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Follower ○○○

I'm nearing retirement and wondered if I should do things differently with my investments

I have already reached out to the folks over in the investing during retirement forum so please forgive me if you have already weighed in on this. I set up my portfolio and investment philosophy with the help of Mel, Taylor, and others here at Vanguard. Therefore, I felt reaching out to people in this forum is the right thing to do since you all helped me get a decent nest egg to retire with. 
 
 
My issue is I don't feel comfortable taking a huge risk with my retirement nest egg now that I've hit my goal. My current situation is I have zero debt, I have a home,  a rental, and some Properties worth at least 500,000 combined. I have about 1.2 million that are mostly in STB funds and cash. They are in TSP, Vanguard, and T.Rowe price funds. (This is temporary by the way) I have put my equity investing on hold while I do some research to come up with a portfolio that fits my risk needs during retirement that is coming up soon. These assets are mostly in tax deferred accounts and roths. I removed all these assets from equities recently because I felt I was being greedy and at risk for a huge portfolio loss in the event of a major correction. I am currently still employed.  I will be 62 in July. 
 
 
Also things to consider is I will have a small pension that amounts to 15,000 per year, SS at 62 will be about 20,000 per year. That's if I chose to file for it. My understanding is it goes up 8% per year if I delay filing for it. Also rental income after expenses is around 10,000 per year. 
 
My wife and I are used to living comfortably on about 70,000 per year. So I'm thinking to keep our principal of our nest egg and keep up with inflation we need 4 or 5% growth per year from our investments. Possibly less. Although a few have suggested total bond portfolios,  most favor around 30% or more exposure to equities over at the investing during retirement forum.  It can't hurt to hear from others. 
 
 
 
 

 

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Participant ○○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments

 

30% VT + 40% BND + 30% VTIP

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Explorer ○○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments

If you're near retirement, I would think you should be 40% bonds anyway.  Ginnie Maes, intermediate corporates, etc.  Maybe even throw in some money markets.  In a downturn like this, money markets don't look so bad.  I kind of wish I had more of them.  Next time we have a global pandemic, I'll be ready & have more - HA.  

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Frequent Contributor

Re: I'm nearing retirement and wondered if I should do things differently with my investments


@bagels95 wrote:
I have already reached out to the folks over in the investing during retirement forum so please forgive me if you have already weighed in on this. I set up my portfolio and investment philosophy with the help of Mel, Taylor, and others here at Vanguard. Therefore, I felt reaching out to people in this forum is the right thing to do since you all helped me get a decent nest egg to retire with. 
 
 
My issue is I don't feel comfortable taking a huge risk with my retirement nest egg now that I've hit my goal. My current situation is I have zero debt, I have a home,  a rental, and some Properties worth at least 500,000 combined. I have about 1.2 million that are mostly in STB funds and cash. They are in TSP, Vanguard, and T.Rowe price funds. (This is temporary by the way) I have put my equity investing on hold while I do some research to come up with a portfolio that fits my risk needs during retirement that is coming up soon. These assets are mostly in tax deferred accounts and roths. I removed all these assets from equities recently because I felt I was being greedy and at risk for a huge portfolio loss in the event of a major correction. I am currently still employed.  I will be 62 in July. 
 
 
Also things to consider is I will have a small pension that amounts to 15,000 per year, SS at 62 will be about 20,000 per year. That's if I chose to file for it. My understanding is it goes up 8% per year if I delay filing for it. Also rental income after expenses is around 10,000 per year. 
 
My wife and I are used to living comfortably on about 70,000 per year. So I'm thinking to keep our principal of our nest egg and keep up with inflation we need 4 or 5% growth per year from our investments. Possibly less. Although a few have suggested total bond portfolios,  most favor around 30% or more exposure to equities over at the investing during retirement forum.  It can't hurt to hear from others. 
 
 
 
 

 


Its hard to generalize.  I waited until 65 to retire, so I could get Medicare.  However, in the couple of years before I retired, I did move to more of a preservation of principal portfolio, as I had accumulated enough retirement assets to live comfortably.  I went to an all bond oef portfolio, that had a continuum of very low risk bond oefs up to "moderate risk" bond oefs.  That portfolio allowed me to grow my portfolio modestly, without major risks to my accumulated principal.  With the current market crash, I am glad I did, as I have had an almost flat performance, while equities have lost 20, 30. 40%.  I am no longer concerned about accumulating assets, but my focus is living a low stress retirement life.  Like you, I have paid off my major expenses--I own my house, own my cars, own my travel trailer, have good Medicare Advantage Insurance, and I am perfectly content with my investment decisions, especially during this market crash period!

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Participant ○○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments

Vanguard Target Retirement Income fund has 30/70 allocation. Looks like you follow boglehead philosophy. Why is that not a simple solution for you?

Good Luck.

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Frequent Contributor

Re: I'm nearing retirement and wondered if I should do things differently with my investments

Modest equity exposure: Target Retirement Income or Life Strategy Income.

Bob

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Follower ○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments

If you use Vanguard target-date funds, keep the TSP money in the TSP, and put it in the L Income fund. (The reason to leave this in the TSP rather than roll it to an IRA is that you can use the TSP G fund, which has less risk than the bond funds in Vanguard's funds.)

Another alternative would be to convert the TSP to an annuity when you retire; the TSP is a better deal than a retail annuity, and this would give you guaranteed income.

