In Need of an investment strategy

[mkazz]

Hi all,
Been visiting this site for a while and I have learned a lot from all the contributors.
I am no investor expert, but I do know enough to get me in trouble- and not enough to keep me out of trouble, so I’m hoping you can give me some advice on how to invest my money to keep me out of trouble.
I am 59 years old, single and do not own a house. I have just been laid off from my job at BOEING after 15+ years.
The prospects of being employed again are dicey as we all know, so I am looking to try to live off the interest from my accumulated money by asking for your advice on how to invest my money in Vanguard Mutual funds, especially index funds.
I plan on living simply and do plan to find some work down the road to help supplement my savings.
I was hoping with your help you could advise me how to set up a simple portfolio with the assets I have, so I may be able to live off the interest (EARLY RETIREMENT), if you think that’s possible.


My Portfolio 12/13/2013

BOEING ING 401K account:

Lifestyle 2020
$490,272.43


Capital one 360 savings account:
$141,164.39


Vanguard accounts:

IRA

VTWNX (0.16) Vanguard Target Retirement 2020 Fund
$54,810.83

NON-IRA

VMMXX (0.16) Vanguard Prime Money Market Fund
$7,710.71

VPMCX (0.45) Vanguard PRIMECAP Fund Investor Shares
$5,785.14

TOTAL combined = 699,744.07



Possible Vanguard portfolio
VTSAX (Vanguard Total Stock Market Index Fund)
VBTLX (Vanguard Total Bond Market Index Fund)
VGSLX (Vanguard REIT Index Fund
?

Thanks to All

 

[Ready]

Hello, and welcome to the forum. I'm sorry to hear about your layoff. Before we could give any meaningful investment advice we would need to know quite a bit more information. Most important is to understand what your monthly expenses are, and whether you have any other sources of income (like a pension) that will be available to you. Once we have that picture, the potential time frame for your investments will be a bit easier to understand. You should also look into what your social security payments would be at 62, 65 or 70. You can look this up at The United States Social Security Administration if you have't already done so.

We need to better understand how much of your investments can be placed into long term investment accounts, where stocks may be appropriate. For shorter term investments, bonds may be suitable. And for emergency cash, a bank account or possible CD might be better suited.

 

[mrfeh]

Not that there aren't folks here that are willing and able to help you, but I suggest you head over to bogleheads.org. There are more people over there that think about such things day and night.

 

[mkazz]

Thanks for reply

Hi, Thanks for reply and advice.

I will follow your advice and add in the requested information and end this post here and move it over to bogleheads.org

Sorry for posting in the wrong forum

Happy holidays to all.

 

[REWahoo]

Not that there aren't folks here that are willing and able to help you, but I suggest you head over to bogleheads.org. There are more people over there that think about such things day and night.

True.

If you do decide to ask this question on bogleheads, please be sure to follow their rules. Start here: Bogleheads - Investment Planning

 

[pb4uski]

A few suggestions for you. First, if you have access to it, use Quicken's Lifetime Planner and plug in you information to see what you need to consider and how your nestegg is likely to fare. If you don't have access to Quicken, take a look at FireCalc and plug your info into that to see how things are.

Second, if your 401k has a stable value option that provide an attractive interest rate, then take advantage of that.

Finally, get it out of your head that you can only spend income - you can live off total return and that may occasionally mean dipping into principal. If you insist on living off of interest then it may mean that you need to go back to work.

 

[mkazz]

What dou you mean by total return?

Hi,
In your reply you stated
"you can live off total return and that may occasionally mean dipping into principal"

what do you mean by total return?

Perhaps that's what I really meant instead of interest.

Thanks

 

[pb4uski]

Total return would be interest, dividends and realized and unrealized capital gains (from increases in share prices).

 

[target2019]

Interest has a specific meaning. If you had $1M and could invest all of it into CDs, it might throw off 3% interest per year at today's rates. That would be $30,000 before taxes. Is that enough? At the end of the year you would still have the $1M investment.

Stock funds and stocks don't throw off interest. The total grows or drops based on the mysterious Mr. Market. And the investment sometimes gives you dividend income. $1M would have bought you 27,240 shares of VTSAX on Jan 1, 2013. Four times throughout the year this fund distributed roughly $.20 per share. So, you would have received $21,800 total dividends during the year. Is that enough? As of today those 27,240 shares are worth $1,224,710. You could take some of those shares and sell, couldn't you?

There are many more investing considerations, and it helps to spend some time understanding the basics. You need a crash course -- so bogleheads would be best.

