Need to update Investment Policy Statement (IPS) after retirement

[corn18]

I haven't updated my IPS since I retired in 2021. Oops. So I opened it up and saw my objective leading up to retirement. "Objective: $XXM in retirement savings with a paid off house." We achieved that but did decide to keep our 30 year fixed rate 2.25% mortgage vs. paying it off.

Now trying to figure out what to put for an objective now that we are retired. What I want to put is "Slide into age 70 with no money left and enjoy!". My military COLA pension + SS more than covers forecast spending from age 70+. Need to look at survivor benefits, but I still have a $500k term life policy that goes for another 20 years that I kept for just this reason. How much should I target for self insuring Long Term Care (LTC) for both of us? Maybe add some sort of statement regarding legacy dollars.

Appreciate your thoughts!

This is what I have so far:

Objective: Spend it all except the Roth accounts.

Asset Allocation (AA): 60% stocks / 40% bonds

Rebalance when AA gets outside of 10% or annually

Invest in very low cost index funds

Live within retirement budget.

Minimize taxes by concentrating bonds in 401k. Do Roth conversions to the top of the 12%/15% tax bracket until age 70.

Maximize growth in Roth accounts by investing in total stock market index funds.

Take my Social Security at age 70 to maximize survivor benefits. Take her social security at her age 67 to maximize spousal benefits.

Life Ins: Maintain term life policy until age 78.

Inheritance: let my wife decide what to do after waiting three months.

Private Equity Investments: Include PE investments in the AA calculation. Do not include PE investments in retirement funds for planning purposes. If/when a PE equity event occurs, immediately sell all interest in the PE target and invest proceeds in taxable account in accordance with AA.

 

[audreyh1]

Mine certainly changed. I changed my investment style and crafted a much more diversified yet minimal maintenance investing style for retirement.

First list your priorities and long term goals like how do you want to take care of a spouse when you pass, how do you want to fund long term care if needed, what do you want to leave to heirs. The rest usually flows from that.

 

[braumeister]

I've gradually adopted the Thoreau policy: "Simplify, simplify."

 

[corn18]

Mine certainly changed. I changed my investment style and crafted a much more diversified yet minimal maintenance investing style for retirement.

First list your priorities and long term goals like how do you want to take care of a spouse when you pass, how do you want to fund long term care if needed, what do you want to leave to heirs. The rest usually flows from that.

How much do you think we should plan for LTC? We will self insure. Google seems to indicate 3 years of semi private nursing care. Gonna set the bar a bit higher. A year of fully private nursing home care in a good facility is $180k around my parts. Three years for 2 people equals $1M. That will be a good starting point.

 

[ArmchairMillionaire]

I've gradually adopted the Thoreau policy: "Simplify, simplify."

I'm thinking along the same lines, but first I have to figure out the best plan for us for these next 8 months, which will be less simple initially. Hopefully, we both will retire next June. I'll be 54 and DW will be 47. We've met with a Financial Advisor twice now, and I plan on rewriting our IPS probably twice between now and next June. I plan on making changes to our existing one by the end of the year, and working on it again from January 1st until June.

Since we'll w*rk for the first half of the year, I have to plan on possibly taking a distribution (rule of 55) from my current 401(k) to get us through the remainder of 2025 if necessary. I'm still fine-tuning our withdrawal strategy as I've been leaning more to that whole "Buckets" philosophy lately. But, since we'll be able to use the 401(k) if we need it, I'm trying to figure out if I want to put as much as I can into the 401(k) for those 6-months that we'll be w*rking to build up that balance, or if I want to put $$ into money market accounts so we have more of a short-term bucket to pull from for the rest of the year.

So in other words, eventually I hope to simplify things.

 

[audreyh1]

How much do you think we should plan for LTC? We will self insure. Google seems to indicate 3 years of semi private nursing care. Gonna set the bar a bit higher. A year of fully private nursing home care in a good facility is $180k around my parts. Three years for 2 people equals $1M. That will be a good starting point.

That should be more than sufficient, way more than most policies provide. You really only need to earmark LTC funds for the first spouse as long as there is enough in the remaining portfolio to cover the surviving spouse.

 

[FiveDriver]

Just for my own education, I would like to ask how you folks have your Bond Allocations set up.

I'm starting to like the 30% - 40% allocation into Bonds. We've built our Portfolios up to this comfortable level with mostly stocks and index ETF's. I think it's time for some Asset Preservation with an increased segment for Bonds.

Do you folks own Bond Funds ? Low-cost ETF's or Managed Funds? Long, Short or Intermediate duration ?

 

[audreyh1]

People here are all over the map with respect to their fixed income investments although I suspect that few mess with long bonds.

Personally I have cash (using various instruments) and short-term and intermediate bond index funds, keeping my overall fixed income duration relatively short. It really depends on your goals.

 

[corn18]

My fixed income is all in auto rolling CD and treasury ladders at Fidelity. Duration of ladders varies from 3 months to 4 years. I am debating whether to just simplify that to a total bond index fund instead. We have been 60/40 forever with no plans to change that.

