Advice

[hudson]

I need to start investing $1,500,000 for retirement income.I would like at least a safe 4% return and some inflation protection. Maybe Wesseley and muni fund etc. Any advice would be appreciated. I've made the money but I am not sure on investing it. thanks

 

[Bikerdude]

Wellesley currently yields 4%. As a conservative income fund it should meet your needs and provide inflation protection. You could do a lot worse.

 

[ziggy29]

I need to start investing $1,500,000 for retirement income.I would like at least a safe 4% return and some inflation protection. Maybe Wesseley and muni fund etc. Any advice would be appreciated. I've made the money but I am not sure on investing it. thanks

As far as a one-stop, keep-it-simple investment, I think Wellesley would work pretty well for you. You could probably tailor something a little more exacting to your needs with $1.5 million, but if you prefer simplicity and something "close enough" to work, Wellesley would be an adequate choice.

 

[hudson]

What would you recommend that would be more exacting?

 

[LOL!]

May I ask how much time you hudson are going to devote to figuring out how to invest an $1.5 million retirement nest egg? How much time have you already spent? What books have your read on the subject? I'm just curious.

 

[yakers]

I like Wellesley, my wife has maybe $200K there, but if the amount was $1.5M than I would recommend a more elaborate asset allocation. At higher dollar levels there can be reduced fees on funds and free advice from Vanguard and other decent companies.
In any case learning a bit about investing enough to get a comfortable asset allocation is critical. The market will go up & down, what will you do when that happens?
My primary tax defered fund is a target retirement type fund, not that it will beat the top performers but I will stay with it through market gyrations and the asset allocation adjusts as I get older. It keeps me from wanting to get more involved.

 

[FinanceDude]

May I ask how much time you hudson are going to devote to figuring out how to invest an $1.5 million retirement nest egg? How much time have you already spent? What books have your read on the subject? I'm just curious.

Good point..........no offense to the OP, but I wouldn't take any concrete advice without doing some "due diligence" myself........too much room for error....

I think it's irresponsible to give advice without knowing the facts, but perhaps that's just me............

 

[Bikerdude]

Good point..........no offense to the OP, but I wouldn't take any concrete advice without doing some "due diligence" myself........too much room for error....

I think it's irresponsible to give advice without knowing the facts, but perhaps that's just me............

No offense taken here. However I think my advice addressed all his posted concerns. I would hope no one would act exclusively on advice given on an internet forum. Maybe I'm naive.

 

[FinanceDude]

I would hope no one would act exclusively on advice given on an internet forum. Maybe I'm naive.

It happens a LOT more than you think, and on forums WAY less intelligent than this one........

 

[Lsbcal]

Since you are going to put this money in Vanguard why not ask them to draw up a free financial plan. You can tell them your particulars and they will suggest something that involves several different funds -- all Vanguard with low expense ratios. I've done this but personally prefer to roll my own. You might want to at least protect yourself against a major inflationary cycle (where stocks & bonds do poorly) by putting some of the bond money into VIPSX which holds TIPS -- just a thought.

Les

 

[hudson]

I am sorry I gave everyone the idea I was married to any particular scenario. I am looking for advice on investing the $1,500,000 in the best and safest manner. I am open to all possibilities.

 

[FIREd]

I would be a bit worried that Wellesley might be too conservative right now. It is true that historically it has kept up with inflation, but I don't think that our current economic situation is favorable for a fund like Wellesley. Interest rates, although declining, are already quite low compared to historical measures and inflation is rampant (well unless you listen to the government, but we all know better, don't we). Plus, Wellesley has almost no exposure to International stocks and has only 35% invested in US stocks. Why not look into a combination of Wellesley and Wellington which would yield 4% in dividend while increasing the US and International stock allocation giving you a better chance to keep up with inflation?
But personally I would want my money to be a bit more diversified, with at least some international exposure and some REITs.

 

[Nords]

Welcome to the board, hudson.

I am sorry I gave everyone the idea I was married to any particular scenario. I am looking for advice on investing the $1,500,000 in the best and safest manner.

If you tell a financial advisor that you're looking for "best & safest", they'll tell you to go buy Treasuries, TIPS, an annuity, or to spread the money around several credit unions offering NCUA-insured high-yield long-term CDs. Those investments are pretty much guaranteed to preserve the principal and keep it "safe".

