How to Invest 401k Funds When Guaranteed Income Sources Pays for Most of Our Expenses

[LateToFIRE]

This thread got me to thinking. Most of my models show that my retirement would be solvent even without my IRA/401k funds due to a combo of sufficient taxable investment funds and SS/pension benefits. So, at least theoretically, I have a similar issue to OP. My approach, so far, has been to invest the IRA/401k funds fairly aggressively ~80/20.

I intend to keep it that way in retirement. The way I see it, it's an opportunity to invest aggressively given less concerned about market volatility.

 

[Closet_Gamer]

I think OldShooter nailed it when he asked about purpose. A really deep understanding of what you want and invest/spend around that.

I would also double/triple check the plan especially at it relates to inflation protection.

You're in a great spot!

 

[njhowie]

We are pretty much 60/40 investors. Before retirement we put less into stocks, and went to 50/50.

Now we're climbing back to 60/40 by decision. Dare we go to 70/30, or further?

50/50 vs. 60/40 is like pewter vs. grey - it's not going to make any real or noticeable difference.

 

[Gumby]

We are in this position. Our mostly COLA'd pensions plus social security cover our living expenses and we have no heirs. We are traveling as much as we want and have a paid-for house that is more than sufficient for our needs in an area that we love. I don't anticipate ever moving or buying a second home, unless we choose a CCRC. If that is in the cards, the house sale proceeds will easily cover any buy-in cost and probably most of the continuing expenses. So our portfolio primarily serves as a backup in the event that something happens to one or more of our income sources (SS cuts, inflation outrunning our COLAs).

Still, it has been my experience throughout life that more money is always better than less money, so we are still invested in the things that got us here in the first place. Currently about 65/35 via mutual funds. (VWENX, OAKBX, VIIIX, VGSLX and treasuries). Our portfolio has grown 20% since we retired in mid-2019. However, given inflation has run about 20% over the same period, we are in the same relative position.

 

[RetiredHappy]

What's the equivalent of VTI at Fidelity?

We buy ITOT (VTI equivalent) at Fidelity.

 

[G-Man]

VTI

As an ETF, VTI trades ike a stock so you can buy it at Fidelity just like any other stock or ETF.

Thanks. I did not know that.

 

[G-Man]

This thread got me to thinking. Most of my models show that my retirement would be solvent even without my IRA/401k funds due to a combo of sufficient taxable investment funds and SS/pension benefits. So, at least theoretically, I have a similar issue to OP. My approach, so far, has been to invest the IRA/401k funds fairly aggressively ~80/20.

I intend to keep it that way in retirement. The way I see it, it's an opportunity to invest aggressively given less concerned about market volatility.

It's makes you re-think your Asset Allocation in retirement. Glad others are in a similar situation.

 

[RetiredHappy]

With taxable brokerage account, I am at 98% equities, all ETFs. It has 2% legacy corporate bond funds which will I will get rid of over the next few years. I believe in 100% equities. My husband has a small taxable brokerage account and it is 100% equities. I am still 4 years from reach Medicare and my medical costs will reduce quite a bit. By then, we should be able to simply withdraw dividends from the brokerage accounts as one income source, without the need to sell anything.

I have also used my entire IRA funds to buy fixed income annuities, which is one of our income streams. We take RMD from my husband's IRA and that account is a little bit trickier because RMD rate is higher than dividends that are produced from that account. So, we will have to sell the "value" type ETF from IRA when we need to liquidate to satisfy RMD. I think he is at 90/10 in the IRA.

Our goal is a little different from yours because I need to leave a healthy inheritance for my son, hence I want our accounts to continue to grow and not shrink. However, if our accounts shrink by 50% by the time, he will still have a nice inheritance.

 

[G-Man]

I think OldShooter nailed it when he asked about purpose. A really deep understanding of what you want and invest/spend around that.

I would also double/triple check the plan especially at it relates to inflation protection.

You're in a great spot!

In the retirement planning software, I'm using 3.5% as my general inflation percentage. I have been obsessed with going over my financial plan on a weekly basis trying to poke holes in it. I will continue to scrutiny the plan.

