My withdrawal plan. Is this right?

[DrRoy]

I keep my current year's cash in a MM. Why lose the interest?

 

[Shabby]

Note that neither # includes LT or ST Cap gains. .

Thank you so much for breaking this down. I have wondered about this for about 20 years. So charts on funds are useless? I want real growth of my $10k.

I understand that the NAV goes down, but there isn't a site or stat that gives the real world yield for a fund? This seems crazy.

 

[24601NoMore]

Thank you so much for breaking this down. I have wondered about this for about 20 years. So charts on funds are useless? I want real growth of my $10k.

I understand that the NAV goes down, but there isn't a site or stat that gives the real world yield for a fund? This seems crazy.

Not sure I follow..real world yield is shown on the M* page for a fund (among many other places). For example, see the link I posted yesterday to the M* VWINX page and look at TTM and 30-day yield #s..that's the "real world yield" for those time periods.

Charts on a fund show total return, including NAV changes (eg: increases or decreases in underlying assets including equities, bonds, etc) and distributions (LT gains, ST gains and dividends). So, the M* chart for VWINX (as well as the YTD, 1-year, 3-year, 5-year and 10-year) averages show "total" return including NAV changes, LT + ST cap gains and dividends.

 

[GravitySucks]

I'd recommend you keep minimum $$ in the zero percent checking and do regular (ie: monthly) transfers from your MM. You're giving up 2.55% annually of every $ that's in checking vs. the MM.

Let's say your yearly expenses are $50K, so you're keeping that in checking. That's $1,275 in lost/opportunity cost income you're passing up.

+1
Though I like to make my life a little more complicated, so I keep enough to get to the next bond ladder redemption in FIDO MM, then I move a quarters expenses worth to the CU MM which pays less, then a month's expenses worth to no interest CU checking.
Unless I'm traveling. Then I put enough in checking to cover how long I'm gone plus a bit.

 

[Shabby]

Not sure I follow..real world yield is shown on the M* page for a fund (among many other places). For example, see the link I posted yesterday to the M* VWINX page and look at TTM and 30-day yield #s..that's the "real world yield" for those time periods.

So TTM includes the Cap Gain payments you get?

 

[audreyh1]

So TTM includes the Cap Gain payments you get?

No.

 

[Shabby]

No.

And what is the theory why I shouldn't be concerned about that? It doesn't need to be included because the NAV drops the same amount?
Thanks for helping me understand this. It has plagued me for years.
I look at Wells payouts for 2018 and think. Geesh, the LT Gains were so much that I would want it included.
Q1 $0.17
Q2 $0.20
Q3 $0.20
Q4 $0.24
LT $1.04

 

[24601NoMore]

Is your Wellesley holding in tax deferred (IRA, 401K, etc) or taxable?

Simplifying all this..if you're interested in "yield", just look at the Dividend Income column and ignore the LT and ST Cap Gain columns (plus Return of Capital, which is rare).

ETA - I believe you mentioned your "dividends" are > than your annual spend. Assuming you were not including LT and/or ST Cap gains in that number, then all is good. Just pull out the dividend amount quarterly and reinvest the LT and ST cap gains. That will in most cases give you some growth, as Wellesley tends to return more than "just" it's dividends yearly (though last year, total return of -2.57% on VWINX was less than dividends [plus cap gains] paid out).

 

[Shabby]

Is your Wellesley holding in tax deferred (IRA, 401K, etc) or taxable?

It is taxable. My thoughts were the tax consequences wouldn't be much because I get $51k in dividends and $12k in std deduction.

 

[Bir48die]

I'd recommend you keep minimum $$ in the zero percent checking and do regular (ie: monthly) transfers from your MM. You're giving up 2.55% annually of every $ that's in checking vs. the MM.

Let's say your yearly expenses are $50K, so you're keeping that in checking. That's $1,275 in lost/opportunity cost income you're passing up.

Yes if you keep all $50k in for the full year. However chances are your average will be $25k so cut that number in half. Still better than zero

 

[24601NoMore]

It is taxable. My thoughts were the tax consequences wouldn't be much because I get $51k in dividends and $12k in std deduction.

If you're at 51K in dividends with most of that coming from Wellesley, that'd imply you have a pretty heft sum in that one fund. You might want to consider a little more diversification..

BTW, does that $51K include dividends + LT and ST cap gains? Assume so based on the earlier posts.