I am open to all possibilities.

If you're truly open to all possibilities then listen to what the people here are trying to tell you. I recommend that you either (1) educate yourself or (2) pay a financial advisor to get to know your goals, timeline, and lifestyle... and then draw up a plan for you.

Your question is so broad and ingenuous as to render the answers meaningless. You want to invest "safe" yet you're entertaining the idea of certain mutual funds & municipal bonds which, while admittedly extremely unlikely to lose money, are not "safe" by definition. You haven't discussed whether you're willing to consume principal, what other assets or sources of income you have, your tax situation, or anything else that would be used to develop a comprehensive financial profile and a recommendation.

I think the key to getting better answers is having the knowledge to ask a better question. Take a look at this post and consider reading "The Boglehead's Guide to Investing" or Bernstein's "Four Pillars".

 

[tightasadrum]

Nords is right on. There is no way to offer anything close to rational suggestions with the information you have provided. With 1.5MM you can get more "help" than you could possibly ever digest from all the investment companies (Vanguard, Fidelity, T. Rowe etc). Shoot. Give me 1% per year and I'll tell you anything you need to know. But seriously, read and learn. But IMHI, diversify your investments among uncorrelated investments so you can sleep soundly. That's all I have to say on the subject.

 

[FinanceDude]

I am sorry I gave everyone the idea I was married to any particular scenario. I am looking for advice on investing the $1,500,000 in the best and safest manner. I am open to all possibilities.

Again, you are not providing any info to help give the advice. If it were me, I would park the money in an insured muni money market account and start education yourself with a visit to the local library or Barnes and Noble.........

 

[hudson]

If anyone is still interested in providing any advice my total situation is as follows: $1,500,000 currenty in tax exempt funds and treasuries. Another $500,000 in 401K in variuos equity funds. I own a home, no mortgage,$10,000 a year in taxes. I have no debt.Starting in Jan.2008 I will have no salary income. I will recieve $20,000 a year in an annuity+ $20,000 a year SS. I would like another $50,000 a year as steady reliable income ( more or less depending on if taxable or not) Should I have taxable income is a major question.I would rather not use any principal for normal living expenses. I would naturally like to cover inflation. I would be happy to answer any other questions that would assist in providing advice. I would very much appreciate different views and no one should be afraid that I would run off half cocked because of something some one recommened. I know I can seek financial advice elsewhere. I was hoping for unbiased opinions from informed individuals who would be happy to share their thoughts.

 

[LOL!]

Consistent advice can be found at FundAdvice.com - Home , Guide to the Vanguard Diehards Forums and Investment Guide (along with the references there-in). Not much reason to repeat it here.

Take the $500K in tax-deferred and put it into fixed income investments, 33% VIPSX, 33% vanguard intermediate term bonds, and 33% something else. Take the $1,500K in taxable and put it in tax efficient funds like a total stock market fund (VTI) and a total international stock market fund (VEU). This will give you a 75% equities:25% fixed income portfolio with $30,000 or less a year of qualified dividend income.

Perhaps if you had a specific question, I could take a crack at it?

[edit: it's VIPSX, aka TIPS] Safe withdrawal rate on a $2MM portfolio is around $80,000 a year. With you needing just $50K a year, it should be a piece of cake. Maybe defer taking SS benefits so soon?

 

[A854321]

What is your age?
Are you single? Any dependents?
How long do you want this money to cover you, ie- projected life expectancy?
Are you retiring in January 2008, or just not working for a while?

 

[Nords]

If anyone is still interested in providing any advice my total situation is as follows: $1,500,000 currenty in tax exempt funds and treasuries. Another $500,000 in 401K in variuos equity funds. I own a home, no mortgage,$10,000 a year in taxes. I have no debt.

OK, sounds like you have an ER portfolio of $2M. Conventional wisdom claims that you can withdraw an initial amount of 4% ($80K) next January and live on that (which includes paying taxes, if any). You can raise that withdrawal every year for inflation.

This assumes that you're investing in a diversified portfolio of stocks, bonds, and some cash. You could probably go as low as 20% stocks and as high as 80% bonds without struggling to keep up with inflation.

A huge challenge for investors asking questions like yours is having the confidence to stick with the plan through downturns. (Sticking with the plan is easy during bull markets.) You really need to educate yourself by reading the recommended books & websites, not just repetitively querying the possibly credulous advice of anonymous Internet posters (myself included).