 

[G-Man]

We are in this position. Our mostly COLA'd pensions plus social security cover our living expenses and we have no heirs. We are traveling as much as we want and have a paid-for house that is more than sufficient for our needs in an area that we love. I don't anticipate ever moving or buying a second home, unless we choose a CCRC. If that is in the cards, the house sale proceeds will easily cover any buy-in cost and probably most of the continuing expenses. So our portfolio primarily serves as a backup in the event that something happens to one or more of our income sources (SS cuts, inflation outrunning our COLAs).

Still, it has been my experience throughout life that more money is always better than less money, so we are still invested in the things that got us here in the first place. Currently about 65/35 via mutual funds. (VWENX, OAKBX, VIIIX, VGSLX and treasuries). Our portfolio has grown 20% since we retired in mid-2019. However, given inflation has run about 20% over the same period, we are in the same relative position.

Thanks for sharing your thoughts.

 

[TheWizard]

Any other feedback?

I'm in a similar situation, especially after I started age 70 SS almost four years ago.

So while I'm around 70/30 in my tax-deferred 403(b), I'm 95+% stock funds in both my taxable account and my Roth IRA.
I'm not quite 100% because my settlement funds receive all dividends and my taxable account settlement fund also receives excess income most months.

And I use limit orders to buy more ETFs. At certain times, like right now, I'm not desperate to buy more VOO or VGT at their near record levels. So my limit orders are set 1-2% below their current levels and might not execute in 60 days.

As more new money goes into those accounts, I'll set limit orders closer to the market price so that I stay at least 95% invested.

What do I expect to need that money for? It kinda doesn't matter.
But my current F-150 is just over eight years old with 88,000 miles, so I might choose to order a new one in 5-6 years...

 

[Rustic23]

We are about 30% each sp500, qqq, and total market. 80 years old, and it's the id's money.

 

[gayl]

Not exactly the same G-Man. I'm self insured for LTC but my pension has a 4% max cola based on whatever SSA gives. So 2023 SSA bump was 8.2% & this year it's 3.2%. So I got a pension bump of 4% both years & even if SSA is 0 this year, I'll still get 3.4% in 2025. That's where we differ. I really want to be 80% stock index ETF / 20% Fixed Income. But I'm stuck at 84% equity / 16% fixed. Even though I spend 2k less per month than I take in. Ah well .... makes for nice checks to 8 beneficiaries (2 kids & 6 grands) each December

 

[RetMD21]

What's the equivalent of VTI at Fidelity?

VTI, it's an ETF afterall.

I agree that you can do anything if you aren't depending on the money. 0 to 100% socks or enen buy a giant immediate annuity. It's a personal preference issue

 

[G-Man]

VTI, it's an ETF afterall.

I agree that you can do anything if you aren't depending on the money. 0 to 100% socks or enen buy a giant immediate annuity. It's a personal preference issue

Thanks for the feedback, everyone.

 

[skipro33]

By 2018, it was obvious to us that we too, had plenty of income from pension and SS to never need to touch our IRA's unless or until we needed long term care. So I put 80% in an S&P500 index fund, 10% into a CD ladder with maturity dates every 90 days, and 10% into a guaranteed savings. (both mostly for the liquidity) We usually underspend our income by $25,000-$35,000 a year and when the checking account reaches over $100,000, we stick it into 529 college funds for grand kids.
While some may not be able to stomach the rollercoaster ride this sort of portfolio will exhibit, we find it... exciting. Especially this year with over 20% growth. Or the fact that compared to 2 years ago, we haven't even broken even, with the S&P currently valued lower than it was on Dec 31st of 2021. Of this I am sure: no other opportunity is as lucrative than a equity index fund without getting speculative with your investments.
Every $100,000 invested 5 years ago, when I started, is now worth $198,000. (close enough anyways) That's over a 14% annualized growth rate. (dividends reinvested)

I was conservative when I needed to be while working, saving, raising a family, but now that I am financially secure and no one dependent on me for financial support, I figure why not? Someone later down the road is going to think fondly of me if I never do get creative enough to find a way to spend it.

 

[mystang52]

Or conversely, at this point, why invest at all? You indicate that your objective is to spend all your hard-earned money. So you have no real objective as far as investing goes, would simply potentially give you more money to spend...or less.

What's wrong with CD's, Treasuries, or Stable Value Fund in your situation?

You've won the game, why continue playing? What's the benefit?

+1, at least in spirit. We are also fortunate that our pensions and SS are more than sufficient for our income needs. We do keep about 15-20% in equities, but we also agree with the "won the game" philosophy.