Some advice on how to proceed with Fidelity Monitor Insight (bond, IRA)

[macyny]

After following the thread on the new investor asking about The Fidelity Monitor Insight, I signed up for the newsletter.

I'm hoping to get some help starting.

I read the Welcome letter and looked at the portfolio's offered.

We have been retired for 15 yrs. We have been drawing RMD's for that whole time. We have one IRA (where the RMD's come from) and a taxable account with only $350,000. IRA has about $500,000.

I think the Growth & Income Portfolio might be the best choice for the IRA. But maybe not? Is that too risky?

A little info. Husband is 85, I am 69. We have been living off the RMD's plus SS. We have no other income. We went through the crash in 07 while drawing down. We lost quite a bit of money.

I have been aggressively investing in stocks since 20010 (when we took the accounts away from the broker) and have been lucky with this bull market. But I'm nervous and realize this has been a big risk.

I'd like to sell a large part of my portfolio and put it in the Fidelity Insight.

If I look at the Growth & Income it gives percentages. I assume I buy those products in the percentages of my account. I hold approx 35% in cash to cover RMD's and to be safe. I do not want to invest the entire IRA. We live off the RMD's.

What about the taxable account? Maybe put a growth in this account?

I would appreciate any advice. I'm confused how to proceed.

Thank you!!

[mathjak107]

there is no exact instructions , we all use it differently .

i can only tell you how we do it .

we keep 1 years spending cash ready to go for this year .

typically we have about 10 years worth of draw based on today's dollars in the income model .

everything else is in the growth and income model .

we have about 60% of the portfolio's in the tax deferred account and 40% in a taxable account .

all of the funds appear in both types of accounts and are duplicated . because it was originally just my money most of it was in the ira's and 401k . but when my wife came along we duplicated the portfolio's with her money too . but it had to be outside the ira's since she had no ira's . we had lots of dough come in from real estate sales so that had to go in taxable accounts in the same funds .


that overall was about a 50/50 mix taken in its entirety .

there are times i will do my own little tinkering , like i was uncomfortable last month with the leverage aspect of the markets and this raining money every day . so i scaled back my allocation to 40% from 50% by moving a chunk from the growth and income model in to the income model .

since we lost all the gains i moved about 1/2 of what i scaled back , back in to the growth and income model last week so as to take advantage .

there are times as well i will move some money from growth and income in to growth upping the ante a bit .

i did that after things settled down when trump was elected . reaped some extra profit and slowly re-merged it back in to the growth and income model .


so yeah i play my little gains while staying within a certain range of comfort .

your may use it differently .

so lets say you have a hypothetical 1 million in total , and need 40k a year from it .

with the way i use it , 400k would go in the income model and 600k in growth and income .

take the 400k and divide it up by the percentages shown for the income model and then do the same for the 600k . if i was starting from scratch i would put all the stock funds which have the most growth in the retirement accounts and the bond stuff which spins off little in comparison in the taxable accounts .

over the long term any special capital gains tax rates would be wiped away by the fund distributions any way in the taxable account so it is not going to work out better most likely unless you are in the zero capital gains bracket..

[mathjak107]

so USING THIS OLD COPY OF THE MODELS , LETS SEE HOW IT WOULD GET ALLOCATED

DON'T USE THESE FUNDS !





INCOME MODEL , GETS 400K . BASED ON PIE CHART . YOU CAN SEE A FUND WAS SWAPPED ON JULY 6TH
SO THE PIE CHART REFLECTS THAT CHANGE IN FUNDS . YOU WOULD HAVE GOTTEN AN E-MAIL TO SELL CORPORATE BOND FUND AND BUY LIMITED TERM BOND FUND INSTEAD .

400,000 X .40 GOES IN BALANCED = 16K
400,000 X .30 GOES IN TOTAL BOND= 12K
400,00 X .13 GOES IN LIMITED TERM BOND =5200
400,000 X .17 GOES IN SHORT TERM BOND =6800


do the same now for the 600k in the growth and income model

[macyny]

Thanks, Mathjak.
So you would put the Income portfolio into the taxable account? I only have $387,000 in taxable. I'm concerned and would like to grow that as its the only savings we have outside the IRA. But I guess any gains would be eaten by taxes.
We are in the 15% tax bracket. Not sure what this year will be.

How do you feel about talking to someone at Fidelity about doing this? I'm nervous about messing things up. I would have to sell a lot of stock and the three mutual funds.

Thanks again and btw, I always try to rate your posts positively and it won't let me. I get a message to 'spread things around.' Ridiculous as it hasn't let me for over a year...sooo, thank you.

Jane

[mathjak107]

if i could structure it that way i would have the bond funds in the taxable account and the stock funds in the retirement accounts where it does the most good . that includes the dividend equity fund in the income model .

you can tell them what you want at fidelity , but keep in mind you just tell them how much to move . they know nothing about the newsletter

[TuborgP]

Originally Posted by macyny

After following the thread on the new investor asking about The Fidelity Monitor Insight, I signed up for the newsletter.

I'm hoping to get some help starting.

I read the Welcome letter and looked at the portfolio's offered.