 

[daylatedollarshort]

If you are a conservative investor, I would recommend the book Risk Less and Prosper by Zvi Bodi and reading this article on stock, retirement portfolios and sequence of returns risk -

http://www.marketwatch.com/story/how-to-avoid-sequence-of-return-risk-2013-09-28

and

this article by William Bernstein on the worst retirement investing mistake -

http://money.cnn.com/2012/09/04/retirement/investing-mistakes.moneymag/

The book and articles are likely to be very different advice than you will hear at the Bogleheads forum, and some counterpoint food for thought.

Plus I second what Ready said about knowing your SS amounts, pension amounts and expenses.

 

[REWahoo]

If you are a conservative investor, I would recommend the book Risk Less and Prosper by Zvi Bodi...

The book ...[is] likely to be very different advice than you will hear at the Bogleheads forum...

Not according to this review (my bold):

Overall, it’s a good book that deserves a place on the White Coat Investor reading list, but I would have to admit I didn’t really learn anything new from the book. I’ve heard all the main themes of the book batted around on the Bogleheads forum for years (although they were probably brought up by others who were influenced by Bodie’s writings). But if any of these ideas are new to you (stocks get riskier with time, your goals matter more than any “bogey”, and inflation-protected bonds are far safer than nominal bonds) then you should spend some time with Risk Less And Prosper.

 

[jIMOh]

Hi all,
Been visiting this site for a while and I have learned a lot from all the contributors.
I am no investor expert, but I do know enough to get me in trouble- and not enough to keep me out of trouble, so I’m hoping you can give me some advice on how to invest my money to keep me out of trouble.
I am 59 years old, single and do not own a house. I have just been laid off from my job at BOEING after 15+ years.
The prospects of being employed again are dicey as we all know, so I am looking to try to live off the interest from my accumulated money by asking for your advice on how to invest my money in Vanguard Mutual funds, especially index funds.
I plan on living simply and do plan to find some work down the road to help supplement my savings.
I was hoping with your help you could advise me how to set up a simple portfolio with the assets I have, so I may be able to live off the interest (EARLY RETIREMENT), if you think that’s possible.


My Portfolio 12/13/2013

BOEING ING 401K account:

Lifestyle 2020
$490,272.43


Capital one 360 savings account:
$141,164.39


Vanguard accounts:

IRA

VTWNX (0.16) Vanguard Target Retirement 2020 Fund
$54,810.83

NON-IRA

VMMXX (0.16) Vanguard Prime Money Market Fund
$7,710.71

VPMCX (0.45) Vanguard PRIMECAP Fund Investor Shares
$5,785.14

TOTAL combined = 699,744.07



Possible Vanguard portfolio
VTSAX (Vanguard Total Stock Market Index Fund)
VBTLX (Vanguard Total Bond Market Index Fund)
VGSLX (Vanguard REIT Index Fund
?

Thanks to All

Do you know what % stocks and what % bonds you want to be invested in with the $700k?

Do you know how much you spend each year right now?
Do you know when you will be tapping into SS? Were you ever married (for 10 years?)- if so, you could access ex spouse SS when both of you are 62, and delay your own (larger) benefit until age 70.

$700k at 4% withdraw rate suggests your investments could generate $28k per year in income to you- do you have a way to supplement this?

 

[mkazz]

Additional Information.

I was planning on doing a roll-over of my Boeing 401k to Vanguard index funds.
Since I am 59, (divorced and single) I was looking at 45% stocks and 55 % bonds.
I am planning to try to live off my investments and not take social security until I reach 661/2 in the year 2020. Or if my investments cant carry me for 7 years I will have to take social security at 62.
As of this year (2013) my social security will be around (estimated)
at 62, 1,634 a month.
at 66, 2,214 a month.
I have no debt, do not own a home, have a 3-6 month emergency fund and my combined living expediences are around 19-20K a year.
Is this enough information to get a general Idea if its possible for me to survive off my investments, and if so what mutual funds should I invest in to possibly cover my living expenses until I start collecting SS.
In the future I do plan on living in a cheaper area. Right now I live in the California bay area, which is very expensive, but since I am unemployed and single I am free to find an alternative place to live.