 

[audreyh1]

My fixed income is all in auto rolling CD and treasury ladders at Fidelity. Duration of ladders varies from 3 months to 4 years. I am debating whether to just simplify that to a total bond index fund instead. We have been 60/40 forever with no plans to change that.

You might think about how you used the fixed income portion of your portfolio including rebalancing.

I’m all into the simplify, simplify approach as I age but I will probably always have some in cash which can be a single money market fund, and short-term index as well as intermediate index. If anything getting older I’m more likely to drop the intermediate index bond fund. This is kind of like laddering as I prefer to have a spread of duration in my fixed income. I have something very short term to draw on if needed, whether for withdrawals or rebalancing and likely both in some situations.

 

[mrfeh]

Just for my own education, I would like to ask how you folks have your Bond Allocations set up.

I'm starting to like the 30% - 40% allocation into Bonds. We've built our Portfolios up to this comfortable level with mostly stocks and index ETF's. I think it's time for some Asset Preservation with an increased segment for Bonds.

Do you folks own Bond Funds ? Low-cost ETF's or Managed Funds? Long, Short or Intermediate duration ?

Three-fund portfolio - Bogleheads

www.bogleheads.org

 

[ArmchairMillionaire]

Just for my own education, I would like to ask how you folks have your Bond Allocations set up.

I'm starting to like the 30% - 40% allocation into Bonds. We've built our Portfolios up to this comfortable level with mostly stocks and index ETF's. I think it's time for some Asset Preservation with an increased segment for Bonds.

Do you folks own Bond Funds ? Low-cost ETF's or Managed Funds? Long, Short or Intermediate duration ?

Since I am still w*rking and not 59-1/2 yet, 72% of my retirement funds are still in 401(k) accounts, so I am limited as to what is available in those plans.

The bond portion of my JH 401(k) is in what they call their Total Bond Market Fund, while the bond portion of my Vanguard 401(k) is in their Total Bond Market Index - Institutional fund.

My Roth-IRA bond funds are in Vanguard Inflation-Protected Securities Fund Admiral Shares.

Between retirement next year and when I reach age 59-1/2, I would like to do some Roth conversions into the Roth-IRA from my 401(k) up to the top of the 12% tax bracket. Once I reach the age of 59-1/2, I plan on rolling what's left in both 401(k) accounts into a Vanguard traditional IRA.

 

[jebmke]

Just for my own education, I would like to ask how you folks have your Bond Allocations set up.

I'm starting to like the 30% - 40% allocation into Bonds. We've built our Portfolios up to this comfortable level with mostly stocks and index ETF's. I think it's time for some Asset Preservation with an increased segment for Bonds.

Do you folks own Bond Funds ? Low-cost ETF's or Managed Funds? Long, Short or Intermediate duration ?

Mostly bond funds. A few individual Tips which will roll off in the next 2-3 years. I keep our duration on the shorter side 3-5 years

 

[VanWinkle]

Three-fund portfolio - Bogleheads

www.bogleheads.org

I have simplified to one intermediate bond fund - total bond this year. It seems to make everything a lot simpler than before. I have a total stock fund in my taxable, and s&p 500 in my Roth so that I can tax loss harvest in my taxable account without any problems from dividends in my Roth. I have not had any ex-US funds since tax loss have sting them in 2020. I am at 56/44 at the moment and am allowing my stock allocation to creep up from my normal 50/50 allocation.

 

[FiveDriver]

Three-fund portfolio - Bogleheads

www.bogleheads.org

Thanks for all these responses, it helps validate my research into Bonds.

I'm not a big fan of the bogle's dogmatic 3-fund approach. I don't use any Total International ETF's. I've found that Total International dilutes the returns -- SPY is up 35% in the past 12 months, these Total Intls are up 22% if that. I can get all the Intl that I want within SPY.
(Now if you can predict which specific Intl market will skyrocket....you might prosper. But one year it's Shanghai, next it's Argentina, next it's Japan)

Back to Bonds. I hold FXNAX and it's performed well for me over time. Nice Divi every month, plus some share price appreciation. I'm looking at the Intermediate range ETF's like BND and IEF. Each has reacted nicely to the recent Rate cut, better than the short-term ETF's.

Is there anything to know about the Intermediate playing field, or the above two ETF's in particular ??

 

[Exchme]

Since I am still w*rking and not 59-1/2 yet, 72% of my retirement funds are still in 401(k) accounts, so I am limited as to what is available in those plans.

The bond portion of my JH 401(k) is in what they call their Total Bond Market Fund, while the bond portion of my Vanguard 401(k) is in their Total Bond Market Index - Institutional fund.

My Roth-IRA bond funds are in Vanguard Inflation-Protected Securities Fund Admiral Shares.

Between retirement next year and when I reach age 59-1/2, I would like to do some Roth conversions into the Roth-IRA from my 401(k) up to the top of the 12% tax bracket. Once I reach the age of 59-1/2, I plan on rolling what's left in both 401(k) accounts into a Vanguard traditional IRA.