We have been retired for 15 yrs. We have been drawing RMD's for that whole time. We have one IRA (where the RMD's come from) and a taxable account with only $350,000. IRA has about $500,000.

I think the Growth & Income Portfolio might be the best choice for the IRA. But maybe not? Is that too risky?

A little info. Husband is 85, I am 69. We have been living off the RMD's plus SS. We have no other income. We went through the crash in 07 while drawing down. We lost quite a bit of money.

I have been aggressively investing in stocks since 20010 (when we took the accounts away from the broker) and have been lucky with this bull market. But I'm nervous and realize this has been a big risk.

I'd like to sell a large part of my portfolio and put it in the Fidelity Insight.

If I look at the Growth & Income it gives percentages. I assume I buy those products in the percentages of my account. I hold approx 35% in cash to cover RMD's and to be safe. I do not want to invest the entire IRA. We live off the RMD's.

What about the taxable account? Maybe put a growth in this account?

I would appreciate any advice. I'm confused how to proceed.

Thank you!!

Several things to consider. What are you living off of now? Answer RMD's and SS. Are you going to be using your tax sheltered account or the account which is part of what you are living off of if that is Fidelity wonderful and very easy to do? If not will you be doing a rollover?

Are you going to use your after tax account? If so you will take a hit on capital gains taxes on the gains you have made. Again a tax hit!

Why are you doing this? What is your goal?

I understand your situation as we are ten years in retirement and one of us just turned 70 and the other will in a week or so. We live off of our pensions, SS and have money left over to invest. Our RMD's just started our just more money in the mix.

If doing it within a Fidelity account or a rollover consider you current asset allocation and the risk level of your portfolio and which Monitor/Insight Portfolio best matches up with it.

The Growth and Income model is about five separate funds with some being income related and some equity. How will you get your RMC money outwith out distorting the ratio of the funds in the portfolio? Will you still leave 35% in cash and convert the other 65% to the Growth and Income portfolio? If so that will in a way work. You just need to work a plan to replace your RMD cash allocation in case of a down turn. As MathJak notes he keeps ten years worth of RMD's in cash We are now at the point of keeping one year cash. We also have the income fund which in this environment is no sure thing depending on interest rate movement.

I would do it in allotments of 50k to begin with and multiples of ten k after that. once you have all five funds fully seeded you can easily buy in units of 10k with each fund being easily calculated as a percentage of 10k. This assumes your money is with Fidelity.

I hope I am not confusing and making sense but it is easier to grow up with the newsletter and to already be within fidelity. Just be sure you know how you plan to access for RMD's

Another thought any large existing fund over 50K or what ever amount might be a good place to start by moving in easy multiples to the portfolio you want. What to breakup and how to do it is a beginning question. You could take parts of multiple funds and exchange them into a cash fund equal to again say 50K and distribute from that.

[mathjak107]

tuborg it is very easy to get the money out with out destroying the ratio .it is no different than when i move from my income model to the growth and income model without distorting things . i keep ten years not in cash but in the income model .

lets say you need 100k . so you sell off the exact ratio of the holdings .

in the example i posted i would sell 40k of balanced

30k from total bond, 13k from limited bond


17K from short term bond .

what is left is the exact ratio but 100k less.

that is exactly how we generate our years spending money each jan 1

[TuborgP]

Originally Posted by mathjak107

tuborg it is very easy to get the money out with out destroying the ratio .it is no different than when i move from my income model to the growth and income model without distorting things

lets say you need 100k . so you sell off the exact ratio of the holdings .

Yes unless it is down market which does happen and you are selling equities at a loss. You have not known a Bear market in retirement and I did very early on. He is holding 35% in cash for a reason just as you are holding ten years. You have years worth of your money topped off by tons of ROI in the portfolio he will just be starting out. Can emotionally play out differently. When I retired I had my vacation day pay out go into my tax shelter. Most of it as it was more than my annual contribution and I retired Jan 1 so I had a full year to work with. I put it in cash and when the big bear came a roaring I was able to use it along with other cash waiting for SS incomes to eventually kick in. Had I put that in the Growth and Income portfolio I would have felt a real world loss and not just a paper loss of profits which came pull backs are. Putting money currently into our after tax fund is again still just in all probability in a down turn just losing ROI as we have had them long enough. The recent downturn didn't come close to touching money actually put in.

On the other hand I have started a couple of funds brand new over the last few years with Vanguard and in some cases had good timing in others not so good. The not so good were more than the normal ouch because the balance for awhile fell below the original amount. At there ages they can be more impacted by time horizon especially the older of the two. It doesn't seem this is a natural process for them.

Remember husband is 85.

[mathjak107]

selling equities at a loss is fine , in fact 100% equities in retirement has almost the same success rate as 50/50 . there is only 1 cycle difference where 100% equities failed .

the reason it does not matter is the higher gains the equities get allows for it . if the income model was all bond funds it would never be at the level you are selling from . you are selling very little too because in the income model equities are only 25% . so it really is a small amount if it should happen .

[snowmountains]

mathjak107, how would one build the asset allocation like in the charts in your post #3 above? I suppose you don't just dump x% of A, y% of B.... all at once. So do you dollar cost into each fund in installments spread over a year, 2 years, or...? Just curious (I'm not a Fidelity customer).