Where a couple can put a fairly large amount of cash today.

[GravitySucks]

I think so, as am I at these recent highs. As mentioned I am not the best advisor. But we have significantly more than they do to weather the current inflation storm.

I've been retired since 2013 and the only constant consensus of opinion has been:
Stocks are over valued.
Interest rates have no where to go but up.
Yet here we are.
Nobody Knows Nothin

 

[Gill]

My impression is that the individuals in question have little or no experience with equities. Therefore I totally disagree with any advice to make a high equity commitment. I like the suggestion of putting all but maybe $200K in the Vanguard Retirement Income Fund which is 30% equities. That is plenty of an equity exposure for these individuals and will give them a good conservative balanced portfolio of 30/70.
Gill

 

[steelyman]

I parked a fairly large (to me) amount of money for months in a short term bond fund (VFSUX) in anticipation of closing on a home purchase this past May. I wondered at the time if that was wise but it turned out well compared to money market funds.

 

[bmcgonig]

Always good idea to wait until 70 for SS. I’m guessing he’ll get about 30k year if he waits.

in the meantime take out $240k and put it into something zero risk and pay himself $30k/yr for the next 8 years. He’s paying himself SS at the 70yr old rate.

Then buy an SPIA that generates 20k/yr. Again guessing that with a 5% payout for a couple that might cost 400k.

Now they have a guaranteed 50k for life. Not even counting her SS. And they have 1.5m -640k = 860k left for investment. I’d put that in some index funds with regard to their risk tolerance. With a guaranteed income they could easily go 60/40 or more. The SPIA isn’t inflation adjusted but the stocks should make up for that. Also the SPIA can be thought of as part of the bond portfolio if they want to look at it that way.

 

[pb4uski]

Or buy a ladder of smaller deferred payout annuities that start every year or every couple years for 3% or 6% oof the base SPIA which when combined with the base SPIA, provides inflation protection.

 

[imnontrad]

I think they should pay off that car loan. Then look at the "three bucket" approach to retirement funds and start structuring their assets that way.
I think whether they can go ahead and retire may depend on their health insurance costs until Medicare starts. If they continue to work, they may consider maxing out Roth and HSA accounts for investment and use the money they received to "pay themselves back" for these contributions if they need this money to pay annual expenses.

 

[indiajust]

File for FICA and set up direct deposit to spending account. Run a quick budget. Keep 2 years in cash, less the FICA. Put the remainder in an ETF mix, like a schwab robofund. One and done. Set it up to do automagic transfers to your spending account.

If they are as averse as you say, I doubt they would want to bother with choosing a few ETF's and the occasional rebalance. But that would be a fine method too.

 

[gooddog]

A preferred ETF like PSK is good in times like these. While the share value will go up and down a bit, it still pays ~5% divs. Not bad. There are other similar ETF's out there.

 

[ERD50]

A preferred ETF like PSK is good in times like these. While the share value will go up and down a bit, it still pays ~5% divs. Not bad. There are other similar ETF's out there.

What makes you say PSK is good?

Look at this link to portfolio analyzer: https://tinyurl.com/yf2po4qz


Starting with $100K in 2009 (Note: The time period was constrained by the available data for SPDR ICE Preferred Securities ETF (PSK) [Oct 2009 - Aug 2021]. ), and a 5% annual inflation adjusted withdrawal, PSK lags far behind a 60/40 VTI/BND blend.

Portfolio Initial Balance Final Balance CAGR
60/40 $100,000 $203,939 6.16%
PSK $100,000 $123,137 1.76%

After ~ 12 years of providing 5% inflation adjusted withdrawals, the 60/40 portfolio has 1.65x as much value, $80,802 more on a starting value of $100,000.

I fail to see the attraction, (unless you are allergic to money!).

-ERD50

 

[gooddog]

-ERD50


A preferred ETF like PSK is good in times like these. Make more sense now?

 

[ERD50]

-ERD50


A preferred ETF like PSK is good in times like these. Make more sense now?

No. Not at all.

Go to this link, set the slider to "one year", and then move it around. PSK almost always trails a 60/40 blend fund in total return.

https://stockcharts.com/freecharts/perf.php?FBALX,PSK

If you have a crystal ball, you could probably find some single stock that will outperform that blend by miles. But lacking that, PSK looks like a very poor bet.

-ERD50

 

[gooddog]

No. Not at all.

Go to this link, set the slider to "one year", and then move it around. PSK almost always trails a 60/40 blend fund in total return.

https://stockcharts.com/freecharts/perf.php?FBALX,PSK

If you have a crystal ball, you could probably find some single stock that will outperform that blend by miles. But lacking that, PSK looks like a very poor bet.

-ERD50

You are no doubt right, judging by my track record.

 

[Brianeboatman]

If they really have no background in self-investing, I'd recommend they spend a good few hour with a fiduciary to set up a plan that matches their risk appetite and needs.

That should probably include a fair sized chunk in low cost index funds, but whether that's 30% or 60% is the detail that is going to be based on their overall detailed financial position.

Or if they do go with an FA, then do so with the idea that it's a temporary solution so they aren't paying AUM fees for the long term. For that I'd say they should go to the nearest Fidelity office.

I second this person's post.