But if you are considering an annuity, the best annuity around is delaying Social Security until age 70 (for the older spouse at least), and spending down your other accounts from age 62-70 to cover the payments you are not getting.  Only if this is still not enough annuity income should you annuitize part of your TSP.

 

 

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Participant ○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments

You're getting good advice. I have one major suggestion. Defer taking Social Security, or you may regret that 8% per year increment -- think about what that means. I took mine at age 66 because of certain short-term thinking (covering college loans of one of my kids). If I had waited til 70, I'd be reaping those additional monthly payments now (at age 75) and beyond.

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Participant ○○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments


@Juris2 wrote:

You're getting good advice. I have one major suggestion. Defer taking Social Security, or you may regret that 8% per year increment -- think about what that means. I took mine at age 66 because of certain short-term thinking (covering college loans of one of my kids). If I had waited til 70, I'd be reaping those additional monthly payments now (at age 75) and beyond.


Juris -  It may feel like you would be getting more money monthly had you taken at 70 vs 66 - which is true. But if you count the monthly amounts you received between 66 and 77 (though reduced in value), you are ahead now at 75 when compared to starting to take it at 70. 

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Participant ○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments

SteadyEddy, it doesn't feel that way, and it isn't that way. I can't count the money I received between 66 and 70. It's long gone, for one thing. Even at my advanced age it's often the reliable cash flow more than the accumulation that matters. Even if Social Security Income is only a modest fraction of your income in retirement, it's guaranteed. And having an added 32% or so each month from SS in the form of guaranteed income makes me less dependent on my other sources and gives me a larger reliable and guaranteed cash flow.

In the case of the OP, it would be >60% more each month in SS cash guaranteed. And it has a built in COLA.

Finally, Social Security never decreases and it never stops -- until you or other beneficiary dies -- no matter how badly your other investments may be doing.

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Follower ○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments


@SteadyEddy wrote:

@Juris2 wrote:

You're getting good advice. I have one major suggestion. Defer taking Social Security, or you may regret that 8% per year increment -- think about what that means. I took mine at age 66 because of certain short-term thinking (covering college loans of one of my kids). If I had waited til 70, I'd be reaping those additional monthly payments now (at age 75) and beyond.


Juris -  It may feel like you would be getting more money monthly had you taken at 70 vs 66 - which is true. But if you count the monthly amounts you received between 66 and 77 (though reduced in value), you are ahead now at 75 when compared to starting to take it at 70. 


This is correct.  The break-even for taking at 66 versus 70 is at age 85.  That is, if you take SS at 66 and invest four years' proceeds in TIPS, then withdraw so that you have as much every year as if you had taken it at 70, you will exhaust the TIPS portfolio at age 85. 

But that still makes waiting until 70 a good deal.  The most important reason is not the break-even time, but the larger annuity; you will get more money if you live longer and thus have more need to spend money in retirement.

Even the break-even justifies waiting.    If you are married, the higher benefit lasts as long as either one of you is alive.  If you are single, 85 is less than the life expectancy of a 66-year-old.  (For a single man with average life expectancy, 69 is the claiming age with the optimal expected value, but the cost of waiting one more year is trivial, and most people considering this decision are in good health and thus have an above-average life expectancy.)

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Follower ○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments

Preservation of capital is paramount  Learn what SORR means  Sequence of Returns

and the marginal utility of wealth

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Participant ○○○

Re: I'm nearing retirement and wondered if I should do things differently with my investments


@grabiner wrote:

@SteadyEddy wrote:

@Juris2 wrote:

You're getting good advice. I have one major suggestion. Defer taking Social Security, or you may regret that 8% per year increment -- think about what that means. I took mine at age 66 because of certain short-term thinking (covering college loans of one of my kids). If I had waited til 70, I'd be reaping those additional monthly payments now (at age 75) and beyond.


Juris -  It may feel like you would be getting more money monthly had you taken at 70 vs 66 - which is true. But if you count the monthly amounts you received between 66 and 77 (though reduced in value), you are ahead now at 75 when compared to starting to take it at 70. 


This is correct.  The break-even for taking at 66 versus 70 is at age 85.  That is, if you take SS at 66 and invest four years' proceeds in TIPS, then withdraw so that you have as much every year as if you had taken it at 70, you will exhaust the TIPS portfolio at age 85. 

But that still makes waiting until 70 a good deal.  The most important reason is not the break-even time, but the larger annuity; you will get more money if you live longer and thus have more need to spend money in retirement.

Even the break-even justifies waiting.    If you are married, the higher benefit lasts as long as either one of you is alive.  If you are single, 85 is less than the life expectancy of a 66-year-old.  (For a single man with average life expectancy, 69 is the claiming age with the optimal expected value, but the cost of waiting one more year is trivial, and most people considering this decision are in good health and thus have an above-average life expectancy.)


@grabiner 

Well said.  

For a couple, *If* the couple has good health, good diet and genetics are a plus, there is strong likelihood that at least one of you will live long into the tail of the curve.  

The winning 70 1/2 trifecta is a couple with:  

1.  All of the above

2.  The husband has the larger payout

3.  The wife is years younger

Doesn't mean things *will* work out that way.  But it's like having 20 in blackjack and the dealer is showing an 8.  I like your odds.  

ctyankee

 

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