Thanks

 

[REWahoo]

I was planning on doing a roll-over of my Boeing 401k to Vanguard index funds.
Since I am 59, (divorced and single) I was looking at 45% stocks and 55 % bonds.
I am planning to try to live off my investments and not take social security until I reach 661/2 in the year 2020. Or if my investments cant carry me for 7 years I will have to take social security at 62.
As of this year (2013) my social security will be around (estimated)
at 62, 1,634 a month.
at 66, 2,214 a month.
I have no debt, do not own a home, have a 3-6 month emergency fund and my combined living expediences are around 19-20K a year.
Is this enough information to get a general Idea if its possible for me to survive off my investments, and if so what mutual funds should I invest in to possibly cover my living expenses until I start collecting SS.
In the future I do plan on living in a cheaper area. Right now I live in the California bay area, which is very expensive, but since I am unemployed and single I am free to find an alternative place to live.

Thanks

The key piece of missing info is what income do you need annually to "survive off your investments". Once you figure that out, plug your numbers into FIRECalc and see what it tells you.

 

[mkazz]

I thought I put that in. I was thinking what my expenses are now- around 20K a year.
Will file calc tell me what mutual funds to invest in?

Thanks

 

[REWahoo]

Will file calc tell me what mutual funds to invest in?

No, you'll need to figure that one out on your own with a little self-education. There are many good (and even more bad) sources of information out there. Here's one of the better ones: Bogleheads - Investment Planning

 

[jIMOh]

I was planning on doing a roll-over of my Boeing 401k to Vanguard index funds.
Since I am 59, (divorced and single) I was looking at 45% stocks and 55 % bonds.
I am planning to try to live off my investments and not take social security until I reach 661/2 in the year 2020. Or if my investments cant carry me for 7 years I will have to take social security at 62.
As of this year (2013) my social security will be around (estimated)
at 62, 1,634 a month.
at 66, 2,214 a month.
I have no debt, do not own a home, have a 3-6 month emergency fund and my combined living expediences are around 19-20K a year.
Is this enough information to get a general Idea if its possible for me to survive off my investments, and if so what mutual funds should I invest in to possibly cover my living expenses until I start collecting SS.
In the future I do plan on living in a cheaper area. Right now I live in the California bay area, which is very expensive, but since I am unemployed and single I am free to find an alternative place to live.

Thanks

20K in expenses at a 4% withdraw rate is 20,000/.04=$500k in investments needed.

Your social security benefit would also cover those expenses at age 62.

 

[pb4uski]

If your expenses are really only $20k a year then you should be good to go. I say "should be" only because $20k a year is pretty low for living expenses so I'm skeptical that is what you'll really need. Have you covered off taxes, health insurance and health care costs, car replacements, travel, etc?

Think of it this way - you need ~$140k to get you from 59 to 66 (7 years @ $20k a year). Let's say you put that off to the side in FDIC insured CDs that mature over the next 7 years (I suggest PenFed). You'll then have $560k left. If you invest that 45/55 then you should be able to take ~$17k a year (plus inflation), so that would give you $37k a year of spending money plus inflation for the next 30-40 years. YMMV.

I think you have enough that Vanguard would do a financial plan and make investment recommendations for you for free.

 

[tmm99]

I would like to know about the 20k per year expense also. I live in the Bay Area and my rent alone is 20k per year. Thx

 

[Major Tom]

I would like to know about the 20k per year expense also. I live in the Bay Area and my rent alone is 20k per year. Thx

Sorry for butting in here as I know your question is directed toward mkazz, but I live in the Bay Area (East Bay) on ~17K/year.

The way to do it is (surprisingly) not to spend much. Cheap rent and not owning a car helps a lot, in my case.

 

[daylatedollarshort]

If you have a place with cheap rent or a mortgage free house and Prop 13 property taxes, living in the Bay Area can actually be relatively inexpensive compared to other parts of the country. The weather and scenery are free to enjoy. There are many hiking trails, biking trails and public parks and beaches. The public transportation system is extensive. Heating and cooling costs are minimal compared to areas with more extreme climates. Food from the Central Valley is relatively inexpensive at farmer's and ethnic markets. A library card and memberships in NARM and AHA for an annual ~$100 cost can get you into most of the museums, gardens and assorted attractions for free all year long. You could probably go to a different park, garden, beach, museum or tourist attraction every day for over a year and never run out of fun and free / cheap things to do.

 

[Major Tom]

If you have a place with cheap rent or a mortgage free house and Prop 13 property taxes, living in the Bay Area can actually be relatively inexpensive compared to other parts of the country.

Now you have me thinking wistfully about that house I bought in LA in 1997 (and later sold). It was so cheap compared to prices now......!

Yes, Prop 13 is the gift that keeps on giving to homeowners in CA.