 

[audreyh1]

And what is the theory why I shouldn't be concerned about that? It doesn't need to be included because the NAV drops the same amount?
Thanks for helping me understand this. It has plagued me for years.
I look at Wells payouts for 2018 and think. Geesh, the LT Gains were so much that I would want it included.
Q1 $0.17
Q2 $0.20
Q3 $0.20
Q4 $0.24
LT $1.04

You asked about yield. TTM (trailing twelve month) is actually referring to the TTM Yield, the yield over the past 12 months so no, it does not include cap gains.

The NAV increases as dividends are received, so of course it drops when dividend distributions are paid out.

Capital gains also accumulate in the fund. The NAV of the fund usually rises over time reflecting capital appreciation, and eventually some of that is realized capital gains, so of course the NAV of the fund drops when capital gains distributions are paid out. If someone is only taking the yield (i.e. dividend distributions) from the fund, then they will reinvest those capital gains distributions back into the fund, otherwise you are dipping into the "principal" as well.

Some of us don't pay any attention to where the gains come from in a fund, whether from dividends or from capital appreciation. We just look at the total return and take some fixed % from the fund regardless.

 

[Texas Proud]

And what is the theory why I shouldn't be concerned about that? It doesn't need to be included because the NAV drops the same amount?
Thanks for helping me understand this. It has plagued me for years.
I look at Wells payouts for 2018 and think. Geesh, the LT Gains were so much that I would want it included.
Q1 $0.17
Q2 $0.20
Q3 $0.20
Q4 $0.24
LT $1.04

Think of this as a individual stock... you got dividends from the stock for the Qs... then at year end you sold enough stock to get the last $1.04.... would you include that in your yield?


A cap gain is selling stock... it reduces the amount of stock you have... it is NOT yield...

 

[Shabby]

To if I am trying to compare 2 funds, say VWINX and VFINX and I look at M*. Do I go to "Trailing Total Returns" on each for the 3YR and look at 6.08% vs. 13.53% and that has all the gains I get (Share price, dividends, ST & LT CG)? Better than TTM Yield right?

(Please no flaming about past performance not being a blah, blah....)

 

[Shabby]

This of this as a individual stock... you got dividends from the stock for the Qs... then at year end you sold enough stock to get the last $1.04.... would you include that in your yield?
A cap gain is selling stock... it reduces the amount of stock you have... it is NOT yield...

OMG, thanks! I get it! That really helps.

 

[HI Bill]

A cap gain is selling stock... it reduces the amount of stock you have... it is NOT yield...

There are two types of capital gain, realized and unrealized. Vanguard shows short term capital gains and losses, and long-term capital gains and losses for each investment. These are not REALIZED until you sell the investment. Looking at these helps you determine both the gains (including dividends if reinvested), and the potential tax liability (what % of the investment are made up of LTCG and STCG?).

Example: I have a total cost of $440K. Current market value is $615K. STCG are -$4K, and LTCG are +$179K. If I were to sell all today, I would pay taxes on the difference between the market value and the total cost. In this case, ~$175K out of $615K would be realized (mostly) LTCG, so about 28% of the investment would be subject to LTCG taxes. If my adjusted gross income isn't above $488,450, then this would put the LTCG in the 15% tax bracket, and I'd pay $26,250 in LTCG taxes.

 

[audreyh1]

To if I am trying to compare 2 funds, say VWINX and VFINX and I look at M*. Do I go to "Trailing Total Returns" on each for the 3YR and look at 6.08% vs. 13.53% and that has all the gains I get (Share price, dividends, ST & LT CG)? Better than TTM Yield right?

(Please no flaming about past performance not being a blah, blah....)

Yes, the total return includes everything.

You can compare total returns between two funds over any time period, and IMO that is the only way to compare funds, although comparing the total return of funds that own drastically different assets like VFINX, 100% stock in S&P500, and VWINX, an income oriented balanced fund owning ~40% equities, makes little sense.

Since I don’t care about yield myself, and don’t invest for yield, I can’t tell you whether paying attention to TTM Yield is useful or not. It I may be useful to someone (known as an income investor) seeking to only live off the yield of their portfolio.

 

[Shabby]

You can compare total returns between two funds over any time period, and IMO that is the only way to compare funds, although comparing the total return of funds that own drastically different assets like VFINX 100%stock in S&P500 and VWINX an income oriented balanced fund owning 40% equities makes little sense.

Not sure what you are referring to: trailing total return.

