer nice dividends. Its been doing pretty well for our purposes, though naturally I watch the MLP's like a hawk, some are solider than others. In addition we had rental real estate, but we are gradually getting rid of them. At the core of it all is a small retirement pension with no COLA.

I have alot of questions!

1. What will happen to the many kinds of bonds when the Feds raise the rates ? Or if the market becomes more generally attractive to investors.

2. What is the most secure way to invest? I assume CD's and Money markets?

3. What is the best way to invest if one wants to travel for a few months at a time? This means not doing anything to the investments for a while.

4. I now create more income than we need. Why should we be taxed on income we don't use but simply save? Is there an alternative, such as a slow and steady increase of our holdings thru an index fund or perhaps very conservative stocks, which would not be cashed out for quite a while?

I'm hoping my questions may apply to many people's situations, and bring on lots of different opinions and feed-back. Like many of us we are ordinary working folk who simply have decided not to work anymore! We are very risk-adverse (financially), treasure our freedom, and are willing to live a thrifty yet fun lifestyle in order conserve the money that makes our free time possible.

 

[John Galt]

Hello Fledermaus! Good questions. Here is how I
handle them:

1. When interest rates go back up, bond prices will fall.
However, unless there is a default, you will still get
your interest and your principle at maturity.

2. CDs and MMs are about as secure aas you can get,
although there are other government backed securities which you can read about in this forum. I stuck with
CDs and MMs until I couldn't stand the rates anymore.
Taking more risk now.

3. Re. traveling while watching your investments, I don't
need to do that. Almost all of my stuff is quite long term, and no stocks. While I am gone the interest/
dividend checks just accumulate in my P.O. box.

4. Re. taxability of money you don't need, I maxed out
my IRA money during my earning years and have not
dipped into it yet (10 years now). Some other income is received through a small corp. that I own which has a
tax loss carryforward, so no taxes there either.
Finally, my income is so low now that I hardly notice
the income tax liability anymore. That was a nice surprise.

Happy trails,

John Galt

 

[dory36]

Re # 3 - traveling - I just ignore the market. I decide on a mix of bond index funds and stock index funds, and rebalance at the end of each year, perhaps changing the mix then.

I pretty much ignore it the rest of the year, even now that I'm no longer traveling full time.

If I'd done this all along, I'd have been a lot better off now!

Dory36

 

[unclemick]

The Classics?

'the rich live off dividends'(Frank Armstong, I think). Buy dividend paying stocks whose dividend growth has kept up with inflation over the long haul.

'the pie chart' buy the mix (stocks/bonds) appropriate for your age.

'new age' Efficient frontier, asset correlation/diversification, tax managed funds, TIP's, I bonds.bond ladders,zero's.

I have strong opinions on all of the above - but looking back, had I bought a Wellington or Dodge and Cox(they've been around since the Great Dpression), dollar cost averaged since 1966(when I started) or even John Greaney's stock portfolio(say 30 'good' stocks) - a villa in the Bahama's might have been possible.

In another post you mentioned Europe - I've never directly dealt with currency effects investment wise except I have two British,Glaxo,BP, and Canadian,Alcan in my hobby stock portfolio. I remember some old stories about French retiree's overseas and people in past decades when I lived out West who got caught by Mexican devaluations in savings accounts.