Getting close, need advice

[pletal]

Almost ready to call it quits. Maybe 30 months out. Here is our situation.
I'm 47 , wife 54. Here's we we are at.

250 K SEP ira, all in cd's
3.2 million in taxable cd's avg 4 percent now, with rollover will be at 2.5
Depending on rates
50k in muni's
200 k in 401k
200 misc cash , savings bonds

Home paid, worth maybe 150k
Three rentals worth maybe total 300k, owe 200k

Been reading forum forever, am uneducated about investing and very conservative. Do work a lot and have saved for three decades, wasn't easy. I am getting pulled in every direction by financial planners. Will not been getting any pension and we are on our own for health insurance. Looking for a rather safe investment that we can get at least a four percent return. Any other advice or help will be greatly appreciated. We are excited and scared for the next phase of our lives.

 

[LOL!]

Are these real financial planners? Do they laugh when you say you want rather safe 4% return nowadays? I don't see that happening in the near term.

For folks as risk averse as you are, I recommend they get a book or two by Zvi Bodie and read it.

 

[SumDay]

Get yourself a fee-only Financial Planner through the Garrett Network. It's not cheap, but it's an educated, objective opinion.

You'll get a do-it-yourself approach type plan.

Sounds like you've done well for yourself!

 

[FANOFJESUS]

You are doing great. You might take some of that cash and pay off the rentals for a return better than 2.5%.

 

[5971]

Looks like you are in pretty good shape right now. Great job saving so much with a relatively modest house. What are your annual expenses? What's holding you back from pulling the trigger sooner?

 

[Midpack]

You've done very well congrats, but your probability of success will depend on how much you plan to spend in retirement.

Many here are DIY investors who use financial planners on an exception basis if at all. Be careful, most (but not all) financial planners will cost you much, much more they are worth when compared to what you can easily do for yourself.

That said, no one can guarantee a safe 4% return, though odds may be good if past history is any indication (who knows).

Though I am not a fan of annuities as a primary holding, a SPIA could be a relatively predictable part of a retirement income distribution plan for a very conservative retiree.

 

[braumeister]

Step one:
Figure out your annual expenses so we can give you a reasonable answer. Assets don't mean squat by themselves unless you can relate them to what you spend each year.

 

[pletal]

Looks like you are in pretty good shape right now. Great job saving so much with a relatively modest house. What are your annual expenses? What's holding you back from pulling the trigger sooner?

I'm not pulling the trigger right now because I own a company with over thirty employees and am trying to delegate my duties to a few so I can head out. This will take around two years. My annual expenses are as follows:

Rental mortgages , rent covers that
$1600. property tax
$6000. Utilities, property taxes
$6000. Food
$3500. Auto, motorcycle, water craft insurance
$5000. Home repair, up keep
$20,000 trips, new car fund, misc items
Will have to pay health INS, figuring 15 k a year
Figure 57k plus taxes

Have no credit card debt, auto loans etc.

 

[traineeinvestor]

You are doing great. You might take some of that cash and pay off the rentals for a return better than 2.5%.

+1

If you want an after tax rate of return that is safe and better than the 2.5% on CDs, paying off the mortgages on the rentals may be the answer (or part of it anyway).

 

[Spanky]

Your expenses are quite low. Most "Safe" investments, i.e., CDs, money market accounts, return much lower than 4% in recent years. In general, this type of investment cannot keep up with inflation. You might consider spreading your investments into stocks, bonds, commodity, real estate, etc as an attempt to produce a required return of 4+%. The Permanent Portfolio (http://crawlingroad.com/blog/) may produce a relatively stable real return.

 

[donheff]

Though I am not a fan of annuities as a primary holding, a SPIA could be a relatively predictable part of a retirement income distribution plan for a very conservative retiree.

+1. You have saved a lot of money but those CDs will start to diminsh over time when inflation picks up. You say you are very conservative and your CD allocation evidences that. Purchase a few inflation protected SPIA's with joint life at reputable insurers. Check your state insurance guarantee limits and divide the policies between your spouse and yourself to get the best coverage. Make sure you cover your essential expenses. Then you may feel comfortable choosing a more aggressive allocation for the remainder of your funds which you can then apply to fun stuff.

 

[panhead]

OK, I'm only on my first cup of coffee, but here is what I see. If we just take the 3.2MM in taxable investments and your expenses:

(57k/3200k)*100 = 1.78% return needed on 3.2MM

yield on S&P500 is about 2.5% Intermediate Bond fund about same (could consider muni as well to avoid taxes)

so if you just invest what you have 50/50 S&P and total bond you should get close to a 2.5% return without touching principal (yes principal will go up and down) so you get: 2.5% * 3,200,000 = $80k. Re-invest the overage,,and use to pay taxes, thus the muni suggestion, ($23k) to hedge inflation and your done. Plus you have about $600k in other investments as backups, plus I assume you are going to get social security.

You could always implement this approach, and annuitize your tax deferred funds for a spia when you get to about 60 and (maybe) interest rates are higher.

This is an incredibly simple approach, I would opt for some international exposure as well as small/midcaps, etc. You might want to take the advice to seek a fee only advisor to help you set up a better investment plan, but hey, I think the above would work with your expense level.

YMMV!

-Pan-

By the way, excellent job of saving $$, you apparently live a very frugal lifestyle for your income.