Yeah, I picked those two funds randomly, not to really compare.
The "Trailing Total Returns" is shown on the Morningstar performance page for the funds. So as an example what website and figure would you use to compare VFINX and VWINX? Where do I get your "Total Returns" number?

 

[Huston55]

There is no one right way. I do something similar to what you plan to do... my retirement portfolio cash is the middleman between the checking account that I use to pay my bills and the rest of my retirement portfolio and dividends are taken in cash... those dividends and annual rebalancing replenish cash.

OP-

Lots of good responses thus far. I use the same technique as PB4 (above) but, my AA (60/35/5-ish) is more aggressive than yours. I also view my “cash” as buckets which are now enough to carry me until SS. Because my AA is more aggressive, I keep enough in “cash-ish” (includes ST bond fund) to cover expenses for the vast majority of bear markets (~4yrs) to avoid having to sell equities. Given that you’re ~30/70 AA (VWINX), you can get by with less cash than me. Also, based on your posts, you seem to have enough VWINX to cover almost 30 yrs of expenses plus, you have SS coming in 11 yrs. So, from an expenses standpoint, I think you’re covered. My only suggestion is to keep more cash in MM to get the interest (many ways to do this). You should also do some tax planning to minimize the tax bite.

Well done!

 

[audreyh1]

Yeah, I picked those two funds randomly, not to really compare.
The "Trailing Total Returns" is shown on the Morningstar performance page for the funds. So as an example what website and figure would you use to compare VFINX and VWINX? Where do I get your "Total Returns" number?

I see now that Morningstar uses that language on their performance page. Just hadn’t noticed before.

I just usually see the term Total Return. And yes they apply to a time period - past 1, 3, 5, years and so on.

P.S. I had already modified my reply and added a bit.

 

[Shabby]

My only suggestion is to keep more cash in MM to get the % (many ways to do this).

Yes, I am going to take that advice and keep more in the MM instead of Cash to get the returns. I can use another MM that gets less return but I don't need to sell it and wait a day to clear the trade. Merrill Lynch made all this really annoying in Jan when they stopped paying good returns on the normal MM accounts. Now we need to execute a trade to buy into the MM that earns 2.5%.

 

[Shabby]

I just usually see the term Total Return. And yes they apply to a time period - past 1, 3, 5, years and so on.

What website are you normally using to look at that data?

 

[24601NoMore]

Yeah, I picked those two funds randomly, not to really compare.
The "Trailing Total Returns" is shown on the Morningstar performance page for the funds. So as an example what website and figure would you use to compare VFINX and VWINX? Where do I get your "Total Returns" number?

If you want to compare two funds (not that comparing VWINX to VFINX makes sense as others have noted), go to the M* Performance page for a fund and click "Compare" to the far right of the chart. Enter the second ticker symbol (or third..fourth..etc). Will update the performance numbers as well as the chart, and show +/- for each additional ticker compared to your original fund. Even better, look at the "Expanded View" to go back year by year for the past 10 years.

Here's the performance page for VWINX. You'll need to enter the other tickers and expand the view to see 10 years..

http://performance.morningstar.com/fund/performance-return.action?t=VWINX&region=usa&culture=en_US

ETA - note the term "Total Returns" at the top, above the graph. The return %s listed are "everything" - NAV change plus distributions, (LT & ST Cap Gains, Dividends, etc).

 

[audreyh1]

What website are you normally using to look at that data?

Morningstar is probably the most reliable source for total return performance data over many time periods and across multiple fund families.

 

[Texas Proud]

There are two types of capital gain, realized and unrealized. Vanguard shows short term capital gains and losses, and long-term capital gains and losses for each investment. These are not REALIZED until you sell the investment. Looking at these helps you determine both the gains (including dividends if reinvested), and the potential tax liability (what % of the investment are made up of LTCG and STCG?).

Example: I have a total cost of $440K. Current market value is $615K. STCG are -$4K, and LTCG are +$179K. If I were to sell all today, I would pay taxes on the difference between the market value and the total cost. In this case, ~$175K out of $615K would be realized (mostly) LTCG, so about 28% of the investment would be subject to LTCG taxes. If my adjusted gross income isn't above $488,450, then this would put the LTCG in the 15% tax bracket, and I'd pay $26,250 in LTCG taxes.

I know... I was trying to give a simple example for the OP to understand... he said he now understands the difference...


Seems you did not get what I was trying to put down....