Starting in Jan.2008 I will have no salary income.

Sounds like you've made the ER timing decision.

I will recieve $20,000 a year in an annuity+ $20,000 a year SS. I would like another $50,000 a year as steady reliable income

Are you saying that your minimum expenses for the rest of your life will be $90K/year? The reason I ask this question is because a huge number of posters claim expenses of about $24K/year, another group claim around $48K/year, and very few are up at your altitude. Many at that level end up drastically reducing their claims when they actually track their expenses.

Track your expenses and determine your ER budget. Then you can run FIRECalc, decide whether your portfolio can support your ER (I suspect that it can with no problems) and start deciding your asset allocation.

I would like another $50,000 a year as steady reliable income

You keep using words like "steady" and "reliable". If that's what you really mean then go buy more annuities, Treasuries, & CDs. Because that's the advice you'll get from any credible financial advisor who hears those words.

Otherwise go read Bernstein's "Four Pillars" to educate yourself on your personal level of risk tolerance, and then you can match your vocabulary to your tolerance.

( more or less depending on if taxable or not) Should I have taxable income is a major question.

Most retirement planners (FIRECalc included) assume that you pay the taxes out of the withdrawals. Most posters here include taxes as part of their expenses and match their withdrawals to include taxes.

I'm not sure I understand why taxable income is a major question. If it's not taxable then you don't need to withdraw as much. If it's taxable then you withdraw some more. Either way it looks like your portfolio is big enough to handle taxable & non-taxable income.

I would rather not use any principal for normal living expenses. I would naturally like to cover inflation.

That tends to limit your options to dividend investing in dividend-paying stocks, bonds, CDs, and annuities. There's nothing wrong with that except that while a principal-consuming portfolio can handle a 4% withdrawal rate (maybe higher) a dividend-investing portfolio may only be able to handle 3%. Still, your $2M could throw off $60K/year to supplement your $40K/year annuity income and handle your expenses. If the portfolio didn't cough up at least $60K then you could cut back your expenses that year to avoid consuming principal.

I would be happy to answer any other questions that would assist in providing advice.

OK, here's some that would keep me interested in answering your questions:
Which book are you going to read first?
Have you tracked your expenses, and if so what are they?
Have you run FIRECalc?

 

[hudson]

I'm will be 62 in 2008 and retired
I have a wife and son
I have worked in the financial industry for 40 years (that's where I made the money)
The $20,000 annuity was given to me by my firm at the end of one of their profit sharing disbursements
My expenses run about $5,000 a month including vacations.
Life expectency based on forever
I've read The Four Pillars of Investing and many other simialiar books
I have ideas of my own and I wanted to hear what other informed people thought about my situation.

Feel free to ask any other questions.

 

[LOL!]

Have you figured out what happens when you die? Will your dependent(s) be OK? Will your annuity disappear or continue on at $20K or a smaller amount? Is the annuity COLA'd?

Have you considered delaying taking SS for yourself? Have you considered converting some tax-deferred money to a Roth IRA? Have you looked ahead to see what your RMD's might be when you are over 70?

On investments, do you wish to slice-and-dice index w/rebalancing or do you wish to be total market indexer? Do you wish to do-it-yourself? Or do you wish to have help? Have your investments beat the DFA and Merriman portfolios over the years?

 

[Corporateburnout]

Based on 5k expenses and 40K income from the annuity and SS your need should be 20K income from your portfolio. Why do you need 50K? Am I missing something?

 

[Spanky]

I have worked in the financial industry for 40 years (that's where I made the money)

May be you should give us advice of making money.

 

[LOL!]

May be you should give us advice of making money.

There are many kinds of jobs in the financial industry. One could be a custodian/janitor for LehmanBrothers. One could sort mail for MorganStanley. One could be a server in Vanguard cafeteria. One could be parking cars in the NYSE garage. All these jobs qualify as working in the financial industry.

 

[Spanky]

There are many kinds of jobs in the financial industry. One could be a custodian/janitor for LehmanBrothers. One could sort mail for MorganStanley. One could be a server in Vanguard cafeteria. One could be parking cars in the NYSE garage. All these jobs qualify as working in the financial industry.

You are so humorous.