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Lazy Portfolio for Retirees?
08-25-2007, 08:05 AM
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#1
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Dryer sheet aficionado
Join Date: Jul 2005
Posts: 32
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Lazy Portfolio for Retirees?
I am trying to simplify the overall tax deferred IRA for my DW in case something happens to me. Are there any retirees using a 4 Fund Couch Potato type Portfolio?
25% TIPS
25% Total Bond
25% TSM
25% Total Intnl ( Or possibly 20% and add 5% REIT Index)
This would be easy for her to keep balanced and should be safe for the 3.5% withdrawal rate we currently use.
I can't bring myself to do a straight "Target Retirement" portfolio. However, a few appropriate external Funds centered around a Wellesley Fund core might be appealing.
This would cut things back from a current 10 Fund Portfolio.
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08-25-2007, 08:45 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Jul 2003
Location: Pasadena CA
Posts: 2,939
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Seems like you have 3 good choices, the 4 funds you indicated, Wellesley + some compatible fund (my wife's IRA is Wellesley + Star) or a Target Retirement type fund (don't know what you don't like about them, do you figure they don't capture enough rebalance benefit?) my main retirement fund is a TR type fund but we do have some stocks too. Any of these would be simpler than a 10 fund portfolio.
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T.S. Eliot:
Old men ought to be explorers
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08-25-2007, 08:49 AM
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#3
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
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Quote:
Originally Posted by Maneiac
I am trying to simplify the overall tax deferred IRA for my DW in case something happens to me. Are there any retirees using a 4 Fund Couch Potato type Portfolio?
25% TIPS
25% Total Bond
25% TSM
25% Total Intnl ( Or possibly 20% and add 5% REIT Index)
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I like it for your stated needs.
Personally I'd lighten up a bit on TIPs. My philosophy is to have enough TIPS for a year or two worth of expenses. My understanding is that stocks historically do poorly early in an inflation cycle, then actually tend to do well; my strategy is to have enough TIPs to see me through the stock adjustment period only given their otherwise ho-hum return.
Go for it - Bogle and Dolin would approve.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.
As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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08-25-2007, 10:42 AM
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#4
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My written instructions to my wife are to either get into a taget retirement fund or to go to a similar portfolio that you show with instructions on how to rebalance the AA as she gets older, I just haven't decided what funds I want in the simple portfolio.
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08-25-2007, 10:55 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 8,664
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I like the lazy portfolio as well. Only problem, I'm too lazy to make the conversion.
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Retired 3/31/2007@52
Investing style: Full time wuss.
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08-26-2007, 07:03 AM
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#6
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Dryer sheet aficionado
Join Date: Jul 2005
Posts: 32
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Thanks all
As long as I leave good enough instructions as to why I selected these funds and the appropriate percentages to use for rebalancing things should be better than the convoluted set of instructions I currently have for 10 Funds:confused:
Possibly before all is said and done, the simplest method certainly would be to have everything in a Target Retirement fund for her.......at least there are no fees involved to change this IRA around a bit. (Simplify it  )
Thanks R-I-T...You have given me something to think about as far as TIPS allocation. My allocation was based on Larry Swedroe's recent bond book pg.226 but even a 25% allocation would be enough for 5 years expenses.
Larry
__________________
"Money doesn't grow on chickens before they hatch."
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08-26-2007, 10:01 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,203
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FSIIX 14.86%
Equities Fixed Income Spartan 500 Index FSMKX 27.21%
55.47% 44.53% Spartan Total Mrkt. FSTMX 13.40%
FIDO MM CASH
36.48%
After tax CASH
8.05%
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08-26-2007, 10:49 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,396
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Maneiac,
Your proposed 4-fund portfolio is very similar to that advocated by Taylor from the Bogglehead forum. It is simple but yet diversified. A 50/50 (equity/fixed income) allocation seems appropriate for someone in his/her 50s or someone who is conservative. An equal split between TIPS and Total Bond Market is a good idea to provide inflation protection and income.
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08-26-2007, 03:14 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,581
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It looks very conservative, but OK. I believe that Vanguard will rebalance for you once a year. Check on that. They will also do an automatic RMD for you. Makes it easy for her.
I like the 50/50 US/intl.
But the 50/50 fixed income/equities looks too conservative for me. How about 30/30/20/20 US/intl/bonds/TIPS? (=60/40 equities/FI.)
How about a Margarita portfolio? 1/3 US, 1/3 intl, 1/3 bonds or TIPS.
My 2 cents:
I have never been a fan of bond funds. I see SS as my fixed income component. Individual bonds I don't like either. They can be called. I can see individual TIPS as a bucket.
Even though I own Vanguard's REIT fund, I would not choose that one for my one sector fund. I prefer VGENX, Vanguard's energy index fund.
For now, I am all equities, 50/50 US/intl. SS will be my 'bond fund'.
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