Retirees Portfolio - What Would You Do?

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Topic Author
magolf
Posts: 2
Joined: Sun Apr 13, 2008 3:11 pm

Retirees Portfolio - What Would You Do?

Post by magolf »

Second try - just noticed I had typed the subject in all caps and that is frowned upon. I have recently found this forum and have been amazed at what you can learn from the posted topics and the suggested books to read. Now that my husband and I are both retired, we would like to reconstruct our portfolio so that it will continue to grow with periodic rebalancing. Would appreciate any input given.

Emergency Funds: Yes

Debt: None

Tax Filing Status: Married, filing jointly

Tax Rate: 10% Fed

Ages: 71 and 69

Desired Allocation: 55% stocks, 45% bonds or no less than 50% stocks, 50% bonds. Longevity (100 years) runs in my family.

Intl. Allocation: 20% of stocks

Current Potfolio: low 7 figures

HIS IRAs:
32% Vang. Wellington Admiral - VWENX
7% Vang. Windsor II - VWNAX

Her IRAs:
4% Vang. Prime Money Market - VMMXV
11% Vang. Interm. Trm. Invest. Grade Admiral VFIDX
8% Vang. Shrt. Trm. Bond Index - VBISX
5% Vang. 500 Index - VFINX
16% Vang. Totl International - VGTSX
13% T. Rowe Price Summit Cash Reserves - TSCXX
4% T. Rowe Price Small Value - PRSVX

Plan on withdrawing 4% yearly (includes RMD) to supplement Social Security and dividends for living expenses. Neither of us have any other pension plans.

Questions:
1. Thinking of getting rid of Windsor II, Prime Money Market and 500 Index and maybe adding Total Stock Market and some TIPS. Should we keep the other 2 bond funds or change to treasuries or something else?

2. Would like to get rid of Summit Cash Resserves and change to something else at T. Rowe Price. Any suggestions such as Reits?
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Post by dbr »

No one has responded to this post so I am going to ask forgiveness in hijacking the discussion to ask the forum (for the benefit of the OP) the following question:

Is this situation an example of proposing that the first allocation decision a retiree should make is not what the stock/bond division should be but rather what fraction of wealth should be annuitized?

The reason I ask this question is that the OP is a couple that has no existing pensions (but does have Social Security), is old enough to reap a decent payout from an SPIA, and feels that a primary risk is longevity.

Comments would be appreciated.
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PiperWarrior
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Joined: Fri Dec 21, 2007 3:55 am
Location: right on course

Post by PiperWarrior »

How about something like this?

His IRA:
5.5% VGSIX REIT Index
11.0% VGTSX Total International
13.5% VTSAX Total Stock Market Admiral Shares

Her IRA (Consolidate at Vanguard)
22.5% VBTLX Total Bond Market Admiral Shares
22.5% VAIPX Inflation Protected Securities Admiral Shares
16.0% VTSAX Total Stock Market Admiral Shares

I put REIT as a diversifier. In the past, the stock market went down for several years while REIT was going up, and vice versa. It has low correlation to just about any other asset class. It also works as an inflation protection to a limited extent because dividends are basically rent.

I've arranged things so that you will qualify for Admiral Shares for as many funds as possible.

I don't recommend Wellington. Although it is a nice fund, if you are adding other things, it increases complexity of your portfolio because it is a balanced fund. Whenever you think about an asset allocation, you would have to split Wellington into bonds and stocks in your mind. I would rather have a portfolio that allows me to directly implement an asset allocation. For example, if my asset allocation calls for 10% bonds, I would buy a bond fund with 10% of my portfolio.

A Target Retirement fund is very nice, but one big problem is that you would have to pay almost twice as much expense as the portfolio suggested above. The difference in the expenses should be about $1,000 per year assuming you have $1M in your portfolio, and that's not a small change to me.
Topic Author
magolf
Posts: 2
Joined: Sun Apr 13, 2008 3:11 pm

Post by magolf »

DBR:

Thanks for your comments.


Piper:

Appreciate the suggested portfolio input and agree Target Retirement Funds are not for us.
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