My wife and I will be retiring some time next year. At that point, she'll be nearing 64 and starting social security. I will be 57.5 and starting my pension (non-COLA), required to be able to enroll in my company's retiree medical plan.
Given our expected expenses at the beginning of retirement, we would need about 1% from the total of our tax deferred and taxable accounts. If we sell our house and downsize, which is the plan at the moment, the extra cash from the downsize would drop the needed amount to 0.8%.
It would seem we don't need a high rate of return to be able to meet these requirements. About the time inflation would start eating away at the value of the pension, I would be able to start social security for myself.
Do we still concern ourselves with achieving as much total return as our risk tolerance will allow? Or do we invest in a way that would kick off more than enough dividends/interest/capital gains in order to meet the shortfall?
As mentioned before, my wife and I are very risk averse, but I think that is mostly due to watching the bottom line net worth drop in bad markets. As such, we have no equities investments. But if a combination of equity and bond funds were to produce enough to cover our expected shortfall without the need to touch principal (at least until the RMDs kick in), I imagine we could stomach that.
Given our expected expenses at the beginning of retirement, we would need about 1% from the total of our tax deferred and taxable accounts. If we sell our house and downsize, which is the plan at the moment, the extra cash from the downsize would drop the needed amount to 0.8%.
It would seem we don't need a high rate of return to be able to meet these requirements. About the time inflation would start eating away at the value of the pension, I would be able to start social security for myself.
Do we still concern ourselves with achieving as much total return as our risk tolerance will allow? Or do we invest in a way that would kick off more than enough dividends/interest/capital gains in order to meet the shortfall?
As mentioned before, my wife and I are very risk averse, but I think that is mostly due to watching the bottom line net worth drop in bad markets. As such, we have no equities investments. But if a combination of equity and bond funds were to produce enough to cover our expected shortfall without the need to touch principal (at least until the RMDs kick in), I imagine we could stomach that.