Why are you holding any bonds in your Roth? Folks generally leave that as all stocks for faster growth. If preferentially put your bonds in tax deferred, it will slow the growth of tax deferred and will reduce the need for Roth Conversions later on.

 

[mrfeh]

Thanks for all these responses, it helps validate my research into Bonds.

I'm not a big fan of the bogle's dogmatic 3-fund approach. I don't use any Total International ETF's. I've found that Total International dilutes the returns -- SPY is up 35% in the past 12 months, these Total Intls are up 22% if that. I can get all the Intl that I want within SPY.
(Now if you can predict which specific Intl market will skyrocket....you might prosper. But one year it's Shanghai, next it's Argentina, next it's Japan)

Back to Bonds. I hold FXNAX and it's performed well for me over time. Nice Divi every month, plus some share price appreciation. I'm looking at the Intermediate range ETF's like BND and IEF. Each has reacted nicely to the recent Rate cut, better than the short-term ETF's.

Is there anything to know about the Intermediate playing field, or the above two ETF's in particular ??

You might want to spend some time over on bogleheads, or even post your questions over there. The fact that you're comparing returns of equities over a 12 month period is concerning. Or that you're considering the NAV changes of a bond fund, which is likely to be immaterial over a long period of time.

Regarding bond funds - I don't know IEF. BND is just the ETF version of VBTLX, which is essentially the same thing as FXNAX. When it comes to intermediate bond funds, there isn't much (or any) difference.

 

[FiveDriver]

Thanks for your input.

I picked the 1 year period for equities because since last October, that's a relevant time frame. Comparing Total Intl to SPY over the past 5 years is not pretty picture either -- 24% vs 96%. I'll stick with the SP500.

The NAV change in FXNAX is my way of checking the ETF's reaction to the rate cuts by FOMC, surely other cuts will follow. When added to the Yield, it makes for a nice increase in the bottom line.

 

[Exchme]

Back to Bonds. I hold FXNAX and it's performed well for me over time. Nice Divi every month, plus some share price appreciation. I'm looking at the Intermediate range ETF's like BND and IEF. Each has reacted nicely to the recent Rate cut, better than the short-term ETF's.

Is there anything to know about the Intermediate playing field, or the above two ETF's in particular ??

Over on Bogleheads, there were a couple of (long and detailed) threads by Professor Ed McQarrie (McQ) that showed that Intermediate Treasuries worked better as a diversifier:

Can you do better than BND? - Bogleheads.org

Can you do better than BND, Part 2: Test across bear and bull markets - Bogleheads.org

 

[njhowie]

... although I suspect that few mess with long bonds.

 

[jollystomper]

I've gradually adopted the Thoreau policy: "Simplify, simplify."

I agree with this. I have been reducing accounts and funds, and eliminated the mortgage, for example.

How much do you think we should plan for LTC? We will self insure. Google seems to indicate 3 years of semi private nursing care. Gonna set the bar a bit higher. A year of fully private nursing home care in a good facility is $180k around my parts. Three years for 2 people equals $1M. That will be a good starting point.

Our plan is similar, $1M "virtually" set aside in our 401K Stable Value Fund for this purpose. I reevaluate this yearly based on income changes It will get interesting if I am able to take SS at 70 and then when RMDs hit a few years after that.

 

[mrfeh]

Thanks for your input.

I picked the 1 year period for equities because since last October, that's a relevant time frame. Comparing Total Intl to SPY over the past 5 years is not pretty picture either -- 24% vs 96%. I'll stick with the SP500.

The NAV change in FXNAX is my way of checking the ETF's reaction to the rate cuts by FOMC, surely other cuts will follow. When added to the Yield, it makes for a nice increase in the bottom line.

Same response - 5 years is also not a worthwhile comparison, but do what you want.

When it comes to intermediate bond, rates (and therefor prices) are set by the market. Anticipated cuts by the FOMC are already priced in.

 

[FiveDriver]

Same response - 5 years is also not a worthwhile comparison, but do what you want.

I turned 75 this past August. A 5 year comparison is exactly what I want.
I don't see Total International being relevant to my Asset Allocation.

 

[Sunset]

Thanks for your input.

I picked the 1 year period for equities because since last October, that's a relevant time frame. Comparing Total Intl to SPY over the past 5 years is not pretty picture either -- 24% vs 96%. I'll stick with the SP500.

The NAV change in FXNAX is my way of checking the ETF's reaction to the rate cuts by FOMC, surely other cuts will follow. When added to the Yield, it makes for a nice increase in the bottom line.

I personally think 10 years is a better timeframe, especially since a 5 year one now includes the covid effect which was a large distortion.

Long ago, I decided not to invest internationally as much as I could avoid it, mainly because I live here and deal mostly in USD, so didn't need the additional currency exchange complications.
Besides many large corporations are world wide, so automatically there is exposure enough (IMHO) to the entire world via large companies.

 

[Sunset]

I turned 75 this past August. A 5 year comparison is exactly what I want.
I don't see Total International being relevant to my Asset Allocation.

Not an optimist